London Interbank Offered Rate – let the games begin

“In virtually all transactions we rely on the word of those with whom we do business.” - Alan Greenspan, former chairman of the Board of Governors of the U.S. Federal Reserve

What happens when those with whom we do business lie?

Routinely. Habitually. Endlessly. For profit.

In the years leading up to the financial crisis of 2008, rigging the LIBOR, the rate at which banks agree to loan one another money, was “common and pervasive,” according to a report by the Commodity Futures Trading Commission.(click here for a previous report)

Thus, the fundamental assumption about transactions tied to the rate, in which even the tiniest fluctuations can mean that billions – even trillions – will change hands, was on any given day a stinking lie.

Barclays Bank, with headquarters in foggy old London town, has agreed to pay nearly a half billion in fines for the practice of lying about what bankers estimated would be the cost of borrowing money on any given day, the LIBOR.

It's only the single most important set of numbers in the global financial system.

According to financial analyst James Surowiecki, “Hundreds of trillions of dollars in derivatives, corporate loans, and mortgages are pegged to these rates...The estimates aren't audited. They're not compared with market prices. And LIBOR is put together by a trade group, without any real supervision from government regulators. In other words, manipulating LIBOR didn't require any complicated financial hoodoo. The banks just had to tell some simple lies.”(click here for a similar report)

How did they inflate, then pop the bubble for profit?

That's easy enough to explain. They allowed mortgage brokers to lie about the worth of real estate and the ability of buyers to repay the loans they made on properties, then they accepted the inflated appraisals tendered by crooked real estate operators. With that bogus information in hand, they loaned the money to people they knew could not pay them back.

That's when they insured those bad bets with government guaranteed and insured contracts.

All that bad paper was “packaged” into blocs of 10,000 or more, then sold to investors as “derivatives” which paid off so much more if the bogus rate of borrowing money from other banks went above a certain fictitious mark. The traders collected their percentage on the trades, then sat back and waited for the loans to go belly up as contract after contract resulted in foreclosure.(click here for a report on a local angle to this conundrum)

Then they took their profits in insurance settlements – at the expense of the taxpayers. That's how you let the market regulate itself. Talk about cowboy capitalism. Yee-ha!

Because the neoconservatives had paid off Congressmen and Senators to play dumb, and allowed banking regulations to be altered to the point where institutions were not required to keep separate their customers' deposits and investments from their speculative trading funds, the institutions were suddenly in danger of failing.(click here to learn how it was done)

So, the neconservative government honchos paid a little more to the crooks under the double dome and loaned themselves some more taxpayer money to “bail out” their own crooked companies.

How do they finance all that? They sell bonds to cash-rich nations such as China, South Korea, Japan, and others, nations who have been given “most favored nation” status by which they reap huge benefit through greatly reduced import duties. Hence, whatever it is, we don't make it here any more. It's just not profitable enough to even get involved. Besides, at this rate, the Chinamen will allow Wal-Mart to dictate the prices they will pay. Who cares, huh?

Meanwhile, the U.S. Treasury continues to print trillions of dollars that are worth only “the full faith and credit” of the U.S. Treasury. The dollar becomes less and less of what it once was.(click here for the definition of a constitutional dollar)

The end result is that many millions of families are now without the means to accumulate wealth through home ownership. Their American dream got sawed up and lumbered.

Even more millions of American families have no prospect of ever achieving that dream, their futures having been mortgaged to the future ability of several generations as yet unborn to be able to pay off this huge and bogus debt, all of which is based on a pack of lies told by a tiny minority – less than one percent - of the working force of the United States of America. What to do? Would you consider these crimes as important as, say, sales and possession of marijuana?

Put some crime scene tape around Wall Street and bring the malefactors to justice. After all, we seem to have a surplus of space in our jails. The hustlers in wing-tips want to rent it go guess who? The American taxpayers, that's who. (You know the drill.)

“For some tips on how to do this, they might look to the way that American police forces have dramatically lowered big-city crime rates,” saith Mr. Surowiecki.