How Long is “Long Term”?

The news that a banker is being prosecuted in London for manipulating the LIBOR rate will be welcome by those who think that the banks have got off their criminal and fraudulent behaviour rather lightly. However we have to look at the root causes of why bankers manipulate FOREX and LIBOR rates. Greed is always a factor but there is, I believe, a structural problem with the way that we organise our capitalism.  Continue reading

Fining Yourself

Can someone please explain to me the logic of fining the Royal Bank of Scotland? The bank has been undertaking some troublesome practices again.  The Financial Conduct Authority has found that more than half of the customers that the bank advised about mortgages, debt consolidation and the affordability of prospective mortgages were given the wrong advice. Presumably the advice was wrong for the customers but not wrong for the bank, and so the FCA has fined the bank £20.7 million with a discount of 30% if the banks pays the fine promptly.  Continue reading

LIBOR – The Stables are still Filthy

If you borrow money at an interest rate that is linked to something, then you have to understand the thing to which it is linked. If you were to borrow money linked to the base rate of a major bank (or one of the base rates of a major bank) you will know that the rate you pay will rise and fall. You rather put yourself into the hands of the bank and the market. If the bank’s base rate to which your interest rate is linked, is also a base rate that is used to attract deposits to the bank, then your interest will fluctuate more or less in line with the market.
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The “help yourself” bank

The Royal Bank of Scotland is one of the United Kingdom’s largest banks. A few years ago it became insolvent and by any normal rule of business, if the shareholders were unable or unwilling to support it, the bank should have gone into insolvent liquidation. However, irony of ironies, the government deemed the bank too large to fail and supported it with so much cash that the government (or taxpayers more accurately) now owns 81% of the bank. Continue reading

The Crooked Traders of london

Back in 1964 a labour politician George Brown, who was Deputy Leader of the Labour Party coined the phrase “Gnomes of Zurich”. He meant, of course, the Swiss bankers and their client speculators (who came from all over the world) who decided, rightly in retrospect, that the British Economy was not all it was cracked up to be and that the British pound was overvalued.  These speculative activities ultimately resulted in the pound in our pockets being devalued and somehow the blame was the fault of the gnomes who lived and worked in underground vaults of the Swiss banks who held the secret funds of people all over the world, including those of the wealthy British.

Banks, like the leopard cannot change their spots and like the Ethiopian cannot change their skins. They are founded to make money by borrowing and lending for a profit and by speculating and trying to outsmart other banks. Sometimes they act as principals and sometimes as mere brokers; they rarely act with principles and often their broking is aimed to break something.

In the recently discovered LIBOR fraud we have found that the banks are alleged not to have returned true figures for the rates at which they were lending to each other, thus over charging the poor fools who borrowed at rates fixed to LIBOR or short changing those other fools who lent at rates fixed to LIBOR.

Bloomberg has reported that transcripts have been brought into the cold light of day which show just how casual and widespread the fraud was; the following is part of a transcript of a conversation when a Royal Bank of Scotland trader was supposed to be returning the actual rates of LIBOR for the actual deals that the trader had made:

Q “What’s the call on LIBOR?”

A “Where would you like it, LIBOR that is?”

Q “Mixed feelings but mostly I’d like it all lower…” –

A “Ok, I will move the curve down 1 basis point, maybe more if I can.”

There are trillions of pounds of transactions by commercial borrowers and lenders that depend on LIBOR being exactly what it says on the tin – the London Inter-Bank Offered Rate.

One thing is certain; as criminal as this behaviour is, no one in the British Banking system will go to prison for the fraud; directors and senior managers will remain untouched but doubtless some overpaid underling will be found responsible and the bank will publish statements of extreme regret that these oversights, from which they have profited, could have occurred.

The threat is not from the gnomes of Zurich but the crooked traders of London.

The Banking Crisis Rumbles On -the Real Problem the Banks Face

The Chairman of Barclays has resigned; one of the great and the good, who also serves of the board of the BBC has said that the buck stops with him, but it is not as simple as that. The buck also stops with many others. I do not expect Mr Diamond to last much longer and fully expect a number of people at Barclays to eventually have their collars felt by the long arm of the law, just as soon as the police and the prosecuting authorities can get their heads around what has happened.  Continue reading

Our Crooked Banks

Banks Cheating? My goodness me. Surely not? Who would have thought that British Banks, established for centuries and servants of the economy their executives honoured and feted and given extreme wealth, would ever resort to rigging markets?

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