Bill Black on FDIC SUIT against 16 Largest Banks--Ethics, Crony Capitalism&Politics (Ritholtz Blog)
Will anything ever be done about this? Max Keiser has railed on about it for years and now Bill Black takes it a bit further with his questions about where is the media on this. 
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by Bill Black - March 24th, 2014, 6:00am
http://www.ritholtz.com/blog/
The FDIC has sued 16 of the largest banks in the world plus the British Bankers Association (BBA) alleging that they engaged in fraud and collusion to manipulate the London Inter-bank Offered Rate (LIBOR). BBA called LIBOR “The most important number in the world.”
LIBOR is actually many numbers that depend on the currency and term (maturity) of the loan. The collusion involved manipulating most of these rates. A vast number of loans and derivatives are priced off of these “numbers.” Estimates of the notional dollar amount of deals affected by the collusion range from $300-550 trillion in deals manipulated at any given time. The LIBOR frauds began no later than 2005 and continued through 2011.
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Ethics
Consider the ethical and political implications of what the FDIC investigation has confirmed. The entire barrel of apples is rotten. Every CEO failed the ethical test, and the ethical bar that they failed to surmount was set exceptionally low. That can only happen when a “Gresham’s” dynamic has been allowed to persist for years because of the three “de’s” (deregulation, desupervision, and de facto decriminalization). Such a dynamic can cause “bad ethics to drive good ethics out of the markets.” No one should be able to view the facts the FDIC cites without a sense of horror combined with an urgent commitment to transform the industry that has done so much financial and ethical harm to our nations. The twin emergencies are global.
Crony Capitalism and Politics
There are two possibilities: the Obama administration knew for six years that the world’s largest banks were endemically led by frauds or the administration learned of that fact recently when it learned of the results of the FDIC investigation. The LIBOR scandal became public knowledge with the Wall Street Journal’s April 16, 2008 expose, so the Bush administration also knew it was dealing with elite frauds. If the Obama administration has long known that fraud was endemic among the leaders of the world’s largest banks, then its policies toward those CEO and the banks they control have been reprehensible and harmful.
If the administration has just learned from the FDIC investigation about the true nature of the CEOs that it has refused to hold accountable and allowed to retain and even massively increase their wealth through leading control frauds then we can doubtless expect a series of emergency actions transforming the administration’s finance industry policies. The FDIC lawsuit provides a “natural experiment” that allows us to test which of the possibilities was correct.
Let’s review the bidding. The U.S. government, through the FDIC, has found after a lengthy investigation that the leaders of 16 of the world’s largest banks conspired together to form a cartel to manipulate the LIBOR “numbers” and to defraud the public about the scam. This should have led the criminal justice authorities to prosecute large numbers of senior officers of these banks – but none of them have been prosecuted. It obviously poses a grave threat to the “safety and soundness” of the entire financial system. The endemic frauds led by elite CEOs demonstrate such a pervasive failure of integrity and ethics by the leaders of the finance industry that there is a moral crisis of tragic proportions. So here are some questions (along with the usual who, when, where details) I request that the media formally ask the administration:
Did the FDIC brief the administration before it brought its LIBOR suit?
Why didn’t Attorney General Holder and the FDIC leadership conduct a news conference announcing the suit and emphasizing its implications?
Why didn’t the FDIC’s “home page” or press release site even note the suit?
Did the suit cause the administration to transform its finance industry policies?
When will the President address the Nation about fixing the twin emergencies?
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