Tip:
Highlight text to annotate it
X
sts
slammed the phone like welcome back to the program
from rolling stone magazine and that's how you be math
welcome to the program
have begun pen that's gone pretty good
you know i've been saying for a guess a week now at the uh...
beginning of the show
that
uh... there's this big live or scandal and uh... can't get to it today
don't know what i'm worried don't know what it means don't know the
applications that will have to get to it it tomorrow and uh... tomorrow has
finally come and we have uh...
that the one person's far as i can tell has been covering it in
uh... outside of the serbs narrow financial circles
tell us what are you
tell us what
the libel or is
what live or at the london interbank exchange rate it's basically the rate at
which banks borrow from each other
uh... and it
in everything ever basically every variable rate investment in the world is
pegged alive or so if you have
if you have a credit card that
where the rate flowed through changes
uh... if you look at the contract
it'll fit something like alive or close to eighty percent or live or prop lot
nine percent
what the people you meet include predicted
they're using this raid
uh... that the bank
uh... established the bar from each other at the benchmark for everything
so what's been going on is uh... the bank to do in gaming
live more
uh... which have been like about eight hundred trillion dollars worth of
financial products worldwide
uh... to making felt more money it depicted couldn't possibly be a bigger
future financial scandal
uh... so this is uh... and i think at one point you wrote to the body of yours
who works on wall street said uh...
it's like finding out that the whole world is on quick sent
right yet exactly beget again web web or than between everything so
mortgages in all those people who have adjustable-rate mortgage number that
that crazy
uh... you know from mail-in opens in the summer rampant
here answer all of the total rate mortgages the role of the role of call
them relied workers so you know it'd be
well you know a lot more plus five-and-a-half roll whatever it is
um...
so if you play around with with one bore and why boren's either aboard down on
you know up a fraction of a percent off what it should be
uh... and it's going to let you know everybody will have the mortgage or
other credit card
is going to pay lesson everybody who has a lot of or bearing investment
uh... power letter that but based on my board is going to our last
uh... so if you're too busy basically affect everybody liked any kind of
investment or alone in the world now my if my understanding is that there are
they were they were essentially
two different
sort of types of manipulation that was going on here
we have uh... barkley said his is the first
uh... that we've or at least this is the only
i guess known instance that we need with that that is come to light of million ra
that's right so uh... right debts
doll though there's some indication but will get to that in a minute
but uh... talk about that uh... the the first manipulation when it was reported
and when what it is
you know i don't i don't know exactly when the first one was right now we're
getting reports of this cut back
a far as the year two thousand but the one that they're having a house on
american to the one hand uh... if and is so in the missus getting larger as we
speak i guess moretti exactly delicately how they'll be
initial reports in terms of barclays um... rate we heard something about i
guess two thousand five two thousand six two thousand seven
uh... you yeah uh... mind that while yet before ok mother to go but descended
became more general turned into different type of manipulation that
we're talking about
what warrior where
again eat tobacco for thinking way but for every morning
uh... dispersed backers of physician called up sixteen of the biggest banks
in the world and i ask
uh... how much under the carpet you to borrow for mother back today right
uh... and when
that number it will
uh... when interest rates are charging tethers low that means the bank tour
perfectly healthy but they trust each other
when a number of high it's an indication of instability
so what happened in two thousand inmates during the crisis
was that the banks were faking the numbers to make themselves look more
stable so that they could produce solicitor general appearance
of stability in the market for that's warranted or general formal of of uh...
manipulation
the more specific form which i think you're going to talk it over the two
thousand five and two thousand deck
is comes when
from trader
uh... who worked for the company like barclays called up the live or
manipulator
any pic with said hey if you shove it down a few notches today
we're gonna make more money on x_y_ and z_ all think that we have worked in a
car but
uh... ekkada matlab
to borrow
uh... whereby treasuries or whatever it is
uh... and for that but we have always been vivian in the in the settlement we
quickly yep traitors calling up these guys
and they put the packing them to the bump the that the level down a little
bit threats like more for personal for for the individual game of the bank were
at the other other form
is to secretary general curative health and so and and and they're able to
manipulate this because they're really talking about what they project uh...
there
they're going to be able to borrow money at and it had esa goes across
something like that get a hundred and fifty died the type of rates on all
different instruments and all different timeframes
we
well yeah i i i applicant that that ought to be exactly understand how to
make this production because there is
but that's a lead
display speculation that there might be too different
uh... places in the bank that the manipulation like the happening it might
be happening at the level of the guy who cannot talk to the perspective the
position
and then it also might be happening at the level of the people in the bank who
talked to the the libel reporter
uh... were reporting all the numbers from the under fifty different
uh... places within the bag
uh... plot but i don't know how that calculation is made although i know that
they end up with a bit you know giving a number every morning to the this
committee
uh... edit it's based on a projection of how much they think it's going to cost
of the borrow
and deval uh...
end one aspect of this the the one where these uh... banks are just trying to
uh... make money off of basically the difference in the spread or or driving
up uh...
be interest rates in some way for that they know will directly benefit them
because they hold instruments
which will
benefit from the idea that the rates are going up
uh... right
the the second part like he's a he's uh... or i guess you you did you talk
about a first was
the sort of faking
the rates to
make the banks look like they were more sound and apparently uh...
bob diamond who was the head of barclays
uh... who's just resigned
claims
or at least there's internal evidence at least that he was uh...
he he would he was uh... basically
uh... push to doing this in some way
by right by the bay yeah backed up by the
though the british uh... uh...
vacuuming living cannot so lemme tell us what the implications of adam
yes so the and october late october of two thousand eight
apparently bob diamond gets a call from up all tucker who's the deputy governor
of the bank of england
and tucker kind of obliquely fifth hey you know we've been noticing the url
ever numbers are or a little bit higher than all the other bags
what the deal there
and diamond basically
according to him diamond says
well the thing is we're we're reporting the real number than all the other banks
are lying
um... and according to diamond tucker then said well you know your numbers
don't know if you have to be so i'd uh...
and any said that because heat that you're going to be getting calls from
whites all from the british government
complaining about this will be able to get into the car
that the british government is telling
the biggest british bank
to fake it live or numbers now they're been whispers that this has been going
on not just in england but in america drawer
for couple actually dating back to three thousand eight there's been speculation
about this but this is the first time that we've
we've heard this and if that's true it's shipped in if u unbelievable putting him
into the pit the it couldn't imagine anything more more creative about and a
m
there
have here but just wanted to do is a
piece in the wall street journal back in two thousand eight and i guess it was
um... in may of two thousand eight
saying that uh... the wall street journal song
uh...
they are
that some banks are
are reporting that lowered the
uh... rates costs to uh... ally boren it seems weird essentially is uh...
what day is so uh... uh...
what we're seeing here you can you could have predicted from brightened it there
was a problem from some other date out there in the marketplace
and so
the the the implication is is that uh...
these banks were
or encouraged
uh... by somebody or early somebody sort of
didn't really follow up on this
uh... pretend that there are more sound
right and and and uh...
it against a backup
but the reason that these story came out in two thousand and two thousand nine is
is because than the number of the live or numbers didn't match
uh... the the credit default
uh... spread
for these banks so in other words thursday uh... you know the banks also
by
credit default swaps against each other this is complicated but it was a
potentially determined that there at that they can buy
that'll out that the bet on the credit worthiness of other bags
and those numbers didn't match the like live or numbers with which suggested
that
live or was too low okay
uh
and what that means that began to think that the government purging
uh... or at least turning a blind eye it was a manipulation with happening and
and again the richter reason why this is important
it's because
it's mainly because city town
and chicken poem the patient bottom unusual form
all these gigantic institutional investors they have billions and
billions of dollars in holdings that are tied to live or
till alive or dead lower than it should be all of these pic these institutions
they earn less
so that means that your town your city your pension
uh... your union
uh... is all all make less money when you guys drive because a lot more down
and for the him first her to come up with the government wanted that to
happen the federal government that is
uh... that incredible and and we should say that obviously will in no when these
uh...
you know did this is you're gonna feel this impact when these uh... municipal
uh... uh...
uh... pensions or funds
um... go down the city and
uh... has less money they project a higher uh...
uh... budget imbalance and they start cutting services
right brightman tidbit tar pits are cutting services then
uh... and in that further impact their or more white when their general uh...
bottom line in their balance sheets of the balance sheet for the for the
evening dollar compound go down
uh... then that further impact their ability to borrow it increases their
borrowing costs what kind of like a double whammy afflicting earn a laugh
men they gotta pay more to borrow and it creates a potential ball in effect
um... so yet when you have
layoffs when you when you when people lose benefits
uh... you know they've been fitted in town to go to town i live in that the
way up a whole bunch of carpet the whale firemen
uh... so you can put it into higher leah defeat but stuff like this but
before the uh... uh... you know they have to have a major impact because that
they even get this
like again affidavit a fraction of a percent
we're probably talking about hundreds of billions of dollars but got taken out of
the pockets of these uh... these accountants pallet now it's it's it's
just
barclays that was doing this
uh... camping but good well and then let's let let's let's talk about that in
a second but if it's just barclays is doing that is every second i have
that huge of an impact uh... on uh...
as alive or rates
well yeah i know it uh... baby can't be barclays because their department
because what they do is when they when they call up every morning
um... take all sixteen bank and they take that the four highest numbers and
the four lowest numbers may throw them out
so one bank reporting fixed numbers i wouldn't have any impact at all
so forget the fact that they were doing that
uh... suggest that they have to be a lease probably five to expect that were
involved in from what i understand you know from talking to lawyers who are
uh... leaving this civil cases uh... and there are a couple of they want
um... video that you've got to come out that all all fifteen bags um... were
were completed it and that's um... so yelping his ego i think that there's so
so are these
if you've got these
let's start with the the sort of the supposedly more
um... reporters the ones who are theoretically doing this for the benefit
of their banks and uh...
the the specific banks they would have to go for
lies essentially to have value that
they were in
uh... that other people relying as well
right and we thought this would be a little bit of the evidence a diplomat
that'll appetizer with bob dunne and and um...
and paul tucker from the uh... you know the field barclays and uh... in the bank
of governor bank of england deputy governor and their alleged conversation
we hear a diamond
uh...
saying to tucker
well the problem is all the other banks are reporting numbers that don't
represent actual
you know transactions actual reality
uh...
so he had no that in order for an order for uh... a single bank
tuned have an effect on
uh... they would have to know that
everybody else was involved with the fact that i have to be
uh... made an arrangement like a cartel file arrangement to her for it to work
at all so so the irony here is that it seems like the last
old out is the first one to uh...
where i could pay a fine right i mean the same like exactly what happened
serpico
uh... decor perhaps rack and then i can remember the details a circle but a m
they did that's the one guy that they don't trust because he's not on the take
essential braithwaite and so um... are are
are their investigations about other banks i mean it we're gonna see other
banks paying uh...
uh... these massive fines
yet for the world i could coincide already agreed to pay
um... a one hundred fifty para million pound find
um... there are investigations in four different countries right now
uh... including japan
uh... canada england and united states
um... all the usual thought specs uh... are kind of under investigation right
now uh... that were american uh... citigroup logic and morgan chase
uh...
there also a couple of major civil too
uh... that are perceiving right now uh... class action suits were the most
college are selling
um... and yet application if you know they have a number of cooperating
witnesses already
uh... who have
worked with the parties and work with the lawyers for these a civil suit
uh... one why it was from u_p_s_ u_b_s_ agreed to to cooperate last year
actually
and they are eternal
so here we're gonna hear we're gonna hear a lot more about this
and we're going to hear about it here and in canada and japan and all over the
place who
likely give me that they
nature of of of the
the type of person who would be a cooperating
uh... witness and it is a is it is is a specific people who are inside the banks
with uh... specific knowledge as to uh... somebody samik
yeah you know uh... i think uh... are
are lending rate is going to be this or
uh... you know in u_s_ dollars
uh... ten-year
notes or whatever it is and uh...
but and in the
standard is jacked up a little better
uh... ordered
drop it down is the one person world friends that work for me too
would be who are these type of whistleblowers essentially
i think it happened the uh... either traitors or the people who purported
numbers alive or i i think one of the world record solidarity
uh... fired a bunch of people
um... who i am believe were you reporters who were reporting on the
numbers um... so uh... enacted it somebody from from that
area the bag uh... underpinning because
um... inadvertent this investigation has been going on
i think for two years now and i think what they did is they they kind of dove
into the the the department from the bank that were responsible for report
porting the numbers and they probably just
start at the beginning in flip somebody in those department and that other thing
is spread so american that by i know that the first reporters came to the the
first cooper's came from ups
about a year ago and that's when the thing really turn development them who
what agency in the u_s_ is involved in these investigations
uh... i think it's a department of justice
uh... primarily that that doing this
um...
uh... yeah i don't i don't know if the s_e_c_ is involved in this uh... this is
it would be an anti-trust case
if it's not that far uh... got through it uh... criminal case so i'm filming at
the department of justice anti-trust division of that
but doing that
and we can each year
some executive from
citibank says
or you know
burning key uh... told me to do this something that we do that well yeah i
mean there there was a little are sort of like uh... waiting for here
in this is that uh... you know and it isn't
i mean that that's the analogy right with what happened in britain
yet know it if it uh... kid turned out to be
that there was already yesterday all over the blog uh... dot com
uh...
speculation that uh... that that if it may be back with similar situation when
i'm here with
with the fed and uh...
and live or uh... dating back to two thousand in seven i think combo you know
none of that have come out yet uh...
idiotic and it debate people who like talk to on wall street unfit that
there's no way that the regulators could not have been aware
that there was a problem in the near and that they were even stories like it said
in the wall street journal dating back to the
two thousand an eight there were stories there was a couple of investigative
reports uh... in germany that came out around that time
those somebody was aware that there was an issue clearly and um...
it just wouldn't surprise me given given although we know about
how
on aggressively they look date they went after
you know other kinds of criminal activity at that time
uh... in the interests of preserving stability it wouldn't surprise me off we
we ended up finding out that
they've gotta turn their do it you know turn their head on this one just uh...
to preserve the appearance debilitate yeah he speculated in your piece uh...
you know what uh...
or hank paulson
what was hank paulson discussing with lloyd uh... blank fine and uh... when
uh... right paulson is a meeting with
the entire board of goldman sachs in
uh... in moscow and moscow great yet exactly raleigh but we are a
communications that went on at this time between
and you know between every ball though they know that the people of the fan
from the treasury department to note that uh...
but it's also met with the but you got to the hedge fund for some reason the
summer two thousand eight
in the meantime blank line twenty four times
uh... did other communication verbal when warren buffett itnet warren buffett
and but making the mysterious investment to goldman fax me there in the the
sudden uh... you know quickly orchestrated shotgun weddings of you
know company put back to america and merrill lynch in and you know well fargo
wachovia
it was pretty clear that there were a lot of high-level conversations going on
behind the scenes
that the public was not privy to involve sort of material
non-public in flatter information that's going on
we know so it's not unrealistic to to wonder whether they were also talking
about stuff like you know live or *** and painful like that right it's like
policy walking around them like uh... one of those
one of those meetings of all the heads of the families right and uh... with a
baseball bat into saying
you know live or
of the greatest of all right i mean again just to go back to lou picking
about what happened and in march of two thousand eight there was a meeting
uh... at
at the new york said
um...
uh... where basically all the major banks on wall street
uh... were invited died it was just sort of a kind of a general get together but
everybody with invited except for bear stearns and and
you know nobody would talk about that meeting but it was
clearly a signal to the rest of them about something and within a couple of
days bear stearns
was going out of business because all these other companies were pulling their
credit once from bear stearns and it's a again with the fifty dollars wierd sir
behind the green behavior that just make
this kind of contrary a with leiberman religion believable and so we don't
really know anything yet but it's sister and make you wonder
yet you've really got a wonder amin how does the entire
um... board of goldman sachs end up in moscow at the same time
uh... and edges available it's almeida my leslie will not pay even in my hotel
bosnia which is what a coincidence to run into you guys right
uh... graham great exactly exactly and moscow's the one place you go there's
apparently
um... the did they don't have the same type of dog reporting that we have in
this country
i hate the fact that right that's right so what's the yet but the public
go ahead
well what's the next year the drop in the n_b_a_ after we got a
there was testimony yesterday in now
in england apparently they don't celebrates a life force likely to uh...
whether what uh...
what is the next year to drop here
well it this is going to be interesting that the see what happens because
uh... it to me it's got a similar uh... to a situation that that i wrote about a
a month and a half ago where this
whose there was a big
can only came out of about the bank
uh... manipulating
manipal bonded and that was another car cartel felt corruption and all that
happened i think they're deeply
settled with each one of the big banks that were involved and the didn't pursue
any big criminal cases and
uh... they've waited for the public to
no not pay attention to it
they're worth another similar cartels style
corruption case involving uh... press fixing in the foreign exchange uh...
markets before its market
and that
they get made its way that they they fell with a few banks and republican
pippen any attention to it may become blew over
and i i'm uh... what i worry about it but that'll happen in this case is that
the oldest
you know dot i could tell you the barclays settlement of the template
they'll fill in all the rest of them and then the public won't modem and big
changes which it should because with you know the if they get away with it
without without
period consequences of just
is called the entire kinda system into question what kind of changes but the
first off let me ask you this uh...
two more questions one is
do you think this is continuing
i mean is there any reason to believe that they stop doing this uh...
in terms of
because we we we still don't really know what the had the solvency of these banks
are doing or
uh... is that uh... is that basically no longer a question
i mean we still don't know how much of a crap these banks are carrying writer or
they have been able to sort of
spreading the the losses by becoming a much bigger um...
no we don't know and and also what we wouldn't be if they were trying to
http
mis report the numbers but this is pointer to every day with a would there
be no way for us to really know that unless we had a packet grammar sitting
on top of that
a black guy everyday which we don't you know in the new the the center brings
into relief the whole problem of a lot of the beef markets which is that a lot
of the *** pendant very heavily dependent upon self
reporting and filth regulation
uh... and what this episode really underscored that typically
you know that we cannot trust these guys
to self-report accurately
uh... for that you know that when you have to what kind of changes were with
you with you would want to make that would be kind of one thing that out
though you might well i think about which is
um... you know forcing them to do this officially peru
compatible
you know uh... uh... over-regulated profits indicated in this whole hand
in the market in this case is actually probably
may be linked list in your wallet essentially work record writer exactly
and the people at predominantly black when newton drop it at the be in the
book in the market right again
this is uh... by the end of the bullet market and i well i mean everybody has
it seems to me that these uh... banks are all operating in their self-interest
it is just where's the self-interest is in the rational self-interest in uh...
reporting your real numbers if you can
uh... make more money or show more
uh... stability by not
um... in so uh...
all right well i guess uh... will will will keep our eyes on this and i you
know their matching it's is a things that we're gonna see some uh... fines
and maybe they'll just say like you know
error will bring us again next time if we have to
loving it could be a everyone will quickly find that book at all
beethoven it won't mean what do you do predicted uh... you can't
from all of that mystique and that was all alone
uh... you m
like i get you find them more but
uh... benefits hank paulson selling them to do this
uh... well you know it's a bit sankey at worst scale of the program here
uh... right
it's it's just
too big to uh... deal with problems i guess
that where jeff hope that's alright with it
you
right right they were glad we know it now but you know kate good numbing
magnaflow dept
dot delete the good thing it except for affected not saying that uh... rolling
stone thanks so much for walking us through this