libor traders rbs citigroup

Whistleblowers Reveal Banks Orchestrated Coverup
whistleblower coverup promontory

Rain Man Claims LIBOR Scandal Goes Much Higher

Rot at the top is enabled by blindness at the bottom. We excerpt two 2013 articles and one old one from: (1) Reuters, Feb 9, on LIBOR by D. Enrich; (2) Alternet, Feb 12, on Bank of America by Y. Smith; and (3) Newport Daily Express from over a year ago (2011, Dec 28), on how to cut mortgages and keep money from banksters by C. Roy.

by David Enrich, by Yves Smith, and by Christopher Roy

Many anonymous traders are implicated in the tall stack of documents regulators published this week detailing Royal Bank of Scotland's attempts to rig the lending benchmark known as Libor. But only one trader is cited by name: a 33-year-old so brainy yet socially awkward that colleagues nicknamed him “Rain Man.”

John Hayes often acted with the knowledge of bosses mindful of his ability to rack up big trading profits. When Citigroup in 2009 sought to lure him away from UBS with a $5 million job offer, some at UBS fought to keep Hayes. His “strong connections with Libor setters in London [are] invaluable,” his boss wrote in an email to executives, including one who now runs the bank’s noncore division.

Citigroup hired Hayes and remains under investigation by the U.S. and British authorities.

UBS, meanwhile, in December became the second bank, after Barclays PLC, to settle Libor-rigging allegations, paying $1.5 billion to U.S., U.K. and Swiss authorities. The UBS Japanese unit where Hayes worked pleaded guilty to U.S. fraud charges.

In a text message to The Wall Street Journal, he said: “This goes much much higher than me.” Jennifer Arcuri, a friend of Hayes’s, said trying to rig Libor “was common industry practice.”

“Who was I to question what they were doing? I thought it was weird, but that’s how they did it,” Arcuri recalled Hayes’s having told her. Within a few months, based on practices at the bank and feedback from his bosses, Hayes considered it part of his job, said a person familiar with his thinking.

Hayes’s boss was aware of his actions, according to the Justice Department.

Many UBS derivatives traders and managers “were involved in the manipulative conduct,” the U.S. Commodity Futures Trading Commission said in December.

Each morning at a meeting of UBS’s interest-rate-derivatives desk in Tokyo, Hayes told colleagues which way he planned to push Libor that day, according to the Justice Department. Hayes was so open about his strategy that he would change his status on his Facebook page to reflect his daily desires for Libor to move up or down, said a person familiar with the matter.

Though generating tens of millions of dollars a year in revenue, he worried his bosses weren’t satisfied. “Have had ok year but management still pushing me for more,” he wrote to a trader at another bank in November 2007, according to the CFTC.

As Hayes brought in more revenue, UBS loosened the reins. The bank let him take so much risk that he could lose up to $3 million for every hundredth of a point rates moved, said people familiar with the matter.

He caught the attention of rival banks. Goldman Sachs put out informal feelers about hiring Hayes, according to people familiar with the matter.

To read more

JJS: Scapegoating one guy protects those above him. So does influencing any investigation.

On January 7, 2013, ten servicers entered into an $8.5 billion settlement with the Office of the Comptroller of the Currency and the Federal Reserve.

Almost certainly it will result in small payments being made to large numbers of borrowers, irrespective of whether they deserved vasty more or nothing at all.

The fees to the major firms engaged to conduct the reviews are so patently out of line that Caroline Maloney, a senior member of the House Financial Services Committee, has launched an inquiry.

The “independent” foreclosure reviewer, Promontory Financial Group, occupies a unique role in Washington, DC. The firm, headed by former Comptroller of the Currency Gene Ludwig, is heavily staffed with former senior and middle level banking and securities regulators. For instance, former OCC chief counsel Julie Williams (who Ludwig hired when he was at the OCC) has just joined Promontory, and her replacement, Amy Friend, came directly from Promontory.

Promontory’s recent accomplishments include telling MF Global’s board that it had “robust enterprise-wide risk management” five months before it failed and finding only $14 million of Standard Chartered wire transfers in a money laundering investigation to be out of compliance, when the bank eventually admitted the amount was $250 billion.

To read more

JJS: Bankers do behave badly, but they also get free money to play with. We give them, via our mortgages, the worth of Earth. Getting all that free money, who wouldn’t act so superciliously? It’s up to us to keep the value of land out of the hands of bankers and to do that, we must keep the rental value of locations out of mortgages. The way to do that is to have community recover the socially-generated ground rent via dues or taxes of fees or leases. However they do it, they’ll keep site values recirculating locally.

Though now it was over a year ago (in 2011, late Dec), the story is worth rereading. It explains LVT and reports that Newport City Council met with University of Vermont Professor Gary Flomenhoft, co-founder of Portland OR's Forum on Geonomics, to study Land Value Taxation and gave the okay for the free study to continue.

To read more

JJS: The reform did not get any further, yet even discussion is a start. Can you get a discussion started in your own town?


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

Bail Out The Banksters?

An Interview With James Quilligan

Bankers Gone Global -- Should Others Catch Up?

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