• Latest News
  • Pitch a Story
  • Work with a Journalist
  • Join the Blog Squad
  • Afghanistan
  • Africa
  • Asia
  • Baltimore
  • Canada
  • Egypt
  • Europe
  • Latin America
  • Middle East
  • Russia
  • Economy
  • Environment
  • Health Care
  • Military
  • Occupy
  • Organize This
  • Reality Asserts Itself
  • US Politics
  • Will Obama Admin. Prosecute the Big Banks for LIBOR Manipulation?

    Michael Greenberger: With Wall St.'s embace of Romney, Obama has nothing to lose prosecuting the big banks for the LIBOR fraud -   July 16, 12
    Members don't see ads. If you are a member, and you're seeing this appeal, click here


    Share to Facebook Share to Twitter

    I support The Real News Network because it lets viewers voice their uncensored opinions. - David Pear
    Log in and tell us why you support TRNN


    Michael Greenberger is a professor at theUniversity of Maryland School of Law, where he teaches a course entitled "Futures, Options and Derivatives."Professor Greenberger serves as the Technical Advisor to the United Nations Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System. He has recently been named to the International Energy Forum’s Independent Expert Group that provided recommendations for reducing energy price volatility to the IEF’s 12th Ministerial Meeting in March 2010. Professor Greenberger was a partner for more than 20 years in the Washington, D.C. law firm of Shea & Gardner, where he served as lead litigation counsel before courts of law nationwide, including the United States Supreme Court.


    Will Obama Admin. Prosecute the Big Banks for LIBOR Manipulation?PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.

    LIBOR, the London interbank offering, as people might know by now, is at the center of a scandal. That's the place every morning where the biggest banks in the U.K. and U.S., and I guess some others, get together and set the rate that they will loan to each other. And they are now accused of having manipulated that rate. And in England, Barclays has more or less admitted to it and paid hundreds of millions of dollars in penalty, although they still say they did nothing wrong, and American banks were up to their eyeballs in it and are now being sued by, amongst others, the City of Baltimore and other American cities, who claim they have lost millions of dollars as a result of this manipulation.

    Now joining us to talk about all of this is Michael Greenberger. He's currently a professor at the University of Maryland School of Law, where he teaches financial law, and he's a former division director at the U.S. Commodity Futures Trading Commission. Thanks very much for joining us again, Michael.


    JAY: So some people are suggesting what's gone on here is tantamount to a criminal conspiracy. Do you think that's true? And maybe in answering that, you can explain again what was going on here.

    GREENBERGER: Well, maybe I can give the latter first. Practically every interest rate benchmark on loans that are made to the tune of about $10 trillion worldwide were for derivative financial instruments called interest rate swaps, which [incompr.] $350 trillion notional worldwide. The measurement of the interest rate to be paid is established by something called LIBOR, or a sister benchmark, which could be EURIBOR, TIBOR for the Japanese.

    LIBOR is the benchmark at issue here. As you said, going back many years, every morning at 11 a.m. a panel of banks, sometimes 16, sometimes 18, submit the amount they estimate—and I underline the word estimate—that they will be charged by their fellow banks to borrow money from them. That benchmark is submitted to the organizer of LIBOR, which is the British Banking Association. And the BBA, in conjunction with Thomson Reuters, eliminates the top 25 percent interest rate settings and the lowest 25, then averages out the middle—say, if there's 16, you eliminate four at the top, eliminate four at the bottom, get eight in the middle, and that is the LIBOR rate for the day.

    Now, that LIBOR rate could be settling trillions of dollars of transactions for that day until the next LIBOR rate is set.

    The problem here is there are two sets of problems in terms of manipulating that rate. One set of problems—and this emanates from the Barclays disclosure—is that from 2005 to 2009, traders that had an interest in setting the rate at a level which would benefit their trades, bring them more money, were telling the members of the panel in their bank what to, quote, "estimate," for that day so that the bank [unintel.] fashion would come out ahead.

    A second problem is, during the 2007-2008 period, the rate that banks were saying they were being charged by each other was an indicator of the financial health of the bank. If the bank was saying it was costing them a higher interest rate to survive from day to day, they were (especially in United Kingdom) candidates for possible nationalization by the U.K. government. Barclays was on the hook as a possible candidate for nationalization, so they entered into some form of discussions with the U.K. regulators and said, look, if we come in very high, we're worried you're going to want to nationalize us, and by the way, we know that other panel members are not giving the proper interest rate they expect to be charged for the lower rate.

    So as an end result of these two different kinds of manipulation, the benchmark for determining the settlement of trillions of dollars of transactions was essentially rigged.

    Now, you asked the question: is this a criminal conspiracy? Well, let's take the word criminal first. There's no dispute this is a criminal problem. How do we know that? Because the United States Department of Justice entered into an agreement with Barclays and agreed that Barclays would not be prosecuted for criminal conduct if Barclays would pay $160 million to the United States and agree to a set of facts which clearly lays out criminal conduct. In other words, they are on the hook for criminal activity. But the United States has said because Barclays was cooperative and paid $150 million, they would be—prosecutorial discretion would be exercised and Barclays would not be prosecuted.

    So we have a criminal problem here. By the way, Barclays is probably the first in a row of settlements for prosecutions to be made. They've essentially agreed to [unintel.] to talk about what the other panel members were doing in terms of participating in this manipulative activity. And that's where you may begin to see a criminal conspiracy.

    JAY: Just let me jump in for a sec. We hear a siren in the background, and I should just alert viewers to the fact that these sirens are not police cars on the way to arrest bankers. I don't even have to investigate to know that's true. Go ahead, Michael.

    GREENBERGER: So you have, by virtue of this settlement by Barclays with the United States Justice Department, which has responsibility for prosecuting criminal manipulation, admissions here of wrongdoing which the Justice Department believes is criminal in nature. Barclays has, throughout, indicated that they are not alone in this venture, that other panel members, many of them U.S. bank holding companies, are guilty of similar conduct. So, yes, this is a criminal problem. No, it does not stop with Barclays. Yes, there will be further activity. On the civil side, we can expect the United States Commodity Futures Trading Commission, who settled with Barclays on the civil penalties side for $200 million, to be looking into other wrongdoing by other banks in conjunction with Barclays, and we can expect the Justice Department to be following suit on the criminal side.

    In the United Kingdom, the United Kingdom regulators, including the U.K. government, have said they are going to beef up their Serious Fraud Office and there will be criminal investigations in the United Kingdom. The Japanese are looking into this. The European Union is looking into this. The German government is looking into this. This is a very big deal. It affects the transactions of almost everyone in the world who borrow money from banks.

    JAY: Michael, there is some sense that the British authorities knew about this fairly early. And we interviewed Bill Black. He was saying there's some reporting that British authorities may have to some extent even connived in this for the sake of not allowing the British banking system to look too much in distress. We also know now that (and The New York Times reports this on Friday) there's been some earlier reports about this that Barclays—actually, an employee of Barclays informed the New York Fed while it was headed by Tim Geithner in 2007, and again Barclays told the New York Fed in 2008 that this was going on. The Times reports that the Barclays employees told the Fed, you can only guess or you would know why they want to lower these rates. So is the Fed to some extent implicated here? And what does it mean for Tim Geithner?

    GREENBERGER: I think that story has not fully been told yet. It's clear that Geithner wrote a letter to the sponsor of LIBOR, the British Banking Association, to the chief British regulator and financial services [unintel.] and the Bank of England and said all is not well here and recommended fixing it. Now, that fix was never made. But what we don't know is also the—as far as I'm concerned, and as history has now demonstrated this last week, the two enforcement agencies, at least in the United States, who had to do something about this were the Commodity Futures Trading Commission and the Department of Justice. What we do not know is whether—I do know, and it's being reported, that the CFTC opened its investigation in 2008, and because it was a complicated investigation, it took this time, from 2008 to last week, before they and the Department of Justice were able to settle.

    What I would hope has happened, at least within the United States, is that Geithner, in his capacity as president of the New York Fed, was either alerting the CFTC and the Justice Department or knew that the CFTC and the Justice Department were looking into this. That would have been an appropriate way to act and, as far as I'm concerned, would—he would have turned this over to the regulators, who we know from last week are responsible for cleaning this mess up.

    We don't know what Geithner said—at least, as I sit here, I don't know what he knew or what he said.

    JAY: And if he didn't do what you said—or even based on what we already know, some people are calling for Geithner's resignation. What do you think?

    GREENBERGER: Well, again, I want—before I start calling for resignations, I want to have the evidence in front of me. There is a nuanced problem here, which, frankly, I think needs to be aired, but I find not to be acceptable, is that the Bank of England, the Financial Services Authority in the United Kingdom, and the New York Fed in United States, they have been saying themselves the world is coming to an end, we have problem restoring confidence to the markets, now is not the time to reveal the fact that a worldwide benchmark for hundreds of trillions of dollars of transactions is being tinkered with, and by the way, this is actually helpful if we have reports that may not be truthful but restore confidence and avoid a worldwide depression.

    JAY: So a bit of convergence of interests between the banks who made money, whether they've made it go up or down, and then the political authorities don't want to add to the panic.

    GREENBERGER: Yes. I'm hoping that is not what the answer is going to be, because, you know, as history has shown in so many scandals, trying to kick the can down the road only burns you more severely than you would have been burned if you'd dealt with it immediately. I think the markets, given the fact that they were already in a state of disarray, could have handled that right. It will be a big embarrassment to Geithner, and possibly the president in the middle of a reelection campaign, to find out that this wasn't dealt with either on the civil side or the criminal side as the law was being revealed as being broken.

    Now, again I just want to say that the CFTC did begin to look at this in 2008. The settlement they derived—and they're bringing in the Justice Department—began with an investigation in 2008. My hope is—for the rule of law, if for no other reason—that Geithner knew that that was happening.

    JAY: Now, is the underlying problem here bigger than a scandal or some of the names we're talking about? I mean, is what really going on here is the big banks and the whole finance sector of the economy, in particular what people call the parasitical sector, have just become so politically powerful that they really have nothing to fear, so even if they get caught, they get a slap on the wrist, it's the cost of doing business, they pay a fine here and there, and merrily carry on to the next adventure?

    GREENBERGER: Again, I think you certainly can look at the Barclays situation as an isolated matter. And saying—for example, buying off prosecution that would put people in jail, for Barclays, to the tune of $160 million, is akin to you and I paying a traffic ticket to avoid going to jail. That was a very cheap price for them.

    Now, on the other hand, what this suggests to me is the—Barclays did do self-reporting here. They did come to the government and adduce this evidence. I think, and what I'm hoping is, as is true of all criminal investigations, you get one of the key actors to be on your side, given a grant of immunity, which effectively has been done here, and they then become your lead evidentiary source for going up the ladder and getting two others. And that's certainly what the Department of Justice—.

    JAY: So the theory is, Barclays turns on Goldman and JPMorgan and some of the others.

    GREENBERGER: Yeah. I think when you look at this and you understand the way complicated financial investigations are carried out, that makes sense. That's certainly what's being advertised here. Many people have said Barclays made a terrific mistake, they shouldn't have admitted anything, they shouldn't have settled. I think if, and what I expect is, at the end of the day, there will be a dozen banks implicated in this. Barclays, by getting in early and effectively turning state's evidence, will have handled this right.

    JAY: Now, given that both presidential candidates, President Obama and Mitt Romney, are kind of tripping over each other to try to get Wall Street money—and apparently Romney is now winning—but how likely are we to see a real vigorous prosecution of this?

    GREENBERGER: Frankly, I think, you know, whatever motivations President Obama may have had or hoped that Wall Street would be neutral or equally supportive of him and presidential candidate Romney have gone by the board. I think any hope now that President Obama will get funding from Wall Street if he pulls punches in this LIBOR scheme will be a double loss. One, he'll get no funding from Wall Street. They're fully committed to Republican agenda of no prosecution, no regulation. And it will very badly disappoint not only his base, but the American public as they are becoming understanding of this.

    It's another shoe that has dropped among many different shoes (the JPMorgan "London Whale" case and others) that the banking system is not one that should be supported. Its social value to the economy is very limited, 'cause these big banks have no interest in making loans to small businesses or individuals who are entrepreneurs. They really in their best sense should be a utility: they take in money, they hold it safely, invest it wisely, and make loans to businesses. That's not a rocket science.

    The banks don't want to do that. They want to have very risky bets à la the London Whale—now we know $4.4 billion lost to JPMorgan Chase. That's how they want to survive.

    Dodd–Frank has drawn the wagons around that. I think the American public have had it up to here with that. And it is instructive that in the United Kingdom both parties are now saying, we not only have to regulate the banks, but they're saying, we've got to shrink these banks, we've got to introduce new banks into the system, banks that will be focused on helping everyday citizens getting the loans they need to start businesses, buy homes, and go to school. There's no percentage anymore, I think, for politicians to be catering to the banks.

    JAY: Yeah. Well, we'll see whether President Obama listens to any of this, 'cause so far he certainly has not adopted this argument. But maybe things are changing. We'll see. Thanks very much for joining us, Michael. And thank you for joining us on The Real News Network.


    DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


    Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at


    Latest Stories

    The Resegregation of American Schools
    The Modern History of Venezuela, Why Still So Much Crime? - Edgardo Lander on RAI (7/9)
    What Role Has Russia Played in Eastern Ukraine?
    Can Johns Hopkins Afford to Pay A Living Wage? (2/2)
    University Sit-In Targets World's Largest Private Coal Company
    The Modern History of Venezuela and the Need for a Post-Oil Economy - Edgardo Lander on RAI (6/9)
    Can Johns Hopkins Afford to Pay A Living Wage? (1/2)
    One Percent of Environmentalists Killings Lead to Convictions
    Investigation Finds Former Ukraine President Not Responsible For Sniper Attack on Protestors
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Ukraine Transitional Gov't Moves Militarily To Reclaim Seized Buildings
    IPCC Report Flawed By Narrow Focus on Carbon Emissions
    The Modern History of Venezuela: The Bolivarian Revolution - Edgardo Lander on Reality Asserts Itself (5/9)
    Obama Signs Directives to Reduce the Gender Wage Gap
    Eastern Ukraine Lacks Political Representation in Kiev
    Demystifying the Role of Mitigation in the Most Recent IPCC Report
    Hypersurveillance State Won't Prevent Another Boston Marathon Bombing
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Univ. of Maine Faculty Reinstated After Students Protest Against Cuts
    The Modern History of Venezuela from 1908 to 1973 - Edgardo Lander on Reality Asserts Itself (2/9)
    IMF Will Address Global Inequality, Says Managing Director Christine Lagarde
    Raising Big Banks' Leverage Ratio Good, But Not Nearly Enough
    TRNN Replay: Austerity Road to 19th Century
    Has Palestinian Maneuvering Revived Peace Talks?
    Late Jackson Mayor Lumumba's Son Wins Primary to Replace His Father, Runoff Election Ahead
    Quebecers Reject PQ and Elect a Liberal Government Representing Big Business
    TRNN Debate: Decriminalization vs. Legalization
    The Beginning of the Chavez Era - Edgardo Lander on Reality Asserts Itself (4/9)
    "Off With His Head": Court Upholds Obama's Power to Kill
    Workers at Nation's Top Hospital Strike For Fair Wages
    From Exile to Radicalization in Venezuela - Edgardo Lander on Reality Asserts Itself (1/9)
    Rwanda 20 Years Later: Genocide, Western Plunder of Congo, and President Kagame
    Ukrainian Protesters in the East Demand More Autonomy From Kiev Government
    Hunger Strikers Demand President Obama Halt His Record 2 Million Deportations
    Indian Parliamentary Elections - A Primer With Vijay Prashad
    West Looks to Carve Up Ukraine & Privatize Industries Held by Kleptocrats
    Where Are Israeli-Palestinian Peace Negotiations Headed?
    The Multiple Kingdoms of Saudi Arabia (5/5)
    Do the Afghan Presidential Elections Signify Progress?
    Republican Presidential Hopefuls Pay Homage to Billionaire Casino Tycoon Sheldon Adelson
    Will Extremist Lieberman Become Israel's Next Prime Minister?
    Why do the Saudis Want the US to Attack Iran? (4/5)
    Immigrant Advocates and Families Tell President Obama 'Not One More'
    Elections, Pipelines, and Protests - The Canada Panel
    Chris Hedges on "Israel's War on American Universities"
    Baltimore Residents Decry Lack of Affordable Housing
    Yellen Talks the Talk But Will She Walk the Walk?
    Hopkins Hospital Workers Speak Out against "Poverty Wages"
    Will Venezuela's New Floating Exchange Rate Curb Inflation?
    The European Central Bank's War on Wages is Pushing Europe's Economy to the Brink
    Supreme Court Decision Opens Floodgates for More Campaign Cash
    Charles Keating, the Financier Behind the Savings and Loan Scandal, Dies at 90
    Saudi Arabia and the al-Qaeda Monster (3/5)
    Maryland Residents Voice Opposition to Natural Gas Fracking Export Facility
    Supreme Court Ruling Gives Wealthy Individuals More Influence Over Elections
    What are the Saudis Afraid Of? - Madawi Al-Rasheed (2/5)
    Baltimore's MICA Adjunct Professors Set to Vote on Unionization
    Boycott of Israel Moving to Next Level?
    Hypocrisy Dressed Up as "Realism" Justifies American Alliance with Saudi Dictatorship
    Immigration Reform in the Shadows of Cesar Chavez's Legacy
    Leaked Senate Report Shows Use of Torture As "Ineffective"
    UN Report Says Climate Change Will Threaten Food Production Worldwide
    The Hypocrisy of US Calling for Enforcement of International Law
    How the Ecuadorian Economy Grew in a Global Recession
    'Shadows of Liberty' Trailer
    Kristina Borjesson on Why CBS Shut Down Her investigation into Flight 800 (2/8)
    Glen Ford on Racism in the American Media (3/8)
    Paul Jay on What Drives Corporate Media and What Drive The Real News (4/8)
    Creating a New Media Paradigm After Citizens United (5/8)
    Should The Left Engage with the Mainstream Media? (6/8)
    What Is the Financial Backing For The Real News? (7/8)
    Standing up to Character Assassination (8/8)
    Oligarchs, Fascists and the People's Protest in Ukraine
    TRNN Debate: Is Obamacare In the Interest of Workers?
    Too-Big-To-Fail Advantage Remains Intact For Big Banks
    Obama and the Saudi Agenda
    TRNN Replay: Investigating the Saudi Government's 9/11 Connection and the Path to Disilliusionment - Sen. Graham on Reality Asserts Itself pt 1
    The Iraq War's Real Legacy
    Petitions with 100,000+ Signatures Call for Snowden's Passport to be Reinstated
    We Need to Harness People Power - Andy Shallal on Reality Asserts Itself (4/4)
    BC Pipeline Fight and Quebec Elections - The Canada Panel
    Jonathan Schell - 1943-2014: Board Member of TRNN on Why We Need The Real News
    Teachers on Strike from the UK to Argentina
    Connecticut Poised to Become First State with $10.10 Minimum Wage
    Oil Spill Threatens Wildlife and Local Economy
    DC School Test Scores Up, But Poor Black Kids Are Doing Worse - Andy Shallal on RAI (3/4)
    Obama's Proposal To End NSA Bulk Data Collection Won't Protect Privacy
    How Google, Apple & The Biggest Tech Companies Colluded to Fix Workers' Wages
    An American Should be One that Questions Their Government - Andy Shallal on RAI (2/4)
    What's Driving Putin & Obama's Posturing on Ukraine?
    Hundreds of Students & Faculty Occupy College Campus to Fight Cuts to Public Higher Ed
    Due Process 'Impossible' In Harsh Death Sentencing Of Over 500 Muslim Brotherhood Members
    Has Anglo-American Capitalism Run Out of Steam?
    Being the "Other" in America - Andy Shallal on Reality Asserts Itself (1/4)
    TRNN Debate: Should Baltimore 'Ban The Box'?
    How Fallujah Became the Iraqi Government's New Battleground
    Why I Decided to Blow the Whistle on the NSA
    NASA Climate Predictions Show Serious Threat To Humanity
    Professor Who Teaches Israel-Palestine Conflict Accuses College of Violating His Academic Freedom
    CIA and NSA Wrongdoing Requires Independent Investigation, Says Former Church Committee Staff
    Are Tuition Breaks Enough To Combat High Student Debt And Low Graduation Rates?
    Industries Across the U.S. Are Stealing Wages From Their Lowest Paid Workers
    Who In Ukraine Will Benefit From An IMF Bailout?
    NSA Recording All International Calls From U.S.
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (2/2)
    BP Gets Green Light to Drill in Gulf, But Has Safety Improved?
    Residents Still Not Drinking Tap Water Two Months After West Virginia Spill (1/2)
    Libya's Descent Into Turmoil Three Years After NATO Intervention
    From Pipelines to Peladeau - Canadian Report
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (1/2)
    Congressional Progressive Caucus Budget Strikes Back Against Austerity
    Libya Three Years Later - Chaos and Partition
    Why Was Gaddafi Overthrown?
    Should Ukraine and West Accept De Facto Crimea Joining Russia? (2/2)
    Tony Benn Saw Socialism as the Culmination of Democratization
    Why Didn't Bush/Cheney Attack Iran and Can Obama Make and Sell a Deal? - Gareth Porter on Reality Asserts Itself (3/3)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi? (2/2)
    Crimea Referendum: Self Determination or Big Power Manipulation? (1/2)
    Sen. Graham: President Must Side with Openness About CIA and 9/11
    Manufacturing a Narrative for War - Gareth Porter on Reality Asserts Itself (2/3)
    Protesters Hit the Streets of Brooklyn to Demand $15 Minimum Wage
    Hammer: 'Moral Bankruptcy' Behind Massive GM Recall
    White House Withholds Thousands of Documents from Senate CIA Probe
    I Grew Up Believing in Time Magazine's Version of America - Gareth Porter on RAI (1/3)
    Western European Banks Vulnerable to Ukrainian Sovereign Debt Crisis
    TRNN Debate: What's Driving Inflation in Venezuela? (2/2)
    CIA vs. Senate: Who Is Obama Protecting?
    Will Tipped Workers Get Excluded Again From Minimum Wage Hike?
    TRNN Debate: What's Driving Inflation in Venezuela? (1/2)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi?(1/2)
    TRNN Replay: A Look at Who's Poised to Become No.2 at the Fed
    How Right-Wing Nationalism Rose to Influence in Ukraine (2/2)
    Netanyahu Attacks Boycott As Campaign Enters New Phase
    Moving Towards a Police State - Michael Ratner on Reality Asserts Itself (7/7)
    Fighting Reagan's Secret, Illegal Wars - Michael Ratner on Reality Asserts Itself (6/7)
    Puerto Rican Independence Movement and Cuba Further Radicalized Me - Michael Ratner on RAI (5/7)
    The Butcher of Attica - Michael Ratner on Reality Asserts Itself (4/7)
    MLK and a Radicalizing Moment in American History - Michael Ratner on Reality Asserts Itself (3/7), Real News Network, Real News, Real News For Real People, IWT are trademarks and service marks of IWT.TV inc. "The Real News" is the flagship show of IWT and Real News Network.

    All original content on this site is copyright of The Real News Network.  Click here for more

    Problems with this site? Please let us know

    Linux VPS Hosting by Star Dot Hosting