Systemic Corruption

M

Musburger

500+ Posts
Just a few items from the past week or two.
1. LIBOR - The apparent coordinated manipulation of interest rates by 16 of the worlds largest banks by misrepresenting lending rates. Not only were these banks involved, but indications are with the full knowledge of both the Bank of England and the Federal Reserve. This practice was systemic well before 2008 and Tim Geithner was cognizant of this at the time he served at the New York Federal Reserve branch.

2. Manipulation of the interest rate paid to recipients of Municipal bonds. To my knowledge, Taibbi is the only one that covered this one. Large banks colluded to bid low at auctions. This cumulatively resulted in skimming billions of dollars over a decade.

3. JPMorgan energy scandal (link). This may get some play. Allegedly the big bank skimmed around $57 million from the people of California.

4. The London Whale (JPMorgan) - Don't know that there was necessarily criminal activity here, but certainly when you lose $5 billion on what was supposedly a hedge, something is amiss.

5. MFGlobal - Going back several months here, but the criminal involvement of CEO Jon Corzine has gone unprosecuted and largely uninvestigated. No clawbacks for Jon.

6. PFGBest - Similar to MFGlobal. The culprit will be punished in this instance, but the lack of regulatory awareness is alarming.

7. HSBC - the largest bank in England has been forced to admit involvement in money laundering for drug cartels. They said they are sorry though.

The first case is the most alarming, simply because it illustrates the pervasiveness of the corruption reaches all the way to the Bank of England and the Federal Reserve. In virtually all these instances (except for small PFGBest which doesn't have the political clout) there are no criminal prosecutions. Generally, the authorities look the other way; perhaps issue fines, and allow the perpetrators to go about their business.

Charles Hugh Smith delves further into systemic corruption in today's entry.

In reply to:
 
I think this touches on so much of what we debate on this site.

When I think of Dem's efforts to use regulation (EPA/SEC etc) to set limits on Corporations, I see the government as reigning in these type of abuses.

Many of you that seem to lean further right, seem to see 'corporations' as the mom/pop small to medium enterprises.

I would suggest that the greed and the disconnect between a businesses effort to make a profit and the consequences for others (the country, customers, employees) rises relative to the size of the company and the profit to be had.

So both characterizations of 'corporations/businesses' are right IMO. So how do we distinguish and regulate the greedy and criminal without sapping/limiting the energy, initiative and enthusiasm of businesses that are simply doing the best they can to succeed but still playing by the rules?
 
Read CHS Of Two Minds blog every day. Thanks for posting Musburger. He usually has some very insightful information that makes you think outside the box. Not the same old MSM garbage.

I agree with all of the scandals you've highlighted at the beginning of your post. I'm wondering if anything will change significantly for the better within our lifetime in regards to systemic corruption that appears to be pretty darn obvious on multiple levels with the Fed and the TBTF bankers.

One analyst and trader who's articles I frequently read is Jim Willie. He has a different writing style compared with Charles Hugh Smith and he's pretty blunt and can be viewed as over the top, but his prediction of the 2008 financial collapse and his assessment of collusion and corruption have been spot on. I'm certain a lot of his claims presented in his articles would be scoffed at by the general public and most on the WM here.

With regards to the LIBOR scandal he presents the following:

"LIBOR CONNECTED TO INTEREST RATE SWAPS

The annual now chronic $1.5 trillion USGovt deficits must be financed. They should be financed at a Spain-like 7% yield. The two nations have equally wrecked finances and an equal unemployment rate. But doing so would be far too disruptive. But doing so would be far too costly. But doing so would take away the wellspring of cheap money for the speculation. The big banks enjoy a brisk carry trade off the USTreasury curve that makes easy profits. No other industry is granted such risk free profits. So enter the IRSwap to generate an artificial USTBond rally from a phony engineered flight to safety. The thought of a flight to the safety of massive uncontrollable USGovt toxic debt pit is laughable on its face. The LIBOR price rig has enabled virtually free funds for the IRSwap that supports the vast 0% USTBond tower."

"The next connection will soon be revealed. The IRSwaps are fed by the deep source fountain of LIBOR, at virtually free cost. It bears repeating. Too much attention is given to the adjustable rate mortgage feeder process. Not enough is given to the derivatives that are abused by the financial sector in unregulated shadow systems. The big banks have sold too many multiples of Credit Default Swap insurance, to the point that both counter-parties are dead. No net neutrality is a reflection of reality. Too legless swimmers do not rescue each other in the deep waters. They both drown, just like the bank parties involved. However, the big story is the Interest Rate Swap contracts, those arbitraged long-term bond swaps versus short-term bond swaps that enable free money to finance the levers that control the long maturity for the USTBonds. Anyone who believes the TNX fell from 3.6% in 2011 to under 1.8% was from a flight to quality is either drinking Wall Street kool-aid or duped by their marketing flyers or captivated by media propaganda or just plain stupid. The vested interest in watching the 10-year USTBond yield go into ultra-low territory is all very understandable. Many financial asset prices depend upon a low benchmark bond yield."

"But the reality is that foreign creditors abandoned the USGovt debt auctions. The reality is that primary dealers to those auctions found themselves stuck with inventory. The reality is that an avalanche of USGovt debt supply could not be handled with absent demand. The reality is that the USGovt borrowing costs required, if not demanded, ultra-low yields to prevent a worse explosion in deficits. The only true aspect of the flight into USTreasurys is that the European sovereign bonds have turned toxic. But the Europeans are far more likely to purchase German Bunds, and they have, driving their yields lower than the USTBonds. Some arbitrage has pulled the two to almost equal, evidence that IRSwaps are at work in the Bund backyard. The story will come out soon enough, how the LIBOR rate was rigged extremely low in order to facilitate management of the ultra-low 0% Fed Funds rate, and to enable the IRSwaps to do their magic in keeping down the long-term USTBond yield. The LIBOR has been and continues to be the feeder system for the IRSwaps that enforce the 0% and 1.5% yields on FedFunds and TNX. The factor is mentioned on financial networks with quick passing and no emphasis. They still sell the flight to safety rubbish story."
The Link
 
The Republican voters are more concerned about the abuses of the illegal immigrant and those on welfare that they don't even look at the abuses being committed by large corporations. As far as the banking industry there seems to be some pretty simple steps that could be taken. Go back to separating the investment firms from the lending institutions. Don't allow them to overleverage themselves. Get rid of the derivatives market all together.....what benefit does it serve?
 
The problem is hornpharmd that many folks who vote for both parties are blind to the systemic corruption, because they are too bombarded with all the propaganda supplied by the controlled MSM and are distracted from the real issues.

As Musburger alluded to, most of the problem isn't necessarily lack of regulations per se, it's been has been the lack of enforcement of those regulations, since the regulators have been in bed w/the big banks. Honesty, integrity and ethics are sorely lacking in all areas of govt. and several industries that benefit from govt. subsidies.

But as you say, going back to restoring portions of Glass-Steagall would be a start. Any credible economist or finance expert has emphatically urged for this that has written or reported about the events leading up to the financial crises. We had decades of no financial problems in the markets while Glass Steagall was in place and within less than 10 years of it's neutering, we have financial calamity. That should be a hint that something is amiss.
 
Sorry, that some people in this country want to curb the abuse in the welfare system and have it provide for who it was intended to provide for, sorry for that.

So you want Glass Steagall re-enacted?
 
For more on systemic corruption, check out the following video clip (23 minutes), with the sobering assessment toward the end of the clip that without systemic fraud, the financial system would implode.
Link
 
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