July 19, 2012 |
Photo Credit: nasirkhan/shutterstock.com
We end today’s show with Matt Taibbi. He’s a contributing editor for Rolling Stone
magazine. His most recent in-depth piece
"The Scam Wall Street Learned from the Mafia: How America’s Biggest
Banks Took Part in a Nationwide Bid-Rigging Conspiracy—Until They Were
Caught on Tape."
Matt Taibbi has also been closely following the Libor scandal. Sixteen
international banks are accused of rigging a key global interest rate
used in contracts worth trillions of dollars. The London Interbank
Offered Rate, known as Libor, is the average interest rate at which
banks can borrow from each other. Some analysts say it defines the cost
of money. The benchmark rate sets the borrowing costs of everything from
mortgages to student loans to credit card accounts.
AMY GOODMAN: Matt Taibbi is with us here in New York. His latest book is called Griftopia: A Story of Bankers, Politicians, and the Most Audacious Power Grab in American History.
Matt, welcome to Democracy Now!
MATT TAIBBI: Good morning.
AMY GOODMAN: Explain Libor.
MATT TAIBBI: Libor
is basically the rate at which banks borrow from each other. It’s a
benchmark that sets—that a lot of international investment products are
pegged to. When Libor is low, that means that the banks feel confident
in each other; and when Libor is high, that means there is generally
instability. And what we’ve been dealing with in this scandal are really
two different types of manipulation: one in which the banks manipulated
Libor downward so as to create the appearance of good health generally,
and then, more specifically, a much more insidious kind of corruption
where they were manipulating it both up and down in order to capitalize
on particular trades, depending on what the banks were holding that day.
So this is an explosive, gigantic financial scandal.
JUAN GONZÁLEZ: But, Matt, you know, I was listening to Lawrence Kudlow a couple of nights ago on CNBC,
the guru of business journalism, and he claims this is a victimless
crime, that this has been blown up out of proportion by the rest of the
media and by some of the government regulators.
MATT TAIBBI: I
mean, it’s—I can’t imagine how he could possibly—a sane person could
possibly describe this as a victimless crime. Basically, every city and
town in America, to say nothing of the rest of the world, has
investments that are pegged to Libor. Most of them are holding
investment accounts that actually will decrease in value as Libor goes
down. So, you’re talking—
JUAN GONZÁLEZ: Well, I think that’s what most people don’t understand, that they say, well, if the interest rate goes down—
MATT TAIBBI: Right.
JUAN GONZÁLEZ: —that means you’re paying less. But they don’t understand the interest swaps that have occurred with many of these governments.
MATT TAIBBI: Right,
most individuals think of it in terms of their own mortgages or their
own credit cards. And it’s true, most of those people probably benefited
when they were manipulating Libor down. But now, remember, they also
manipulated it upwards at times. But when it was downward, those
individuals did benefit. But on the whole, overall, ordinary people
actually suffered when Libor was manipulated downward, mainly because
local governments, municipal governments tended to lose money. So if you
live in a town that had a budget crisis, that had to lay off firemen or
teachers or policemen, or couldn’t provide services or textbooks in
their schools, you know, that might be due to this. And remember, even
the tiniest manipulation downward, when you’re talking about a thing of
this scale, would result in tens of trillions of dollars of losses. So
it’s an enormous scandal. It eclipses anything we’ve seen since 2008.
AMY GOODMAN: Matt,
on Wednesday, U.S. Treasury Secretary Tim Geithner defended himself
against criticisms that regulators should have done more to address
concerns over the credibility of the Libor interest rate.
TREASURY SECRETARY TIMOTHY GEITHNER: We
acted very early in response to concerns that the processes to set this
rate was impaired and flawed and vulnerable to misrepresentation. We
were worried about it, we were concerned about it. I took the initiative
to brief the entire U.S. regulatory community on this at a very early
stage, early May. My staff then briefed the SEC, CFTC.
We brought it to the attention of the British and took the exceptional
step of writing them—putting in writing to them a detailed set of
recommendations that revealed the extent of the concerns in that
context. And the U.S., to its credit, set in motion, at that stage, a
very, very powerful enforcement response, the first results of which you
have now seen.
AMY GOODMAN: That’s Treasury Secretary Tim Geithner. Matt Taibbi, your response?
MATT TAIBBI: Well,
first of all, the Bank of England chief, Mervyn King, says that the
memo that he sent to the British actually didn’t outline any specific
regulatory concerns. It didn’t give them any information but only
proposed steps that they might take in the future. And those steps were
actually just more recommendations for more self-regulation for the
banks. My question is, if the Bank of England and the Fed knew about
this activity dating back to 2008, why was nothing done? Why were there
no criminal investigations until now? Why did the rest of us not hear
about it? This is information that should be pertinent to everybody who
makes investments, but it was kept secret from everybody. Remember, the
information that the Fed got was that some of the banks not only were
manipulating Libor, but they were doing it because they felt they had no
choice, because everybody else was doing it. And for the Fed to get
that information and not immediately launch a massive criminal
investigation, or help the Justice Department do that, speaks to the
ineffectiveness of their response.
JUAN GONZÁLEZ: Well, isn’t
part of the problem, though, that some of these governments and central
banks actually looked—looked aside at what was going on because they
wanted to keep interest rates low, and hopefully bringing the economies
back and having some kind of economic resurgence?
MATT TAIBBI: Yeah,
absolutely. There’s one way to look at this and say, OK, the Bank of
England and the Fed knew about this in 2008, but they had an interest,
perhaps, in seeing Libor artificially suppressed, because in that panic
of 2008, when everything in the markets was going haywire, it actually
benefited governments by creating the image of financial soundness in
the markets. But, A, that’s an irrational response, because it’s a
terrible precedent to set for the government to allow manipulation of
the markets in any way, and, B, the banks weren’t doing this just to
make themselves look healthier, they were also doing this just to make
money. They were trading against this information in what essentially
was the biggest kind of insider trading you could possibly imagine. So, I
don’t think that argument is going to hold water.
Matt, some, like you, say the Libor scandal could cost the banks tens of billions of dollars. But the Wall Street Journal
editorial page has portrayed Barclays bankers as the victim. When the scandal first broke, theJournal
ignored it for a week. Then, in a piece
"Barclays Bank Bash," it wrote, quote, "Federal gumshoes are hot on the
trail of banks suspected of attempting to manipulate a key interest
rate. If only it were easy to separate the effect of alleged
manipulation efforts by private banks from the deliberate manipulation
by government," unquote. Talk about the U.S. media coverage of the Libor
MATT TAIBBI: Well,
first of all, there hasn’t been enough coverage in the United States,
and that’s probably because the scandal has not yet spread to our
shores. And it will, because this starts—it probably starts with
Barclays and UBS and the Royal Bank of
Scotland. These are the three banks that we know of already that have
admitted to this conduct. But it’s eventually going to involve big
American banks, as well. And we know who they are; we don’t have to
mention them. But they’re the other—the American banks in the survey are
also going to be involved in this.
But I think the American media generally has been slow to realize the
gravity of the scandal. I think there’s a lot of fatigue out there among
people with all of the financial corruption. I think news editors
generally are reluctant to go there, especially with something as
complicated as Libor. But what we’re going to see is a lot of coverage
like what you just heard from the Wall Street Journal, where
there’s going to be a suggestion that this was done in sort of a
patriotic manner, in order to create an appearance of soundness in the
markets during a period of crisis, that this was done at the behest of
governments. And I would suspect that that’s going to be the first line
of defense for these banks.
JUAN GONZÁLEZ: I wanted to
ask you about something else not directly related to Libor but certainly
to banks and to the—your connection to them to the Mafia: the recent
revelations that HSBC, one of—the biggest bank
in Europe, admitted that it was laundering tens of millions of dollars
in drug money from the Mexican drug cartels, forcing one of its chief
officers to resign publicly in a hearing?
MATT TAIBBI: Right,
yeah, that’s obviously a big scandal, too. It probably has been
overshadowed by the Libor revelations recently. We’ve obviously heard
things like this before, banks not asking enough questions about where
the money is coming from: the Bank of New York scandal back in the late
'90s with the Russian mob money that was flowing there by the billion;
you know, to a lesser degree, the scandal involving Jon Corzine and his
company, and what questions did Chase ask or not ask when they were
dealing with them. There's clearly a laxity among all the banks in
asking enough questions about where money is coming from. I suspect that
the HSBC scandal will help spread awareness in that regard, as well.
AMY GOODMAN: What is the solution, Matt Taibbi?
MATT TAIBBI: To the Libor situation or—
AMY GOODMAN: Yes, and overall, whether we’re talking about HSBC to—
JUAN GONZÁLEZ: To crooked banks.
AMY GOODMAN: —the
power and to the administration, not to mention in this election year,
the opponents, shoring up and supporting and protecting?
MATT TAIBBI: Well,
the Libor scandal presents really the mother of all regulatory
dilemmas, because this scandal could not have happened if it was just
one or two or even three banks acting as rogue participants. The way
Libor works is, they take a survey of 16 banks every day. They take the
four highest numbers and the four lowest numbers, and they throw them
out. They average out the remaining numbers. And what that means is that
pretty much all the banks have to be in on it in order to move the
needle in any one direction. So you’re talking about 16 of the world’s
biggest, most powerful financial institutions. And if they’re all
cooperating in what essentially is a gigantic international price-fixing
operation, what do regulators do? You know, fines are clearly not going
to be sufficient. Even if they pursue criminal investigations and jail a
few of the traders, that’s really not going to be sufficient either.
So, it really poses a tremendous question. What are they—they’re going
to have to revoke some kind of privileges to all of these banks, and
that will really result in a massive shake-up of the entire financial
Juan Gonzalez is the co-host of the nationally syndicated radio news program, Democracy Now!
.Amy Goodman is the host of the nationally syndicated radio news program, Democracy Now!
Matt Taibbi should get a Pullitzer Prize and the thanks of a grateful NationReplyDelete
after all these Criminals are Arrested, Convicted and in Prisons doing not less than 25-years each. The only name, the biggest Name, the Entity that Own's those 16 Libor Banks and within that elite the Five UK Banks that Own and Operate the US FED since 1913. The UK Rothschild Superbank that Own's all Banks with Names like Rockefeller, or Chase,
or Morgan-Stanley, Morgan-Chase, and the entire Community of US Banks Owned and Operated by this Unnamed Rothschild Superbank
domiciled within the UK.
We who are over 70 owe Matt Taibbi a great debt because this Intrepid Russian Writer recognized High Crimes and Financial Treason long before any other American Writer decided to Expose the Republicans and Democrats, at all levels of US Government, together with the Entire
Regulatory and Judicial Communities, Coast to Coast across America.
Outsourcing led by Arthur Anderson since 1979 and Announced as
Official US Policy by President Ronald Reagan in 1983 was the first attack on the Financial Underpinnings of the USA. Then came 2007-2008.
AAA-Rated Bogus Securities, AAA-Rated RE Mortgage Investments, etc., we all know this stuff now. Thank Matt Taibbi, a Real American Hero...Or How We Learned To Love that 1959 Hedgemony MAD Deal
between the US, UK, and the Old Soviet Union. In any event, Matt Taibbi
is a Gift from the Fates and we all love it.
1983-2003 will be exhaustively researched for forensic evidence of High
Financial Crimes by Banks, Brokerages and Insurance Companies.