Heidi Moore explains! (“Affordability and home ownership are far more closely correlated than interest rates and home ownership. Interest rates may make mortgages more expensive, but they don’t affect the underlying price. That price is what drives people away.”)
For years, traders at Deutsche Bank AG, UBS AG, Barclays, RBS and other banks colluded with colleagues responsible for setting the benchmark and their counterparts at other firms to rig the price of money, according to documents obtained by Bloomberg and interviews with two dozen current and former traders, lawyers and regulators. UBS traders went as far as offering bribes to brokers to persuade others to make favorable submissions on their behalf, regulatory filings show.
Members of the close-knit group of traders knew each other from working at the same firms or going on trips organized by interdealer brokers, which line up buyers and sellers of securities, to French ski resort Chamonix and the Monaco Grand Prix. The manipulation flourished for years, even after bank supervisors were made aware of the system’s flaws.
“We will never know the amounts of money involved, but it has to be the biggest financial fraud of all time,” says Adrian Blundell-Wignall, a special adviser to the secretary-general of the Organization for Economic Cooperation and Development in Paris. “Libor is the basis for calculating practically every derivative known to man.”
It’s the biggest financial fraud of all time, yet the general public finds it it too boring? complex? to really give it the attention it deserves. So let’s put this story on our reading lists today.
Update: Heidi’s newest column is about how nobody cares about Libor:
…there is literally no one in the United States who has ever pounded a dinner table in outrage over government complacency, yelling, “But if we’re so tough on financial crime, why haven’t we thrown those obscure Asian bureaucrats of a foreign bank into the slammer for fixing a London-based interest rate?!”
No. What US consumers wanted was the prosecution of American banks, for American crimes. Insider trading. Mortgage fraud. Foreclosure abuses. Unjust, overdone compensation for executives and managers who failed to uphold ethical business standards.
Heidi N. Moore has a delicious translation of Speaker Boehner’s letter to Pres. Obama about THE FISCAL CLIFF, and you should definitely read it. (“We’ve been pretty clear that we don’t want to raise taxes on people making more than $250,000 a year – but if we absolutely have to, then we insist on cutting government spending on programs like social security and Medicare.”)
If this sarcasm piques your interest in the cliff and now you’re like, oh maybe I should read about that I guess, MAY I SUGGEST this thread in which Heidi and her Guardian pal Dominic Rushe answer reader questions about the fiscal cliff. Their responses are extremely readable and understandable.
FOR EXAMPLE, Heidi answered the question, “Why is it called a cliff?” super simply (TO SCARE YOU), and then explained the whole mess in four short paragraphs.
“There’s no good reason that it’s called a cliff! The phrase was invented by Federal Reserve chairman Ben Bernanke in February and everyone stuck with it.
Heidi’s articles about The Banks are the only articles about The Banks: “The reaper has come for America’s strongest bank. JP Morgan, the bank that sailed elegantly through the financial crisis with no scratches, just announced its first quarterly loss since 2004 … Consequences, long delayed, are being visited on the financial sector for its abuses, and JP Morgan’s bad quarter is the first really tangible evidence of that.”
Friend and hero Heidi N. Moore has a super easy-to-understand and also cutting analysis of what went wrong on Facebook’s big day (hint: LOTS). There are some fun things to be learned about how IPOs work, which is good, because we’re all going to need to know what to do and what not to do when our own sick startups go public. Step one: Don’t do secret and illegal things. Step two: Do everything Facebook did, but opposite.