From JTO
LIBOR is the acronym for London Interbank Offered Rate. It is the interest rate established periodically by a committee of banks under the auspices of the Bank of England, the UK central bank, and is the estimated interest rate that top banks would charge each other for short term I.e. overnight loans. LIBOR is established for multiple currencies including UK, all of Europe, Japan and the U.S.
This is similar to the functioning of the U.S. Federal Reserve Open Markets Committee, which, similarly, is staffed by Fed officials and prominent bank heads, and set U.S. Treasury Note sales and purchases by the Fed, which effectively establish core interest rates in the U.S.
LIBOR and U.S. Treasuries are both used worldwide as a baseline risk-free interest rate over which interest rates are calculated for all forms of debt in the global credit markets including $350 trillion (yes, trillion) in derivative securities.
What has been discovered is that the bankers were setting LIBOR not based on its intended purpose, but in order to benefit their massive bets made by their institutions on derivatives related to interest rates and currency values. This went on for a period of years.
This scandal is so massive and so corrupt that it makes the last crisis look small. Putting it in perspective, U.S. GDP is about $13 trillion, China/Japan are tied for second at about $4 trillion; Germany and UK are $3-3.5 trillion. Derivatives outstanding at the beginning of the financial crisis were Bout $60 trillion, or equivalent to World GDP. Derivatives outstanding today are about $350 Trillion, or 6 years of world GDP.
Sandy Weill, who merged Citibank and Travelers into the first megabank, and singlehandedly drove the repeal of Glass Steagall, was quoted the other day as saying, as a result of the LIBOR scandal, that the banks need to be broken up as they will continue to take extraordinary risks at the expense of the taxpayers
and depositors. This is the equivalent of NapoleN calling for a end to militRy conquests.
The banks have become not only too big to fail but to big to regulate, as the elected representatives who regulate them need their money to run for office. And they will bankrupt the country – it can happen. This is why Romney is raising so much more money than Obama. This crisis has knocked the middle class of the country to its knees and these characters are moving in for the kill.
Timothy Geithner noted this past week that the U.S. government lent bailout money to these banks using the LIBOR rate that everybody knew was flawed.
By using an artificially low Libor, the government saved the banks millions of dollars at the expense of taxpayers.
Where is the outrage from fiscal conservatives and the Tea Party??
In yesterdays Villager, I was dismayed to see that Woodstock conservative Tom Pandolfi lays blame on immigrants and welfare recipients for our nation’s woes with nary a peep about those who crashed our economy sending millions into unemployment- while continuing to exploit the system for their own advantage.
But heck, with a 9th church coming to Woodstock, we can all just pray ourselves out this problem.
The tea party characters remind me of Woodstock’s own Citizens for Prudent Spending – see Rosendahl article below. If praying is the proposed response I sure hope these people are praying with great frequency.
How do I start a “church” to get out of paying property taxes too?
LibDem said:
“Where is the outrage from fiscal conservatives and the Tea Party?? ”
Hey, I’m outraged because I pretty much agree with your analysis of the flawed LIBOR rate.
Randy-
Pastor/Real Estate Appraiser McCormack has it all figured out. Here’s what you do:
1- Get yourself an official on-line Minister certificate (just google and you will see how easy it is.)
2- Find a good deal on a house (foreclosure perhaps) in a town with loose PNZ regulations.
3- Change the home from “residential” to “house of worship” and watch your tax bills disappear.
4- Put a cheap sign up and an ad in the Shopper’s Guide. All you need is about 10-20 suckers (they’re a dime a dozen).
5- Stress the importance of sacrifice to these god-fearers, reminding them that they are sinners and need to repent (guilt goes a long long way in manipulating people) as you gently subordinate them to tithing 10% of their income. This should cover the mortgage.
6- When the real estate market improves in a couple of years and the “church” property has gained substantial value, you tell the sheep how blessed they are that their congregation has outgrown this humble abode. Its now time to move into a new promised land- a larger building that glorifies god.
7- You sell the “church”, make a profit, hand over the “new project” to the youth minister and bid the sheep godspeed.
Think I’m making this stuff up? Just do another google search: “church ponzi scams”
Loadstar-
We’re going to turn you into a Progressive yet.
When you start to realize that we, the middle working class, are being duped by the 1%, that they seek to divide and conquer us through social issues and scare tactics, you will then come to the conclusion that the liberals have been right all along and that the myths about liberalism which are perpetrated by those who are greedy are done so for one reason alone:
They don’t want you to become inflamed by the truth.
Lib,
I believe you. I’m reading the article in the villager and thinking all along.. So this is just an excuse to not pay property taxes.
Meeting Hall in the basement?
Only 50 Parishioners?
Kindergarten? (sounds like a profit maker to me)
Then he says… I’ve setup churches all along the east coast.. Ahh.. just move along, pay no taxes, make some money and move on.
Well that didn’t take long. The first lawsuit was filed by Berkshire Bank of New York with 9 branches, claiming that several hundred million dollars in loans it made, benchmarked to LIBOR, carried artificially depressed interest rates. It is estimated that several hundred billion in loans in the U.S. alone are in a similar state and would have recourse to the handful of megabucks that manipulated LIBOR. All of these banks, of course, are too big to fail, and losses will be passed along to depositors, shareholders and ultimately taxpayers.
So now the financial system will remain in it’s cautionary mode as this next scandal shakes out – and as the Chinese, U.S. and European economies continue to slow.
Lib, If your analysis of the application for church is correct, there is nothing illegal about any part of it. And, there is no reason why PNZ can deny this application.
Yes JTO. Profits for some. Austerity for others. Isn’t it just history repeating itself once again.
Marylou- Really no analysis. Not even speculation. Just my paranoid skepticism, particularly when it comes to religion and Woodstock’s zoning regs. Both put on a good act, until you pull away the curtain.
John Reed, former chair of CitiCorp when it merged with Travelers in 1998, was quoted in the WSJ today, agreeing with Sandy Weill that the banks need to be broken up. Reed said it was clear to him even then, and he recommended to Weill, that the merged company could create substantial shareholder value by marrying their related respective businesses and splitting them of in pairs. Reed also acknowledged that the concept of the megabuck simply did not work as the company was too complex to manage, with conflicts of interest among different business lines as well as between countries.
Also in the WSJ today was a piece by Stephen Moore, WSJ editorial member, on the topic of “Obamanomics”. Moore is the kind of simplistic sycophant with platform and megphone who trumpets the glories of free market capitalism, deregulation and tax reduction with the fervor of an evangelist. According to Moore, Milton Friedman would have defeated the socialistic ideology of the Obama administration with the power of his ideas, which he believes raised India and China out of poverty. Among Friedman’s ideas was the notion that we should dispense with the Food and Drug Administration, which he believed was responsible for the death of millions by withholding approval of drugs until they were proven safe and effective. According to Friedman – and Moore- the pharmaceutical companies should be free to pump whatever they wanted into the public and consumers would decipher which ones were effective and safe. This is the kind of delusional thinking that is driving the economic policies of the Republican Party these days.
Friedman, for all his brilliance, never left academia to work in any industry. Likewise for Robert Merton and Myron Scholes, economists who engineered the first large hedge fund with former Salomon Brothers bond trader John Merriwether. John Keynes, by contrast, was a successful financial speculator, a successful practitioner in the markets, who warned of the implications of the rushing debt imposed on Germany as an adviser to the British government after World War One, and who helped devise the fiscal and regulatory policies that led the U.S. of the Great Depression.
Personally, I would leave the academics at the college gate and heed the advice of Weill, Reed and Keynes.
LibDem: I think that you were accurate in your characterization – “paranoid skepticism.”
Thanks JTO. Glad to see that consequences and solutions are being talked about.
Not sure if you caught yesterday’s NYT’s editorial by Steven Rattner, a counselor to the Treasury secretary in the Obama administration. He suggested that we strengthen regulation on the banks rather than split them up. He noted that it wasn’t the concentration of the banking system but rather its irresponsible management that took over exuberant risks, enabled by poor regulation.
While Dodd-Frank legislation stemmed from the fiscal crisis, Rattner notes that it is weak and “the possibility of future catastrophic failures has not been eliminated, but nor would it be by Mr. Weill’s proposal.”
He added, “In a world of behemoth banks, it is wrong to think we can shrink ours to a size that eliminates the “too big to fail” problem.”
Rattner calls for a Dodd-Frank “do-over”. He believes that simply reinstating “an out-moded concept like Glass -Steagal” or calling for “bank split up” is merely a distraction.
Interesting take.
Personally, I would also like to see some prosecutions.
Regardless, what I find most alarming is that the Republican response is to underfund Dodd-Frank and weaken it. In fact, the general Republican answer to our economic problems is to clamor for less regulation. This is quite appalling to me and should remind us all who’s side the GOPer’s are really on.
LibDem – They need to do both – one is not a substitute for the other. The bigger the banks are the more critical it will be that they be bailed out to avoid a system wide collapse as happened four years ago. It also makes them more powerful in their lobbying to water down regulation as happened with Dodd Frank. As to Glass Steagal, I would say simpler is better. What caused the complexity of Dodd Frank is the hundreds of pages of regulations required to cover all the loopholes, through which one could drive an army of bankers, that preserve the ability of banks to engage in investment banking and derivatives trading activities. We Ned to return to a bright line law and real enforcement. As to enforcement, not only have the Republicans watered down the regulations with loopholes, they have delayed implementation through a extended rule making process, and as you point out underfunded staffing of the enforcement divisions.
When the Interstate Commerce Commission was formed initially to regulate the railroads, which, through control of transit routes from the agricultural centers in the Midwest and West to the populations centers in the East, Was impoverishing both farmers and consumers to enrich themselves, J.P. Morgan, who formed the Northern Trust railroad monopoly with E.J. Harriman and John Rockefeller, was said to have remarked “good, now we can use the ICC to rig prices for us”. It took Teddy Roosevelt- a political giant – to resolve this problem in the public interest.
Steve Rattmer is a career long wall street investment banker. You know what they say, the more things change . . .
Things have not changed
…the more they stay the same…I should have guessed.
I must admit to a level of apathy in my belief that true transformative change can occur, considering our current campaign finance structure.
Thanks for your sharing your knowledge and insight. Much appreciated.
With regard to welfare recipients and other so-called entitlements,…(see Con’s new article. Admin).