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May 6, 2013
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Just as you’re struggling to finance a summer vacation, or simply to
pay the freaking rent, how would you like to open your wallet and hand
over a wad of cash to a gang of international con artists who commit
fraud as casually as they order a five-course dinner?
Really?
That’s how you feel about it? Well, tell it to the U.S. Department of
Justice, because that’s just what’s going down as a result of the LIBOR
scandal.
To recap: Bank hustlers manipulated the world’s most
important set of benchmark interest rates and thereby impacted the
prices of upward of
$500 trillion worth of financial
instruments. The LIBOR scam devastated state and municipal budgets,
squeezed pension yields and ripped off bank shareholders. In a case of
jaw-dropping fraud, greedy traders rigged up the benchmark so that they
could cash in on bets on derivatives, while banks submitted fake numbers
to make themselves look financially healthier. One Barclays official
was fond of
fudging numbers in exchange for champagne.
“Dude…I owe you big time!” gushed a trader in an email to Barclays’ Mr.
Fix-It. “Come over one day after work and I'm opening a bottle of
Bollinger."
That’s right. A bottle of bubbly for a scam that
screwed your grandma on her retirement savings.
Retail bank certificates of deposit, you see, are very popular with
senior citizens, and they are priced based on LIBOR benchmarks. As
Alexander Arapoglou and Jerri-Lynn Scofield have explained on AlterNet,
that alone could cause Grandma’s income to drop by as much as 2 percent.
It ain’t like she didn’t need the money! That's not even counting what
happened to her pension -- or yours.
LIBOR was, in the opinion of many, the con of the century. But is it a crime without punishment?
About a month ago, the
Wall Street Journal
reported that a federal court judge had let several banks off the hook,
dismissing claims that 16 banks targeted by lawsuits had broken federal
antitrust laws by rigging LIBOR. As Matt Taibbi explained in his
must-read article
on the banking scandal, the federal judge bought the banks’ ridiculous
blame-the-victim story that if cities and towns and other investors lost
money over LIBOR rigging, it was their own fault. Why would they think
the banks were competing, rather than, um, “collaborating”? A
collaborative cheer sounded in bank boardrooms around the world, because
unless the plaintiffs can win on appeal, the ruling significantly
reduces what banks would potentially have to pay for wrongdoing.
Some people in the state of Oregon are feeling just a bit riled by this state of affairs.
New
research shows that the state of Oregon alone lost at least $110
million as a result of the LIBOR scam. The research on Oregon is based
on an analysis of monthly investment data provided by State Street Bank,
the custodian bank for the State of Oregon. On Friday, the Oregon
Working Families Party joined a coalition of labor and community leaders
to call on Governor John Kitzhaber to sue the Wall Street banks
responsible for the costly fraud. According to a statement from the WFP,
Oregon has not filed a single lawsuit in connected to LIBOR. The
governor remains mute on the issue.
“Wall Street just robbed us
again. When are our leaders going to stand up for Oregonians to bring
some of our money back home?” said Steve Hughes, state director of the
Oregon Working Families Party. “This ain’t chump change either—with $110
million Oregon could literally double its contribution to the Oregon
Opportunity Grant to help more Oregon students get a college education.”
Joe
Dinkin of WFP told me in an email that despite the recent federal
ruling, "other legal avenues for recovery remain open under both federal
Securities Act and state law." He adds that "nearly all of Oregon's
losses were in securities investments, so fraud claims pursuant to the
federal Securities Act could allow state to recover losses."
Oregon is hardly alone in its troubles with LIBOR. Last year,
political economist Thomas Ferguson traced out
how cities and states around the country had lost billions over the
years on swaps, many of which also are tied to LIBOR in one way or
another
.
According to Bloomberg,
U.S. prosecutors are pursuing guilty pleas, criminal convictions and
fines from banks in a global investigation of the fraud. That might be
reassuring, if it weren’t for that small matter of Attorney General Eric
Holder recently telling Congress that the size of financial
institutions has had “an inhibiting impact” on prosecutions against
them. In other words, too-big-to-fail is too-big-to-jail. In a recent
article, Pam Martens asked a burning question: Is the DOJ
deliberately stalling on bringing charges against U.S. banks connected to LIBOR, namely JPMorgan Chase and Citigroup?
Meanwhile,
the riggers continue to rig, and the regulators sit around scratching
their heads. And as for you and me? That part is easy: We get fleeced.
Perhaps
you’d like to ask officials in your own state what they are doing about
LIBOR. But also ask how many banks and financial companies contributed
to their most recent election campaigns, and how much they accepted from
national party oriented groups that help raise money from banks and
their executives for state officials’ campaigns, like the Democratic
Governors Association, the Democratic Attorneys General Association, and
their Republican counterparts.
Interestingly, Oregon Governor John Kitzhaber received
large contributions from the DGA when he ran in 2010. Perhaps that has something to do with his silence on LIBOR.
Lynn Parramore is an
AlterNet senior editor. She is cofounder of Recessionwire, founding
editor of New Deal 2.0, and author of 'Reading the Sphinx: Ancient Egypt
in Nineteenth-Century Literary Culture.' She received her Ph.d in
English and Cultural Theory from NYU, where she has taught essay writing
and semiotics. She is the Director of AlterNet's New Economic Dialogue
Project. Follow her on Twitter @LynnParramore.
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