Tag Archive: Richard Diamond

Jul 19 2012

LIBOR: There Will Be No Prosecutions

LIBOR If you think for that the Justice Department in this administration is going to prosecute or regulate any of the people who were involved in the LIBOR scandal, erase that thought. Regardless of any evidence the government may have now or in the future that would send the average trader to prison for life, the main goal for Attorney General Eric Holder is to protect the banksters from prosecution. There was no reason to give immunity

from prosecution of the Commodities Exchange Act. Since the government already had the e-mails, they had enough to issue subpoenas and arrest warrants. Instead, Holder’s office gave them immunity from prosecution:

A crucial element in any prosecution is criminal intent, and it’s plain from the Barclays e-mails that various participants knew that what they were doing was wrong. As one Barclays trader put it in e-mails to traders at other banks, “don’t talk about it too much,” “don’t make any noise about it please” and “this can backfire against us.”

Faced with what would seem to be an open-and-shut case, how did the Justice Department proceed? Barclays entered into a nonprosecution agreement in which the United States government agreed not to prosecute Barclays as long as it met its other obligations under the agreement, including continued cooperation in what the government said was an investigation still under way. Barclays also received a conditional grant of immunity from the antitrust division. [..]

The United States government “had the smoking guns,” Professor (John C.) Coffee said, and “it could have demanded its price from Barclays,” including a guilty plea to a crime. At the same time, the agreement “isn’t surprising,” he said. “The Department of Justice has done this in almost every major case since the collapse of Arthur Andersen.” (Andersen was the accounting firm indicted after the collapse of Enron.)

Glen Ford nails precisely why there will be no prosecutions, since the ultimate aim is “protecting the banks from the consequences of their crimes:”

“The reason Eric Holder is staging criminal investigations is because that’s the only way he can protect the bankers, through immunities and by gradually narrowing the scope of the case.”

The Obama Justice Department is in theater mode, again, pretending to threaten the bankster class with criminal penalties – prison time! – for their manipulation of the global economy’s benchmark interest rates. The Justice Department claims to be building criminal and civil cases in the LIBOR scandal, which in sheer scope is the biggest fraud by international capital in history. But that’s all a front, a farce. Barack Obama has spent his entire presidency protecting Wall Street, starting with his rescue of George Bush’s bank bailout bill after it’s initial defeat in Congress, in the last days of Obama’s candidacy. He packed his administration with banksters, passed his own bailout and, in collaboration with the Federal Reserve, channeled at least $16 trillion dollars into the accounts of U.S. and even European banks – by far the greatest transfer of capital in the history of the world. Obama has reminded the banksters that it was he who saved them from the “pitchforks” of an outraged public. He pushed through Congress so-called financial reform legislation that left derivatives – the deadly instruments of mass financial destruction that were at the heart of the meltdown – untouched. [..]

Now Obama and Holder are playing the same diversionary game, making tough noises about criminal investigations of the LIBOR conspirators. But the Justice Department has already given immunity to Barclay’s Bank, of Britain, and to the Swiss banking giant UBS. More immunities will follow. The reason Eric Holder is staging criminal investigations is because that’s the only way he can protect the bankers, through immunities and by gradually narrowing the scope of the case. In the end, there will be settlements all around, and the banksters will move on to even more fantastic heights of criminality – thanks to the loyal, protective hands of President Obama.

Prosecutions? Don’t hold you breath.

Jul 17 2012

LIBOR: Past Time to Investigate the NY Fed

Wall St. is a high crime area and the criminals are allowed to run free.

~Dennis Kelleher~

Back in May of 2009, Eliot Spitzer, former New York State Attorney General, aka “The Sheriff of Wall St,”, wrote this article for Slate after the revelation that New York Federal Reserve Bank Chairman Stephen Friedman’s “purchased some Goldman stock while the Fed was involved in reviewing major decisions about Goldman’s future.” In the article he called into question just who it is that selects the person who sits at the head of the table:

A quasi-independent, public-private body, the New York Fed is the first among equals of the 12 regional Fed branches. Unlike the Washington Federal Reserve Board of Governors, or the other regional fed branches, the N.Y. Fed is active in the markets virtually every day, changing the critical interest rates that determine the liquidity of the markets and the profitability of banks. And, like the other regional branches, it has boundless power to examine, at will, the books of virtually any banking institution and require that wide-ranging actions be taken-from raising capital to stopping lending-to ensure the stability and soundness of the bank. Over the past year, the New York Fed has been responsible for committing trillions of dollars of taxpayer money to resuscitate the coffers of the banks it oversees. [..]

So who selected Geithner back in 2003? Well, the Fed board created a select committee to pick the CEO. This committee included none other than Hank Greenberg, then the chairman of AIG; John Whitehead, a former chairman of Goldman Sachs; Walter Shipley, a former chairman of Chase Manhattan Bank, now JPMorgan Chase; and Pete Peterson, a former chairman of Lehman Bros. It was not a group of typical depositors worried about the security of their savings accounts but rather one whose interest was in preserving a capital structure and way of doing business that cried out for-but did not receive-harsh examination from the N.Y. Fed.

The composition of the New York Fed’s board, which supervises the organization and current Chairman Friedman, is equally troubling. The board consists of nine individuals, three chosen by the N.Y. Fed member banks as their own representatives, three chosen by the member banks to represent the public, and three chosen by the national Fed Board of Governors to represent the public. In theory this sounds great: Six board members are “public” representatives.

So essentially, we have the thieves guarding the vault. Willie Sutton would have loved this.

That brings us to the LIBOR scandal and Treasury Secretary Timothy Geithner’s role. In his currentSlate article, Mr. Spitzer again reiterates the growing need to investigate the NY Fed. and Mr. Geithner. What did he know? When did he know it? Why didn’t he refer it to the Justice Department?

The New York Federal Reserve knew about Libor games being played by the banks years ago and seems to have done precious little about it-except perhaps send a memo parroting the so-called reform ideas proposed by the banks themselves. Then nothing more. No prosecutions, no inquiries of the banks to see if the illegal behavior had stopped-just a live-and-let-live attitude.

Apparently, as Mr. Geithner had testified during his confirmation hearing for Treasury, he didn’t see himself as a “regulator.” Yet, that is the most important part of the NY Federal Reserve. But then look who chose him as Fed president:

Hank Greenberg of AIG and John Whitehead of Goldman Sachs–these companies that got bailed out-were on the NY Fed committee that made Tim Geithner their president.

No conflict of interest there? Wow.

MR. Spitzer believes that it is time for the NY Fed to be investigated:

Was there a similar conflict of interest when the New York Fed apparently did nothing adequate about the Libor games? Well, look who was on the board: Dick Fuld of Lehman fame; Sandy Weill of Citibank; Jeff Immelt of GE-the largest beneficiary of the Fed’s commercial paper guarantees; and, of course, Jamie Dimon of JPMorgan Chase, whose bank’s London derivative trades and Libor involvement make his role on the board even more absurd.

Matt Taibbi, Rolling Stone contributing editor, and Dennis Kelleher, president and CEO of Better Markets Inc., join “Viewpoint” host Eliot Spitzer to assess the scope of the unfolding Libor scandal given news that the U.S. Justice Department is building criminal cases and expects to “file charges against at least one bank later this year,” according to The New York Times.

Lets just say that I agree with Atrios, don’t hold your breath for either an investigation or prosecutions.

Jul 13 2012

Happy Friday the Thirteenth or Not

If it weren’t Friday the Thirteenth, you’d think it was April’s Fool. It’s all the usual excuses by the CEO’s and the TBTF banks, “we are just finding it was this bad”

JPMorgan Fears Traders Obscured Losses in First Quarter

JPMorgan Chase, which reported its second-quarter results on Friday, disclosed that the losses on a soured credit bet could mount to more than $7 billion, as the nation’s largest bank indicated that traders may have intentionally tried to conceal the extent of the red ink on the disastrous position. [..]

If the trades, made out of the powerful chief investment office unit in London, had been properly valued, the bank said it would have lost $1.4 billion on the position in the first quarter.

Jamie Dimon, the bank’s chief executive who has consistently reassured investors that the losses would be contained, announced that the bank lost $4.4 billion on the botched trade in the second quarter. So far this year, the bank says it has lost $5.8 billion on the trades in credit derivatives.  [..]

Since announcing the multibillion-dollar mistake, JPMorgan has lost $25 billion in market value.

Jamie Dimon finally admitting what we already knew but still not admitting that the real losses for the bank is closer to $30 billion. He is either the most incompetent CEO or he thinks that we’re all stupid to realize he knew about tis all along.

or  “but Timmy wrote a memo”

Barclays Informed New York Fed of Problems With Libor in 2007

A Barclays employee notified the Federal Reserve Bank of New York in April of 2008 that the firm was underestimating its borrowing costs, following potential warning signs as early as 2007 that other banks were undermining the integrity of a key interest rate.

In 2008, the employee said that the move was prompted by a desire to “fit in with the rest of the crowd” and added, “we know that we’re not posting um, an honest Libor,” according to documents that the agency released on Friday. The Barclays employee said that he believed such practices were widespread among major banks.

In response, the New York Fed began examining the matter and passed their findings to other financial authorities, according to the documents.

But the agency’s actions came too late and failed to thwart the illegal activities. By the time of the April 2008 conversation, the British firm had been trying to manipulate the interest rate for three years. And the practice persisted at Barclays for about a year after the briefing with the New York Fed.

Friday’s revelations shed new light on regulators’ role in the rate manipulation scandal. The documents also raise concerns about why authorities did not act sooner to thwart the rate-rigging.

The perp’s figured they were too big to indict and the Justice Department agreed.

In Barclays Inquiry, the Calculation in Making a Deal

The question needs to be faced in the wake of the bank’s admitted efforts to manipulate the London interbank offered rate, known as Libor, the benchmark for countless interest rate determinations and approximately $450 trillion in derivative contracts.

If the Justice Department was looking for a textbook case of white-collar financial crime – including a conspiracy that was flourishing at the height of the financial crisis – this would seem tailor-made. As the facts released by the government make clear, there were two separate but overlapping schemes to manipulate Libor within Barclays. Yet the bank secured a nonprosecution agreement and agreed to pay a penalty of more than $450 million, a comparatively paltry sum for a bank that had more than £32 billion ($50 billion) in revenue in 2011. “The perception so far has been that the regulators have been toothless,” John C. Coffee Jr., professor of law and specialist in white-collar crime at Columbia Law School, told me this week. [..]

(The criminal division said its agreement with Barclays was reached in conjunction with the antitrust division.)

And this is why Richard Diamond and Jamie Dimon have nothing to worry about and the world is still being screwed.