Friday
Aug102012
by 
Bishop Hill
Bishop Hill Keenan and the LIBOR scandal
Aug 10, 2012 Climate: Sceptics Economics Ethics A few days ago readers were discussing the apparently inability of anyone in the UK establishment to bring anyone to book for any misdemeanour whatsoever. In that vein, Doug Keenan's recent article in the FT seems rather pertinent. Although it's somewhat off-topic for this blog, covering the issues surrounding the recent LIBOR-fixing scandal, the themes of willful ignoring of evidence that might lead the truth being uncovered are obvious. The involvement of the former head of the UK's Committee on Climate Change, Lord Turner, only adds spice.
Update on Aug 10, 2012 by
Bishop Hill
Bishop Hill
An extended version of the article appears here.
Keenan himself is interviewed on the BBC's World Business Report (from 5:10).
Reader Comments (16)
But the bottom line in Keenan's article is perhaps very much on-topic
My testimony was not wanted, the specialist told me, because it “contradicts the narrative”.
Doug Keenan is just the kind of guy that I would employ as a regulator. Doug has high moral standards, great integrity, is highly intelligent and he is HONEST.
Lord Turner is very keen on carbon trading and banning air travel: http://greenaironline.com/news.php?viewStory=369
The op-ed piece published in the Financial Times was limited to 800 words. The full version of the article is about 1200 words:
http://www.informath.org/media/a72/b3.htm
The Business Editor of BBC News, Robert Peston, tweeted that link, calling the article a “must read”.
A bunch of crooks basically.
"But what if the professor isn't bent?"
"Camp Freddie, everybody in the WORLD is bent".
Many a true word etc.
It certainly indicates that self-regulation (much loved by the right) has worked out about as well as multi-culturalism (much loved by the left). I wonder if consumers who benefitted by too low LIBOR fixings (appropriate word that, fixings) will be queuing up to return their ill-gotten gains.
Another shining example of the "public-private partnership" we've heard so much about. The marketing folks must have put in overtime on that one, a pleasant alliterative phase that evokes the efficiencies of the private sector coupled with the benevolence of government. What could go wrong?
As Doug and others have shown, the true result has been good, old-fashioned crony capitalism. Instead of the best we've good the worst of both worlds, the greed of industry enforced by the power of the state. Of course those public servant stewards of the partnership get to skim the vigorish as compensation for all their hard work. We see blatant examples in climate science and medicine, with the research community all to happy to climb on board. No surprise it's going in the financial markets.
Thanks for the expose Doug, keep shining the light of exposure on these guys.
Hmmm .... as Doug says
"misreporting of Libor rates has been common practice since at least 1991....Why have investigations only recently begun? It seems highly implausible that all the investigating agencies could have been unaware for decades. Indeed those agencies have a reputation among traders of being like Potemkin billages"
And why is it "the investigations appear to be ignoring any misreporting in years before 2005"
Why indeed....
Interesting to see what of Doug Keenan's report had been edited out of the Financial Times article -
"Current investigations have found that bankers were colluding with each other in misreporting Libor rates. Such collusion is not surprising, though, given that the BoE/Treasury was colluding with some banks on base rates. In other words, the Libor misreporting occurred in an environment that abetted such actions.
The banking environment has been largely created by official institutions, e.g. the BoE, the Treasury, and to a lesser extent, the Treasury Committee. It is those institutions that should bear primary responsibility for the lack of integrity."
http://www.informath.org/media/a72/b3.htm
Quite. Not surprising then they didn't want his evidence as it "contradicts the narrative".
It seems to me that the authorities would be quite happy for calls for extra regulation for the banks ie bigger state control, bigger Govt. and certainly wouldn't want it to be known there was any sort of collusion.
But who can forget the number of bankers knighted during those years when Gordon Brown frequently bragged in his budget speeches of 'x quarters of growth'
"It certainly indicates that self-regulation (much loved by the right) has worked out"
"FarleyR "
Guess I'm a bit confused by this statement since I know of at least 3 US government groups that regulate LIBOR/banks... more then likely at least 10 in the US alone. I know that each euro country has at least 1 government group who regulates this as well.... thus no self regulation happening.
Also not to point out but the really big scandal of this wasn't so much the LIBOR fixing but that groups like the US Treasury actively TOLD banks to fix the LIBOR.
It does rather seem as though they have got his testimony, whether they 'wanted' it or not!
It's the left's myth that reduced, or not apparently obvious, regulation amounts to self-regulation. They need that to excuse more and more regulation which ultimately creates more and more loopholes for exploitation and, most importantly, no consequences for those that do the exploiting. If banking industries were truly "self-regulated," then we would see far fewer of these manipulations for one reason only: they would be able to see the true risk, rather than risk padded by government intervention. "Too big to fail" is exactly why they keep on trucking without a care for the consequences.
Mark
It is not simply in this area. The Charity Commission is basically a lobby for the charity industry. Ever tried complaining? You will simply be told trustees can do whatever they like.
Then there are the so called monitoring officers at local government offices, whose main function is to whitewash any wrongdoing. We had Standards for England who published lovely codes and statements which were honoured in the breach, and they have now been abolished.
We have an out of control civil service, corrupt parliamentarians, regulatory agencies which collude with malpractice they are supposed to be regulating, and all powerful interest groups fighting it out behind the scenes.
The sad and dangerous result of all this is voter cynicism and apathy, and in the end it results in mindless riots as the only way to express a deeply felt but totally inarticulate discontent and anger.
robotech master said “the really big scandal of this wasn't so much the LIBOR fixing but that groups like the US Treasury actively TOLD banks to fix the LIBOR”.
The US Treasury and the like were desperate and trying to prevent the collapse of the banking system. Given that a collapse of the banking system would have imperiled out society, I think that what they did was good.
Note that there have been two distinct motivations for banks to misreport Libor: to directly increase profits; to mask liquidity problems. My article concerns the first (as stated).
The really big scandal, IMO, is the one cited by His Eminence: willful ignoring of evidence that might lead the truth being uncovered. I also much agree with something michel wrote: corrupt parliamentarians, regulatory agencies which collude with malpractice they are supposed to be regulating, and … powerful interest groups fighting it out behind the scenes.
"The US Treasury and the like were desperate and trying to prevent the collapse of the banking system. Given that a collapse of the banking system would have imperiled out society, I think that what they did was good."
This statement makes no sense when followed by this statement...
"Note that there have been two distinct motivations for banks to misreport Libor: to directly increase profits; to mask liquidity problems. My article concerns the first (as stated)."
The Treasury and other groups "saved" the economy by bailing out and making the banks profits from these bailouts and general corruption.
So by your own statements you seem to imply you support the fixing of LIBOR and the thief of billions from the public all for the benefit of the government and the government banking system....
Lets also not forget that LIBOR has been know to being fixed since at least 1991... so your also admitting that the banking system which you claim needed to be saved(or the end of the world aka global warming) has been being saved since at least 1991...
Your arguments are a cluster fk at because not based in any type of logic that I can see. If the banks failed it would not be doomsday. Its happened before it will happen again.
On the other hand the steady march toward socialism is doomsday... the steady march toward the any government accountable is doomsday. The total disregard for the rule of law will lead to doomsday. History has shown this clearly.
The only doomsday that these government support banks may bring about by failing would be the socialist/big government dreams that live to feed off them.
Speaking of other price fixing that can't ever happen and hasn't been happening for 20+ years... gold and silver come to mind. I highly suspect the next scandal to hit there as once again the Banks and government have been working to suppress these inflation indicator.
"2005" ⋘ "1991" ! WOW ! Now T H A T ' S something {virtual} that, as a matter of fact, smells to ^high heaven^ ! Sthinks not?
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[Congratulations, Douglas! Your article appeared in translation (for instance?) also in the German Financial Times (02.08.2012): "Libor-Lüge. Wie ich versuchte, den Libor-Skandal aufzudecken".]
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Haven't "we", eventually, "long" been able, through various "techniques" -- for example, such as recently developed and promoted by Robert Holmes -- on the one hand to prevent just such case (ultimately, for example, even by "neural engineering"?) and on the other hand to retrace, within human power to high exactitude, almost to a hair's breadth, into whose "pockets" every single dollar goes/went (Lately, some refer by way of illustration, for instance, to a popular (fictional and simplified) version, the role of Batman's antagonist, Bale, in the movie The Dark Knight Rises.)? Holmes (made his PhD in Statistics in 1981 at the University of California at Berkeley; MA, MS, Mathematics, Biostatistics at UCLA; BS, Mathematics at Stanford University) worked, for instance, also on "cortronic neural networks" and "over the last 10 years at HNC [HNC Software, Inc.] and FICO [, ...] develping predictive models for financial services; credit & fraud risk models, first and third party application fraud models and internet/online banking fraud models".
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Interest rates and taxes: For instance, also The Guardian ran on 21 July 2012 with a report on the new research paper by a former chief economist at consultancy McKinsey, James Henry; in the paper Henry states on p. 8 (also his opinion on climate change and shows) that a "global underground" of private banks "avoids" taxes between $21-32 trillion (including, amongst other (kinds of) institutions, "bailed out banks" like Goldman Sachs, UBS, Credit Suisse, HSBC, J. P. Morgan [or, as the case may be, give or take, the "bailed-out" Deutsche Bank (confer for example here) and others); and that that "loss" of taxes could contribute significantly to many countries's financial straits by "paying the costs of global problems like climate change".
Henry researches, inter alia, diverse grades of interconnectivity and transparency of many public banks and private financial/investment institutions (page 15 f.):
[For example, to the aforementioned BIS confer also, exemplary case, the somehow volatile comment concerning a quote of Carroll Quigley here (BTW, did, for instance, Reuters or The Guardian report on "1991" or dates before 2005? Also, some sources claim that the manipulations to LIBOR lasted till 2010, 2011.). To IMF, the World Bank, the OECD, and other institutions search, e. g., also bishop-hill.net and other sources.]