Another breach in the wall of a corrupt system: The LIBOR scandal

On July 2, LaRouchePAC wrote in a report sent to me, “Most cases of financial fraud are presented to the public as cases of individual crimes, committed by individuals or small groups of individuals—as corrupt acts by elements within an otherwise honorable system. But every once in awhile a case comes along that blows that fiction out of the water and reveals that it is the system itself that is corrupt. Rather than rotten apples spoiling the barrel, a rotten barrel is spoiling the apples. The corruption comes from the top.”

What LaRouchePAC is writing about, which has gone almost unnoticed in the United States is that, “On June 27, British banking giant Barclays reached an agreement with U.S. and British banking regulators to pay at least $450 million to resolve charges of manipulation of the London Inter-Bank Offered Rate (LIBOR) and the less significant European Inter-Bank Offered Rate (Euribor—to which the great majority of Spain’s mortgages are tied, for example). Barclays will pay at least $200 billion to the CFTC [Commodity Futures Trade Commission], $160 million to the U.S. Dept. of Justice, and $92.8 million to Britain’s Financial Services Authority. Marcus Agius, the Rothschild in-law and former Lazard banker who chaired Barclays, resigned today. More heads will fall—Barclays is but the first bank to settle, out of more than 20 banks under investigation.”

Yet in a recent Rolling Stone article by Matt Taibbi, Why is Nobody Freaking Out About the LIBOR Banking Scandal, I would respond that the venerable LaRouchePAC has been on it for a considerable amount of time with its own pile of facts and dirt. Here is their complete explanation, with the facts and results it produced.

“The LIBOR—controlled by the British Banking Association and the rate at which banks supposedly loan money to each other overnight—is effectively the imperial interest rate, used to set interest rates in transactions all over the world. It serves as a reference rate, with interest rates often quoted as “LIBOR plus a specified percent. LIBOR is used in calculating interest rates on a wide variety of loans—mortgages, credit card loans, student loans, government and corporate bonds—and in the derivatives markets. The Financial Times puts the level of contracts using LIBOR at $360 trillion, and that is probably far too low.”

And there’s more: “The big international banks make their money largely by skimming from financial flows. The more money that flows through the banks the bigger their cut. And when they manipulate the interest rates in their favor, [the more] that cut increases. Huge profits can be made by small increases in the skim. To manipulate interest rates in this way requires all the major players to be part of the crime, from bankers to regulators to the so-called “people above suspicion” who steer the system from above. What the LIBOR case shows, then, is that the British Empire’s monetary system is a global criminal enterprise, run from the top, which manipulates markets, and lies, cheats and steals from the peoples of the world.”

So, “Rather than simply fining individual banks, the U.S. Government should declare the whole system a criminal conspiracy under the RICO statute, and shut down every bank involved. These banks are worse than the mafia, and should be closed, with the banking system being reorganized under Glass-Steagall to prevent such corruption in the future and to return banking to its proper role in serving the General Welfare.”

Interest-rate manipulation is systemic

LaRouchePAC also writes, “Within the overall umbrella of the LIBOR interest-rate scandal lie two subscandals—one in the U.S. and one in the U.K.—which further demonstrate the pervasive, systemic nature of interest-rate fraud.” This was also mentioned by Taibbi and Yves Smith on a Bill Moyers segment.

“In the U.S., where JP Morgan Chase’s raping of Jefferson County, Alabama, is perhaps the best-known recent example, banks have been caught skimming billions of dollars from local governments and agencies by rigging bids in the $3.7 trillion municipal bond market. Shedding some badly needed light on the subject is the case of USA v. Carollo, in which three former employees of GE Capital were found guilty of conspiring to rig the process by which interest rates are established on the issuance of new municipal bonds. One result of this was that municipal governments were tricked into paying more interest on their bonds. This practice is widespread on Wall Street, and has cheated governments out of untold billions over the years.”

See Matt Taibbi and Yves Smith’s interview with Bill Moyers on How the Wall Street Mafia Holds America—and the World—Hostage, pages 6 through 8, on how Jamie Dimon and JPMorgan Chase were a part of the Jefferson Country, Alabama, scam to turn a $300 million bond initiative for a sewer system into a $2.9 billion boondoggle. In fact, Dimon was shielded from being sworn iin before Congress by Alabama Representative Spencer Bachus, pages 6–8 of the interview’s transcript linked above.

LaRouchePAC reports, “In Britain, the so-called High Street banks—including Barclays—have been caught in another interest-rate scandal, this one involving the swaps market. The banks would make loans to small businesses at variable interest rates, and then sell them derivatives to ‘protect’ them from hikes in their rates. That is, the banks knowingly sold complex derivatives to their customers as ‘protection,’ some of which looted the customer out of $2 for every dollar of protection it supposedly offered!” That would make a 100% profit on every dollar spent.

LaRouchePAC continues, “Interest-rate swaps are a huge business. According to the BIS [Bank for International Settlements], there were $504 trillion in interest-rate derivatives outstanding at the end of 2011, of which $403 trillion were interest rate swaps. And the actual number is probably twice, or more, what the BIS reports. Increasing the skim even a tiny amount on that volume of business would be highly lucrative to the banking system.”

LIBOR and the U.S. Dept. of Injustice

LaRouchePAC continues in this explosive story, “Had one not seen the wholesale destruction of the U.S. economy by a predatory financial system run completely amok, and the stunning collusion in that destruction by a regulatory apparatus in flagrant violation of the law and the public welfare, one might take some measure of comfort in the press release issued by the Dept. of Justice, June 27, in which the DOJ bragged that it had gotten Barclays to pay a $160 million penalty for its role in the manipulation of LIBOR and Euribor.

“Specifically cited in the press release were Assistant Attorney General Lanny Breuer of the DOJ’s Criminal Division, and James W. McJunkin, Assistant Director in charge of the FBI’s Washington Field Office.

“The press release reeks with the fawning way U.S. authorities treat the banks, noting that ‘Barclays made timely, voluntary and complete disclosure of its misconduct. After government authorities began investigating allegations that banks had engaged in manipulation of benchmark interest rates, Barclays was the first bank to cooperate in a meaningful way in disclosing its conduct relating to LIBOR and EURIBOR.’”

“In other words, after it was caught, Barclays copped a plea in exchange for a gentle slap on the wrist. Barclays will cooperate in the investigation, resulting in further slaps on the wrist for its co-conspirators. We can all sleep soundly, knowing that justice was claimed to have been done—just as the bankers can relax, knowing it wasn’t.”

By the way, “Assistant Attorney General Lanny Breuer has recently been in the news for his role in covering up the Obama Administration’s role in the ‘Fast and Furious’ affair, in which the U.S. government supplied arms to a Mexican drug cartel. So Breuer and the DOJ would seem to make a habit of protecting the British Empire wherever it gets into legal trouble.’” Fortunately in this case, whatever evil that went around seems to have come around to haunt its purveyors.

Jerry Mazza is a freelance writer, life-long resident of New York City. An EBook version of his book of poems “State Of Shock,” on 9/11 and its after effects is now available at Amazon.com and Barnesandnoble.com. He has also written hundreds of articles on politics and government as Associate Editor of Intrepid Report (formerly Online Journal). Reach him at gvmaz@verizon.net.