Your Retirement for a Bottle of Champagne: How Wall Street Fraudsters Ripped You Off, Again
Just as you’re struggling to finance a summer vacation, or simply to pay the freaking rent, how would you like to open your wallet and hand over a wad of cash to a gang of international con artists who commit fraud as casually as they order a five-course dinner?
Really? That’s how you feel about it? Well, tell it to the U.S. Department of Justice, because that’s just what’s going down as a result of the LIBOR scandal.
To recap: Bank hustlers manipulated the world’s most important set of benchmark interest rates and thereby impacted the prices of upward of $500 trillion worth of financial instruments. The LIBOR scam devastated state and municipal budgets, squeezed pension yields and ripped off bank shareholders. In a case of jaw-dropping fraud, greedy traders rigged up the benchmark so that they could cash in on bets on derivatives, while banks submitted fake numbers to make themselves look financially healthier. One Barclays official was fond of fudging numbers in exchange for champagne. “Dude…I owe you big time!” gushed a trader in an email to Barclays’ Mr. Fix-It. “Come over one day after work and I'm opening a bottle of Bollinger."
That’s right. A bottle of bubbly for a scam that screwed your grandma on her retirement savings. Retail bank certificates of deposit, you see, are very popular with senior citizens, and they are priced based on LIBOR benchmarks. As Alexander Arapoglou and Jerri-Lynn Scofield have explained on AlterNet, that alone could cause Grandma’s income to drop by as much as 2 percent. It ain’t like she didn’t need the money! That's not even counting what happened to her pension -- or yours.
LIBOR was, in the opinion of many, the con of the century. But is it a crime without punishment?
About a month ago, the Wall Street Journal reported that a federal court judge had let several banks off the hook, dismissing claims that 16 banks targeted by lawsuits had broken federal antitrust laws by rigging LIBOR. As Matt Taibbi explained in his must-read article on the banking scandal, the federal judge bought the banks’ ridiculous blame-the-victim story that if cities and towns and other investors lost money over LIBOR rigging, it was their own fault. Why would they think the banks were competing, rather than, um, “collaborating”? A collaborative cheer sounded in bank boardrooms around the world, because unless the plaintiffs can win on appeal, the ruling significantly reduces what banks would potentially have to pay for wrongdoing.
Some people in the state of Oregon are feeling just a bit riled by this state of affairs.
New research shows that the state of Oregon alone lost at least $110 million as a result of the LIBOR scam. The research on Oregon is based on an analysis of monthly investment data provided by State Street Bank, the custodian bank for the State of Oregon. On Friday, the Oregon Working Families Party joined a coalition of labor and community leaders to call on Governor John Kitzhaber to sue the Wall Street banks responsible for the costly fraud. According to a statement from the WFP, Oregon has not filed a single lawsuit in connected to LIBOR. The governor remains mute on the issue.
“Wall Street just robbed us again. When are our leaders going to stand up for Oregonians to bring some of our money back home?” said Steve Hughes, state director of the Oregon Working Families Party. “This ain’t chump change either—with $110 million Oregon could literally double its contribution to the Oregon Opportunity Grant to help more Oregon students get a college education.”
Joe Dinkin of WFP told me in an email that despite the recent federal ruling, "other legal avenues for recovery remain open under both federal Securities Act and state law." He adds that "nearly all of Oregon's losses were in securities investments, so fraud claims pursuant to the federal Securities Act could allow state to recover losses."
Oregon is hardly alone in its troubles with LIBOR. Last year, political economist Thomas Ferguson traced out how cities and states around the country had lost billions over the years on swaps, many of which also are tied to LIBOR in one way or another.
According to Bloomberg, U.S. prosecutors are pursuing guilty pleas, criminal convictions and fines from banks in a global investigation of the fraud. That might be reassuring, if it weren’t for that small matter of Attorney General Eric Holder recently telling Congress that the size of financial institutions has had “an inhibiting impact” on prosecutions against them. In other words, too-big-to-fail is too-big-to-jail. In a recent article, Pam Martens asked a burning question: Is the DOJ deliberately stalling on bringing charges against U.S. banks connected to LIBOR, namely JPMorgan Chase and Citigroup?
Meanwhile, the riggers continue to rig, and the regulators sit around scratching their heads. And as for you and me? That part is easy: We get fleeced.
Perhaps you’d like to ask officials in your own state what they are doing about LIBOR. But also ask how many banks and financial companies contributed to their most recent election campaigns, and how much they accepted from national party oriented groups that help raise money from banks and their executives for state officials’ campaigns, like the Democratic Governors Association, the Democratic Attorneys General Association, and their Republican counterparts.
Interestingly, Oregon Governor John Kitzhaber received large contributions from the DGA when he ran in 2010. Perhaps that has something to do with his silence on LIBOR.