Rigged Rates, Rigged Markets!

- Rigged Rates, Rigged Markets!
by http://www.nytimes.com/
Update: After this editorial went to press, Barclays announced that its chief executive, Robert Diamond Jr. had resigned, effective immediately, and that Marcus Agius, who had resigned as chairman of Barclays on Monday, would become chairman again and lead the search for a new chief executive.
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Marcus Agius, the chairman of Barclays, resigned on Monday, saying “the buck stops with me.” His was the first departure since the British bank agreed last week to pay $450 million to settlefindings that, from 2005 to 2009, it had tried to rig benchmark interest rates to benefit its own bottom line.
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Mr. Agius was right to go and the bank’s chief executive, Robert Diamond Jr., should follow him out the door. But the investigations cannot stop there.
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The rates in question — the London interbank offered rate, or Libor, and the Euro interbank offered rate, or Euribor — are used to determine the borrowing rates for consumers and companies, including some $10 trillion in mortgages, student loans and credit cards. The rates are also linked to an estimated $700 trillion market in derivatives, which banks buy and sell on a daily basis. If these rates are rigged, markets are rigged — against bank customers, like everyday borrowers, and against parties on the other side of a bank’s derivatives deals, like pension funds.
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Barclays is only one of more than a dozen big banks that provide information used to set the daily rate for Libor and Euribor. The settlement, struck with regulators in Washington and London and with the Department of Justice, indicates that the bank did not act alone. It shows that unnamed managers and traders of Barclays in London, New York and Tokyo colluded with or prevailed upon bank employees who provide the benchmark data to make false reports. The aim was to bolster Barclays’s trading positions and to aid or counteract other banks’ attempts at manipulation.
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