Libor Lie A Black Swan?

Gold Kiwi · Jul 16, 2012

http://usawatchdog.com/libor-interest-rate-rigging-scandal-a-black-swan/

In a financial system reeling from one fraud after another, this is the mother of all rip-offs by the banksters. Karl Denninger of Market-ticker.org calls this, "the largest organized theft ever committed in human history." This has already brought out lawsuits by the dozens from investors and institutions who say they were cheated by Libor rate rigging. Who's suing the big banks? A better question might be who's not suing? ...

Several state AG's are also suing, right alongside municipalities and cities around the country, and that is just in the U.S. Remember, this scandal is global. Hedge funds trading in derivatives are going to line up to sue the big banks if they were on the losing end of a trade. Libor affects $550 trillion in derivative contracts. Some investors got hurt when Libor was manipulated up, and some took losses when Libor was manipulated down. There is something for everyone, and that equates to very big exposure to the banks involved in the alleged rate rigging. If the banks are responsible for just 1/10 of one percent of the $800 trillion in Libor transactions, it would represent $800 billion in liability to the banks. I'll bet the total cost will be much higher, and some banks will go under as a result of litigation and loss of reputation. Ron Hera of Hera Research told me last week, "Truth is, if you take back more than 1% of what the banks have stolen, they're busted."

On top of that, there are going to be big fees paid to lawyers to defend lawsuits against the big banks. There are going to be fines and penalties paid by the banks. (Barclays paid more than $450 million in the UK to settle rate rigging charges.) There will also be loss of business to the banks involved in the scheme. There will surely be derivative contracts voided because rates were rigged and were not the honest interbank lending rates those contracts were based on....

The cheap Libor rates also made the big banks look more solvent than reality because they were understating their funding costs by rigging low rates... How solvent will the big banks appear when rates are no longer manipulated downward?

Another unintended consequence of the exposure of the Libor rate rigging scandal may have an effect on the value on the almighty U.S. dollar. Rob Kirby wrote a great piece you can read at Goldseek.com that said, "Libor . . . is one of the lynch pins in setting [rigging] global U.S. Dollar interest rates. This is why a larger discussion needs to be had about the Libor rigging it is not a London or Barclay's centric story. It has EVERYTHING to do with making the American Dollar look viable as the world's reserve currency." How are the U.S. dollar and Treasuries going to fare when the manipulation of Libor stops cold?
Click to expand...

Log in or Sign up

Libor Lie A Black Swan?

Gold Kiwi New Member Silver Stacker

Share This Page

Log in or Sign up

Libor Lie A Black Swan?

Gold Kiwi New Member Silver Stacker

Share This Page

Useful Searches