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The War of LIBORation

Jul 06, 2012

Each day 17 banks receive a phone call asking them what other banks charge them for inter-bank loans. The rates are determined largely by the credit ratings of the banks. Barclays was fined $453 million when it was discovered that they had been lying for years. The rate they reported was lower than what they actually were having to pay.

The investigators discovered that very likely ALL of those big banks had been lying. The result was that the LIBOR rate was lower than it should have been. They determine the LIBOR rate by averaging out the rate reported by all of those big banks (after discarding the highest 4 and the lowest 4).

The LIBOR rate is used on trillions of dollars worth of financial transactions every day. When the big banks did Interest Rate Swaps (IRSwaps), they were betting that the LIBOR rate would remain low; while the other side of the contract was betting that the rate would go higher. So far, the big banks have been winning their derivative bets, because they were falsifying the information used to determine the LIBOR rate on their own bets. This made casino banking their main profit-making venture.

This has been a massive fraud worth trillions of dollars. Every dollar that they won was, in effect, fraudulently stolen from someone else who thought he was gambling on a level playing field. I mean, they studied the situation and concluded that the LIBOR rates certainly had to go higher, due to the financial difficulties in the world, so that is how they bet. Their financial analysis turned out to be accurate. Their mistake was in trusting those banksters to tell the truth.

Silly rabbit!

Barclays' $453 million fine was so low that it shows that crime pays after all. If caught, they are required to give back only a small portion of their loot.

On the other hand, the exposure itself is worse than the fine. The big banks are now suffering huge loss of confidence, which is their main stock in trade. All of the big banks now are being investigated--or will be investigated shortly. Germany's big Deutsche Bank is taking a huge hit on its share prices today, because they are one of the first to be investigated: 


Investigators in the United States, Europe and Japan are examining more than a dozen big banks over suspected rigging of the London Interbank Offered Rate (Libor)....

As the credit crisis intensified between 2006 and 2008, allegations started mounting that Libor no longer reflected the real cost banks were paying for funds. Authorities have been examining whether traders tried to influence the rate to profit on bets on the direction it would go.

The daily Libor poll asks banks at what rate they think they will be able to borrow money from each other in 10 major currencies and for 15 borrowing periods ranging from overnight loans to 12 months.

The rates submitted by banks are compiled by Thomson Reuters, parent company of Reuters, on behalf of the British Bankers' Association.

Bix Weir sent out an email today giving us the names of the 17 banks in question. He also identified which ones are involved in rigging the silver and gold markets. (I put those in bold in the list below):

Here are the 17 banks that form the committee to set LIBOR:

Bank of America
Bank of Tokyo-Mitsubishi UFJ Ltd
Barclays Bank plc
BNP Paribas
Citibank NA
Credit Agricole CIB
Credit Suisse
Deutsche Bank AG
JP Morgan Chase
Lloyds Banking Group
Royal Bank of Canada
Société Générale
Sumitomo Mutsui Banking Corporation Europe Ltd (SMBCE)
The Norinchukin Bank
The Royal Bank of Scotland Group

It is important to note that of these 17 banks that colluded to set phoney LIBOR rates, 9 of these banks are "Authorized Participants" colluding to rig the gold and silver markets in the phoney Gold and Silver ETF's (GLD & SLV).

Like a tidal wave as it approaches shore, the scandals are mounting.

I do not know how long it will take for investigators to finish their work, nor do I know if the banks will be successful in bribing them to overlook their crimes. Many of the chief investigators are ex-employees of those same big banks, and I suspect that they are still on the payroll using a Swiss bank account. Nonetheless, I do see this as the greatest hit yet to the foundations of Babylon.

It looks like LIBORation Day is drawing closer.

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Category: News Commentary

Dr. Stephen Jones

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