Guest Post: The Great LIBOR Bank Heist of 2008? Submitted by Tyler Durden on 07/02/2012 21:01 -0400
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Submitted by John Aziz of Azizonomics
The Great LIBOR Bank Heist of 2008?
The LIBOR manipulation revelations ask some interesting questions.
Washington’s Blog notes:
Barclays and other large banks – including Citigroup, HSBC, J.P. Morgan Chase, Lloyds,Bank of America, UBS, Royal Bank of Scotland– manipulated the world’s primary interest rate (Libor) which virtually every adjustable-rate investment globally is pegged to.
That means they manipulated a good chunk of the world economy.
They have been manipulating Libor on virtually a daily basis since 2005. While the implications of this to the $1200 trillion derivatives market would seem to be profound, one question I have not seen asked much yet are the implications of the manipulation to the reality of the 2008 financial crisis.
Here’s a really wild hypothesis: if the LIBOR rate was under manipulation in 2008, is it not possible that the inter-bank lending rate spike (and resultant credit freeze) was at least partly a product of manipulation by the banking cartel?
Could the manipulators have purposely exacerbated the freeze, to get a bigger and quicker bailout? After all, the banking system sucked $29 trillion out of the taxpayer following 2008. That’s a pretty big payoff. LIBOR profoundly affects credit availability — and the bailouts were directly designed to combat a freeze in credit availability. If market participants were manipulating or rigging LIBOR, they were manipulating a variable directly tied to the bailouts.
That means that every single tick must be under scrutiny; we know that rates have been manipulated for profit. I am no conspiracy theorist; it may just be a coincidence that a massive spike in a variable we now know to have been manipulated contributed to a credit freeze that led to historically-unprecedented bailouts. Yet it is no great leap of the imagination to say that the crisis may have been deliberately worsened for profit.
Investigators should investigate.
(H/T to Saifedean Ammous)