All Things
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The Greeks and the US Athens is more than 5000 miles away from Washington DC. Greece is a small country with relatively few resources. Ours is a very large, rich and powerful country. In spite of the differences, there are lessons to be learned from...
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A preventable crisis? The Federal Crisis Inquiry Commission, appointed to find out why banks and financial institutions collapsed in 2008, has reported to the nation. They found that the current economic crisis could have been prevented. The report...
- Take Control
When critics call President Obama's health reform plans “socialist” they often worry about the overwhelming power of government. The Federal government is very powerful; the worry is justified. But if the same people then go on to say that health...
- Greed?
A while ago when it became obvious that we are in serious economic trouble, the President and other leaders said “the economy has some problems but its fundamentals are sound.” Today they tell us that we facing recession, perhaps depression. The fundamentals...
- Regulating The Markets
Last week, Sen. McCain came out in favor of regulating financial markets. That is a departure from traditional Republican orthodoxy that is truly astonishing. For 100 years or more, Republicans and many Democrats have told us that markets are "self-regulating."...
All Things
Nothing but Bad News.
Two kinds of bad news stories seem to come back with ever greater frequency. Stories of mass killings of people unknown to the killer keep repeating more rapidly. First the killing in the movie theater in Aurora; now a pretty random shooting at a Sikh temple.
The other story that keeps repeating quite regularly and, it seems, with increasing frequency is that of malfeasance by banks or other financial institutions. In these cases it is often much harder to understand what exactly went on but the consequences are much more widespread and much more serious.
The most recent bank shenanigan is the manipulation of the so-called LIBOR bank rate. How do banks know at what interest rate to lend or borrow money? Some semi-public organization in London asks the big banks every day what they paid for loans and based on the replies that institution sets the current interest rate. The only trouble about this arrangement is that the banks have lied and given false information. As a consequence interest rates have been too high or too low. Depending on what was to their advantage that day, banks reported loan rates higher or lower than they actually were.
When the banks reported higher rates than they actually paid, many other borrowers paid more for their loans than they should have. In many situations that has serious consequences. The British Medical Journal reports that some public health facilities went bankrupt, partly due to having to pay higher interest rates than necessary as a consequence of the manipulation of LIBOR rates by Barclays bank. (It appears that Barclays was not the only bank cheating on this deal. Banks such as Citigroup, Deutsche Bank, HSBC, JPMorgan Chase, RBS and UBS apparently are also under investigation).
Some states in the US worry that their pension fund money was adversely affected by artificially high interest rates due to LIBOR manipulations.
As one commentator put it: "LIBOR represents the cost of money. It affects mortgages and credit cards, as well as corporate bonds and loans, since interest rates are almost all pegged to LIBOR. " [http://prospect.org/article/libor-scandals-lies] The cheating by the largest banks may well affect everyone who has college loans, car loans, or mortgages on their house.
The numbers involved are very large ." There are at least 900,000 outstanding US home loans indexed to Libor that were originated from 2005 to 2009, the period the key lending gauge may have been rigged, investigators have said. Those mortgages carry an unpaid principal balance of $275bn, according to the Office of the Comptroller of the Currency, a bank regulator." [http://www.ft.com/cms/s/0/1b2d25aa-cb66-11e1-911e-00144feabdc0.html#axzz22tilzKvA].
A final, startling fact. In 2008 and 2009 Timothy Geithner, the current Secretary of the Treasury, then head of the New York Federal Reserve Bank, knew about these interest rate manipulations by the big banks. He did nothing.
Random shootings are horrible. As in the most recent case, the shooters often die. If they survive, the courts will order lengthy sanity testing because part of us thinks that they must be insane to commit mass murder. The big bankers who cheat may seriously damage the lives of hundreds of thousands of people. Do we think that they are mentally defective? No, they're just being good capitalists.
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The Greeks and the US Athens is more than 5000 miles away from Washington DC. Greece is a small country with relatively few resources. Ours is a very large, rich and powerful country. In spite of the differences, there are lessons to be learned from...
-
A preventable crisis? The Federal Crisis Inquiry Commission, appointed to find out why banks and financial institutions collapsed in 2008, has reported to the nation. They found that the current economic crisis could have been prevented. The report...
- Take Control
When critics call President Obama's health reform plans “socialist” they often worry about the overwhelming power of government. The Federal government is very powerful; the worry is justified. But if the same people then go on to say that health...
- Greed?
A while ago when it became obvious that we are in serious economic trouble, the President and other leaders said “the economy has some problems but its fundamentals are sound.” Today they tell us that we facing recession, perhaps depression. The fundamentals...
- Regulating The Markets
Last week, Sen. McCain came out in favor of regulating financial markets. That is a departure from traditional Republican orthodoxy that is truly astonishing. For 100 years or more, Republicans and many Democrats have told us that markets are "self-regulating."...