Numerous people have asked me to comment on the LIBOR rate-rigging scandal. I have not done so previously because I had little to add.
Zerohedge has done a fine job breaking every story. So have others.
I prefer to comment when I have an edge of some kind: a different angle, a different source, or if I can offer a more comprehensive analysis than other writers.
As pertains to LIBOR, I still have no earth-shattering reports or breaking news. Rather, I am commenting because of repeated questions as to where I stand on the story.
Given the nature and magnitude of the story, that is a fair question from readers.
Criminal Investigations Pending
Before discussing where I stand, let's consider the latest headline from the New York Times: U.S. Is Building Criminal Cases in Rate-Fixing
As regulators ramp up their global investigation into the manipulation of interest rates, the Justice Department has identified potential criminal wrongdoing by big banks and individuals at the center of the scandal.What is LIBOR?
The department’s criminal division is building cases against several financial institutions and their employees, including traders at Barclays, the British bank, according to government officials close to the case who spoke on the condition of anonymity because the investigation is continuing. The authorities expect to file charges against at least one bank later this year, one of the officials said.
Authorities around the globe are examining whether financial firms manipulated interest rates before and after the financial crisis to improve their profits and deflect scrutiny about their health. Investigators in Washington and London sent a warning shot to the industry last month, striking a $450 million settlement with Barclays in a rate-rigging case. The deal does not shield Barclays employees from criminal prosecution.
The multiyear investigation has ensnared more than 10 big banks in the United States and abroad. With the prospects of criminal action, several firms, including at least two European institutions, are scrambling to arrange deals, according to lawyers close to the case. In part, they are trying to avoid the public outcry that stemmed from the Barclays case, which prompted the resignation of top executives.
Given the scope of the problems and the number of institutions involved, the rate-rigging investigation could provide a signature moment to hold big banks accountable for their activities during the financial crisis.
“It’s hard to imagine a bigger case than Libor,” said one of the government officials involved in the case.
According to people briefed on the matter, the Swiss bank UBS is among the next targets for regulatory action. The Commodity Futures Trading Commission is pursuing a potential civil case against the bank. Regulators at the agency have not yet decided to file an action against the bank, nor have settlement talks begun.
UBS has already reached an immunity deal with one division of the Justice Department, which could protect the bank from criminal prosecution if certain conditions are met. The bank declined to comment.