LIBOR-Gate Will Take Down Many More Bankers, And The Claims Will Spiral Into The Trillions!

• LIBOR-Gate Will Take Down Many More Bankers, And The Claims Will Spiral Into The  Trillions! 
  by David Kotok, Cumberland Advisors, via http://www.businessinsider.com/ 
  Markets reacted to this crazy week of discredited, ADP-based employment  forecasts, LIBOR revelations and central bank fizzle.  The result is plain  ugly.
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  In Europe, post-ECB, credit spreads widened.  Good-guy yields declined;  bad-guy yields rose.  See our updated EU contagion series at www.cumber.com.  Note how Swiss yields are negative  until the 5-year maturity (which is a whopping 7 basis points).  For new  readers, see our archives on why the Swiss 10-year government bond is now the de  facto benchmark for the eurozone.  The European  Central Bank demonstrated too little, too late.  …
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  In the US, the employment statistics release shows an ongoing but weakening,  very slow recovery.  A plus 80 thousand nonfarm jobs is better than minus  80 thousand.  We see nothing to alter this slow but marginally positive  growth outlook.  The Fed’s additional “Twist” is a whimper, not a  shout.  In fact, that is probably a good thing, since monetary policy has  its limits, and we are near them.  We expect no more from the Fed for the  rest of this year unless there is a seriously negative event. 
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  LIBOR-gate, as Michael Lewitt titled it, is a mess.  It is potentially  huge.  We expect more ugly revelations.  Other institutions may be  implicated.  Critics of emerging-market governance standards need to look  in the mirror.  The so-called developed markets now exude a rising  stench.
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  “Widespread fraud has become apparent in the Mainland US and among US-listed  financial firms.  Extraordinary numbers of political figures and public  appointees have massive wealth.  Examples include (1) Dick Fuld, who  was a director of the Federal Reserve Bank of NY until his firm, Lehman  Brothers, went into bankruptcy.  He has not been charged with any  crime.  He denied knowledge of any accounting irregularities.  (2)  Former US Senator Jon Corzine’s firm was a Federal Reserve primary dealer before  it failed.  Huge balances of client funds are unaccounted for at MF Global.   Corzine says he does not know what happened. (3)  No one knows the counterparties of the transactions that cost JPM  billions.  (4) Members of Congress and their staffs trade on insider  information and are not violating US law because of the congressional exemption  that Congress legislated for itself.”
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  Steve, I could lengthen this but you get my point.
  I will stop with my own personal observation about the LIBOR scandal.   My colleagues Michael Lewitt, Bob Eisenbeis, and Bill Witherell have written  about it this week.  (www.cumber.com)
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  The LIBOR rigging is systemic. For evidence see a Bloomberg report  from May 29, 2008, under the headline, “Libor Banks Misstated Rates, Bond at Barclays Says.”  (Yes, the article ran more than four years before Barclays’s $453 million  settlement last month with U.S. and U.K. authorities for manipulating  Libor.)  
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  Steve, this scandal is going to take down many more than just Barclay’s  leaders.  The claims are likely to be in the trillions.
  Imagine the board meeting at Barclays.  The general counsel says, “I  have a settlement proposal.  We can pay 1/2 billion in fines to the US and  UK authorities now; and you, Mr. Chairman, and you, Mr. CEO, and you, Mr. COO,  will resign at once.  Others will also resign or be dismissed.   Gentlemen, I can make this deal right now and settle it or we can have a  prolonged investigation.  In my opinion, paying the half billion now and  taking the resignations early is the cheapest way out of this mess.”  The  board votes yes.
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  Steve, the insiders on that board know the facts.  Watch out for what is  coming.  It  may dwarf allegations about Chinese corruption.
  The US and UK systems were once the models for the world.  They are now  sick and corrupt.  We are five years into a financial crisis and nothing  has changed.  Who are we to throw stones at others?

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