While some individuals accumulate wealth through honest efforts, others do so by taking advantage of their peers. If you obtained a loan from a bank between 2005 and 2009—whether for a house, a car, education, or even your credit card—you may have fallen victim to a widespread price manipulation scheme orchestrated by major banks.
This revelation may come as a shock. In essence, it implies that nearly everyone, from businesses to investors, who utilized credit during that time was deceived to a significant extent.
“This dwarfs by orders of magnitude any financial scams in the history of markets,” remarked Andrew Lo, a finance professor at the Massachusetts Institute of Technology.
Figures like Charles Ponzi, Bernie Madoff, and Kenneth Lay pale in comparison to the price-fixing conspiracy executed by big banks; their misdeeds were minor, deceiving their clients and customers. In contrast, the big banks effectively misled the entire population.
Regrettably, this is not a fabricated narrative. What follows is a concise examination of this outrageous fraud…
Manipulating Rates for Financial Gain
The LIBOR, or London Interbank Offered Rate, serves as the interest rate at which banks lend to one another. This rate is determined based on daily reports from up to 18 major banks. Thomson Reuters compiles this data, discarding the highest and lowest submissions to calculate the average LIBOR.
The Commodity Futures Trading Commission (CFTC) notes that over $800 trillion in securities and loans are linked to the LIBOR, encompassing $350 trillion in swaps and $10 trillion in loans, which include car loans, home mortgages, and credit card interest rates. As such, even minor fluctuations in the LIBOR have the potential to significantly impact investment returns and borrowing costs globally.
“Between 2005 and 2008, Barclays traders repeatedly asked colleagues responsible for the LIBOR process to adjust the bank’s submissions in ways that would benefit their trading positions,” reports CNNMoney. “Barclays staff also colluded with other banks to manipulate the rates.
“Additionally, between late 2007 and early 2009, Barclays made artificially low LIBOR submissions. This occurred during the peak of the financial crisis, when the bank feared that submitting higher figures would lead to market punishment as investors questioned its viability.”
It’s important to note that Barclays may not be the only bank implicated…
“Suspicion has now spread to all banks involved in the LIBOR process. Deutsche Bank, Royal Bank of Scotland, Credit Suisse, Citigroup, and JPMorgan Chase are among those institutions currently under investigation by regulators.”
Widespread Financial Manipulation
The methods of financial misconduct are practically limitless. They encompass everything from theft and deception to subtler yet equally unethical practices, such as insider trading, redirecting funds, paying dividends with borrowed capital, and executing trades without full disclosure (like in the Facebook IPO incident).
Recently, Barclays reached a settlement with the CFTC, the U.S. Justice Department, and Britain’s Financial Services Authority for $453 million—a mere fraction of what might be expected for manipulating an $800 trillion market. Shortly thereafter, Barclays CEO Bob Diamond resigned.
While additional penalties may arise, these measures alone cannot rectify the considerable injustices that have occurred. People are frequently imprisoned for minor infractions, yet major banks seemingly escape accountability for manipulating the financial system on such a grand scale. There is clearly something amiss.
This situation arises when a select few individuals are granted the power to significantly alter the economy for their own gain. When necessary, they comply with regulations, but their concessions often prompt further problems.
This reality undermines the notion of a free market economy. In this regard, the price of the most critical asset in the economy—its money—has been effectively fixed by bankers. Furthermore, the federal funds rate, which dictates the borrowing costs for banks from the Federal Reserve, is controlled by the Federal Open Market Committee, causing distortions throughout other goods and services in the economy.
In conclusion, the systemic manipulation of financial instruments by these institutions raises profound questions about accountability and ethical governance in our economic systems. As long as such practices persist, the integrity of the financial landscape remains fundamentally compromised.
Sincerely,
MN Gordon
for Economic Prism
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