Everything Is Rigged: The Biggest Price-Fixing Scandal Ever
The
Illuminati were amateurs. The second huge financial scandal of the year
reveals the real international conspiracy: There's no price the big
banks can't fix
By Matt Taibbi
April 25, 2013 1:00 PM ET
Conspiracy
theorists of the world, believers in the hidden hands of the
Rothschilds and the Masons and the Illuminati, we skeptics owe you an
apology. You were right. The players may be a little different, but your
basic premise is correct: The world is a rigged game. We found this out
in recent months, when a series of related corruption stories spilled
out of the financial sector, suggesting the world's largest banks may be
fixing the prices of, well, just about everything.
You may have
heard of the Libor scandal, in which at least three – and perhaps as
many as 16 – of the name-brand too-big-to-fail banks have been
manipulating global interest rates, in the process messing around with
the prices of upward of $500 trillion (that's trillion, with a "t")
worth of financial instruments. When that sprawling con burst into
public view last year, it was easily the biggest financial scandal in
history – MIT professor Andrew Lo even said it "dwarfs by orders of
magnitude any financial scam in the history of markets."
That was bad enough, but now Libor may have a twin brother. Word has leaked out that the
London-based firm ICAP, the world's largest broker of interest-rate
swaps, is being investigated by American authorities for behavior that
sounds eerily reminiscent of the Libor mess. Regulators are looking into
whether or not a small group of brokers at ICAP may have worked with up
to 15 of the world's largest banks to manipulate ISDAfix, a benchmark
number used around the world to calculate the prices of interest-rate
swaps.
Interest-rate swaps are a tool used by big cities, major
corporations and sovereign governments to manage their debt, and the
scale of their use is almost unimaginably massive. It's about a $379
trillion market, meaning that any manipulation would affect a pile of
assets about 100 times the size of the United States federal budget.
It
should surprise no one that among the players implicated in this scheme
to fix the prices of interest-rate swaps are the same megabanks –
including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal
Bank of Scotland – that serve on the Libor panel that sets global
interest rates. In fact, in recent years many of these banks have
already paid multimillion-dollar settlements for anti-competitive
manipulation of one form or another (in addition to Libor, some were
caught up in an anti-competitive scheme, detailed in Rolling Stone last
year, to rig municipal-debt service auctions). Though the jumble of
financial acronyms sounds like gibberish to the layperson, the fact that
there may now be price-fixing scandals involving both Libor and ISDAfix
suggests a single, giant mushrooming conspiracy of collusion and
price-fixing hovering under the ostensibly competitive veneer of Wall
Street culture.
The Scam Wall Street Learned From the Mafia
Why?
Because Libor already affects the prices of interest-rate swaps, making
this a manipulation-on-manipulation situation. If the allegations prove
to be right, that will mean that swap customers have been paying for two
different layers of price-fixing corruption. If you can imagine paying
20 bucks for a crappy PB&J because some evil cabal of agribusiness
companies colluded to fix the prices of both peanuts and peanut butter,
you come close to grasping the lunacy of financial markets where both
interest rates and interest-rate swaps are being manipulated at the same
time, often by the same banks.
"It's a double conspiracy," says an
amazed Michael Greenberger, a former director of the trading and markets
division at the Commodity Futures Trading Commission and now a
professor at the University of Maryland. "It's the height of
criminality."
The bad news didn't stop with swaps and interest rates.
In March, it also came out that two regulators – the CFTC here in the
U.S. and the Madrid-based International Organization of Securities
Commissions – were spurred by the Libor revelations to investigate the
possibility of collusive manipulation of gold and silver prices. "Given
the clubby manipulation efforts we saw in Libor benchmarks, I assume
other benchmarks – many other benchmarks – are legit areas of inquiry,"
CFTC Commissioner Bart Chilton said.
But the biggest shock came out
of a federal courtroom at the end of March – though if you follow these
matters closely, it may not have been so shocking at all – when a
landmark class-action civil lawsuit against the banks for Libor-related
offenses was dismissed. In that case, a federal judge accepted the
banker-defendants' incredible argument: If cities and towns and other
investors lost money because of Libor manipulation, that was their own
fault for ever thinking the banks were competing in the first place.
"A farce," was one antitrust lawyer's response to the eyebrow-raising dismissal.
"Incredible," says Sylvia Sokol, an attorney for Constantine Cannon, a firm that specializes in antitrust cases.
All
of these stories collectively pointed to the same thing: These banks,
which already possess enormous power just by virtue of their financial
holdings – in the United States, the top six banks, many of them the
same names you see on the Libor and ISDAfix panels, own assets
equivalent to 60 percent of the nation's GDP – are beginning to realize
the awesome possibilities for increased profit and political might that
would come with colluding instead of competing. Moreover, it's
increasingly clear that both the criminal justice system and the civil
courts may be impotent to stop them, even when they do get caught
working together to game the system.
If true, that would leave us
living in an era of undisguised, real-world conspiracy, in which the
prices of currencies, commodities like gold and silver, even interest
rates and the value of money itself, can be and may already have been
dictated from above. And those who are doing it can get away with it.
Forget the Illuminati – this is the real thing, and it's no secret. You
can stare right at it, anytime you want.
