Expect Libor rigging to continue with big banks as U.S. courts impose ‘slap on the wrist’ fines
In today’s financial world where governments, regulators, and courts deem banks ‘too big to jail’, fraud, corruption, and theft are just the cost of doing business.¬† And when banks and brokers can make tens of billions of dollars or more, and only pay fines of about 1-5% of their profits, then there is no incentive not to continue committing fraud when all they will receive is a virtual ‘slap on the wrist’.
Thus it should come as no surprise on Oct. 13 when three ‘too big to fail’ banks were hit with a paltry fine of $132 million from Libor fraud that affected trillions of transactions, and made the banks hundreds of billions of dollars over time.
Three banks accused of manipulating the Libor benchmark interest rate, Citigroup, Deutsche Bank, and HSBC, have agreed to pay a combined $132 million, according to a US court filing.
The banks agreed to pay $33.4 million, $80 million and $18.5 million, respectively. The money will go into a settlement fund to compensate those who lost money because of the alleged manipulation.
The settlement is pending approval by a US district judge and included no admission of wrongdoing.
‚ÄúWe are pleased the matter is resolved,‚ÄĚ¬†said an HSBC spokesman.
Citi, Deutsche Bank, and HSBC agreed to cooperate with the plaintiffs, futures traders and others who lost money as a result of the banks‚Äô alleged collusion.
The Libor rate is fundamental in global finance affecting trillions of dollars of contracts and loans worldwide, including mortgages and bonds.
The rigging scandal erupted in 2012, involving 11 banks and brokerages fined for the misconduct. The public outrage forced Barclays CEO Bob Diamond to resign. ‚Äď¬†Russia Today
Libor is the interbank lending rate that becomes the foundation for nearly all interest charged on obligations such as credit cards, student loans, mortgages, and automobile loans.¬† And even a very small rise in these rates can cost consumers hundreds if not thousands of dollars over the life of a loan.
Former President Barack Obama’s Attorney General Eric Holder was the man who coined the phrases ‘too big to fail and too big to jail’, and as such no real banker was ever prosecuted for their fraudulent activities during the eight years following the 2008 financial crisis.¬† And sadly it appears that the Trump administration is following this same course of action as to date there have been no real investigations or indictments of bankers as well in the first nine months of his watch.
Kenneth Schortgen Jr¬†is¬†a writer for¬†The Daily Economist,¬†Secretsofthefed.com,¬†Roguemoney.net, and¬†Viral Liberty, and hosts¬†the popular¬†youtube podcast¬†on Mondays, Wednesdays and Fridays.¬†Ken can also¬†be heard Wednesday afternoons giving an weekly economic report on the¬†Angel Clark radio show.