Courtesy of Pam Martens.
Lanny Breuer, Assistant U.S. Attorney General and Head of the Criminal Division of DOJ Has Announced He Is Stepping Down
Just when one thinks the winks and nods between Washington and Wall Street couldn’t get any worse, there is growing evidence that the U.S. Justice Department knows that 20 banks engaged in the rigging of Libor but is intentionally delaying bringing charges against U.S. banks JPMorgan Chase and Citigroup.
Evidence is also stacking up that while the largest banks in the world were under intensive investigation for rigging Libor, they continued to rig it, while regulators remain dumbfounded about what to do.
And, in an Alice in Wonderland type of development, despite trillions of dollars of financial products resetting based on the Libor index, a key regulator says it’s become a fictional benchmark because the loans between banks that it’s based on have all but disappeared.
Libor is an acronym for London Interbank Offered Rate. It is supposed to be a reliable reflection of the rate at which banks are making uncollateralized loans to each other according to their own submissions. Based on the average of that rate, after highs and lows are discarded, the Libor index is used as a key index for setting interest rates around the world: on many adjustable rate mortgages, credit card payments, student loans, and interest rate swap deals sold by Wall Street to cities, counties, and municipal authorities. Interest rate contracts traded on exchanges are also impacted by Libor.
Libor rate setting is overseen by the British Bankers Association, which represents banking interests. A Libor interest rate is produced for ten currencies over 15 maturity periods from overnight to one year. Each morning, 8 to 16 banks, depending on the currency, submit rates based on this official gauge: “At what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11:00 a.m. (London time)?” Once rates are submitted, the highest 25 percent and lowest 25 percent are discarded with the remaining submissions averaged. The final calculations are released each day at around 11:30 a.m.
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