News about the Libor debacle is coming faster and hotter than first tuesday can keep up with. Here’s the latest:
- Barclays CEO, Robert Diamond, has resigned;
- Barclays has agreed to pay a $450 million settlement to U.S. and U.K. regulators;
- the former CEO has admitted to manipulating key interest rates affecting Libor; and
- the former CEO has accused both regulators and other banks of being complicit in the rate manipulation, fueling ongoing inquiries into JPMorgan Chase, UBS and Citigroup.
Related article:
first tuesday take
It appears that Mr. Diamond isn’t following the time-honored Wall Street protocol of the CEO falling on his own sword. Rather, he seems intent on fingering everyone involved. But make no mistake, in this den of thieves, no one is innocent.
Although it has taken more than four years for someone in the banking industry to be held personally liable, the handling of Barclays will ensure the public and interested professionals affected by rate manipulation (that means you dear reader) will get the full picture of how corrupt and unethical (to put it lightly) the banking industry has become. Although much could be said about the nefarious activities of Barclays and the specifics surrounding Libor, the real issue at hand here is one of global magnitude — a dire need to reform the self-interested practices of all institutional lenders.
Barclays, just like all of the big U.S. banks, is a financial institution that holds assets for its depositors all with a government guarantee. Operating under the safety of these grand guarantees, Barclays and the rest of the big banks use these deposits to speculate in financial markets on their own account — if they win on their bets, they keep the profits; if they lose, the loss is shifted to the government to be borne by the taxpayer. In other words, they privatize the gains and socialize the losses — a brilliant little sleight of hand for those at the top.
This win we keep, lose you pay standard is quite clearly a conflict of interest, one that was recognized some 80 years ago and reformed with the now dead Glass-Steagall Act. Now we have the Volcker Rule, which sounds hard-hitting but has presently been lobbied into impotence by K Street. With the ability of lenders to gamble on their own behalf with their depositor’s guaranteed money, the incentive for cheating and excessive risk-taking is very high. This stacked-deck temptation has lead to a pervasive culture of doing what is best for the bank, rather than what is best for the depositors and the taxpayers who pledge their money to cover the government guarantees.
Now that we are all beginning to see under the magician’s skirt, how many buyers’ agents will continue to place homebuyer’s in Libor-indexed adjustable rate mortgages (ARMs)? How many have noticed that, ARMs aside, the proper spread on fixed rate mortgages (FRMs) of 1.4% is currently running closer to 2%, and thus despite “historically low mortgage rates” everyone is still being overcharged some 30 to 60 basis points, a massive fortune shifted to, well, the mortgage lenders.
In what is touted as the best time in history to acquire a mortgage, are homebuyers still being – dare we say it – ripped-off? Let us know what you think in the comments section below.
Related article:
Market Charts: Interest Rates Affecting Real Estate Transactions
re: “Barclays’ ex-chief spreads the blame in rate rigging scandal” form the New York Times
The whole system needs to be torn down. Only when financing is eliminated (cash only), or 50%+ Down pmts are required will we see price come down and on par with what stagnant wages can truly afford. Our savings rate is near zero wonder why, oh yes, its all going to interest pmts. As currently set up, home financing is nothing more than slavery. 30 years of interest and then you die, all your wages gone to interest.
This cuts right to the truth, thank you for this piece. Shame on Bernanke.
Finally, the great majority of the American people are awakening to the massive and almost inconceivable fraud that has been perpetrated upon them by the banking elite not only just since 2008, but for centuries!
A group of Swiss scientists have run a super-computer program to ascertain the ties between banks and corporations worldwide. What they came up with is truly startling–a tiny handful of corporations controls–by means of cross-ownership and control–a staggering 80% of all the world’s wealth.
And here is what is even more startling: The most powerful inner group of that small circle of controlling corporations are banks. And, it doesn’t end there. The controlling banks are all owners of the FED. Yes, the FED is NOT and never has been a government agency, but is a privately held corporation whose owners are the big banks.
Information is coming forth from a new book just out (authored by a government official who was there behind the closed doors in 2008) explaining how obsequiously Hank Paulson, Timothy Geithner, and other government officials bowed to the whims of the banking elite during the crisis and ended up serving THEIR needs, not the needs of the American people.
The LIBOR scandal is the shot across the bow. It will continue to expand, as local, state, and federal governments bring lawsuits against the criminal parasites (bankers) that have sucked the life blood of mankind for far too long.
The goal will be to break the back of the Banking Cartel and finally free us all from the immoral and criminal manipulations that it perpetrates.
What do I tell my clients that had adjustable mortgages that were tied to the LIBOR rate over many years? Will and should the lenders refund all of these illegal gains?
Unfortunately, at this time we are unable to provide our readers with any information regarding recourse for a homebuyer who may have been affected by the fraudulent manipulation of adjustable rate mortgages by the major lending institutions. The investigations into BofA, JPMorgan Chase and others are ongoing and it may be some time before a borrower outreach program is developed, if one is developed at all.
In the meantime, we will keep you up to date with all of the most pertinent information regarding the Libor scandal as more news becomes available. Please be on the lookout for the August issue of the journal where we will feature an article on the origins of Libor, its use as a benchmark for ARMs as well as an explanation of exactly how mortgage borrowers and homebuyers were affected by the rate manipulation.
The incredible manipulation, brazenly and apparently routinely, employed by financial institutions will not cease until politicians are insulated from the corrupting influence of big money.