Dr. FIVE 14 February 2013
Dr. FIVE 14 February 2013
Vigil for Savita Halappanavar, Dail Eireann, 14. November 2012
C. Flower 14.11.2012
Irish whistle-blowing former banker Jonathan Sugarman speaking recently in Athens. Τhe function was organized by ATTAC-Hellas in collaboration with the Greek Committee for a Public Debt Audit. Sugarman spoke on the Libor scandal, the lack of transparency in banking practices, the problematic character of state supervision of the banking system (relevant to his own case for the indictment he issued was ignored/suppressed by the Irish regulatory authority), and the extent to which the recent Draghi measures represent a solution.
We all have to pay interest on our loans, and we all hope to get interest on our deposits. When we the banks have money lying around idly it means they’re losing money, as it could be gaining interest as a deposit with another bank that needs the money. Part of my job as a banker was to ‘count the money’ towards the end of a trading day and make sure that any un-needed surplus – say 500 million euros – would be to deposited by the dealers. They would typically place this money on overnight deposits with other banks. The benchmark for interest payment on this deposit would be the LIBOR (or Euribor). The LIBOR was allegedly an un-biased ‘weather report’ of what conditions were in the market that day. Now we have learned that some of the biggest banks in the world have been heavily involved in distorting this ‘neutral’ reading of the market.
Every morning by 11.30 a.m. in London a panel of international banks including UBS, Societété Generale, Deutsche Bank, Barclays, the Royal Bank of Scotland is asked “OK how much interest are you willing to pay on overnight deposits, one week deposits, one month deposits and so on. ” This is the price of money today in London at lunchtime. I cannot overestimate the significance of this interest rate – every interest payment that each one of us makes on the mortgage that you pay, ever car loan – is determined by this rate.
LIBOR ( the London Inter Bank Offered Rate) has been in the headlines far less that it should be. The Libor fixing scandal is by far the biggest and most far reaching scandal to have occurred in the world of finance. Why is it not getting the attention it deserves in the name of public interest?!? simply because the companies involved in fixing this price are the most respectable and distinguished of the banking world – HSBC & Barclays of the UK, Deutsche Bank of Germany, UBS of Switzerland.
LIBOR rates form the basis for the determination of amounts to be received and paid on contracts amounting to hundreds of trillions of dollars. Just to put this figure into perspective – Ireland’s bailout was ‘only’ 85 billion Euro. So while Christine Lagarde of the IMF keeps reminding the Greeks that they should pay their taxes, she is remaining very silent about the fact the bankers whom she wines & dines with at Davos are being accused of breaking the law at a much larger scale.
Barclays has ‘agreed’ to pay a fine of 290 million pounds for its role in fixing the LIBOR. RBS, now 82% owned by the British public has also been negotiating how much is feels like paying the British public for being caught red handed. We now have a state-owned body negotiating with with a state authority about how much it feels like paying for breaking the law. Try negotiating your legally-declared tax bill with the Revenue office and see how far you get…
Some choice quotes from the press on the Libor rate-fixing scandal….
A comment in today’s Financial Times is by a former Morgan Stanley trader, Douglas Keenan, confirms a passing comment in the Economist, that Libor manipulation goes back for more than 15 years. In fact, this piece makes it clear that is the time frame exceeds 20 years. From the Financial Times:
In 1991, I had live trading screens that showed the Libor rates. In September of that year, on the third Wednesday, at 11 o’clock, I watched those screens to see where the futures contract [on three month Libor] should settle. Shortly afterwards, Liffe announced the contract settlement rate. Its rate was different from what had been shown on my screens, by a few hundredths of a per cent.
As a result, I lost money. The amount was insignificant for me, but I believed that I had been defrauded and I complained to Liffe [ London International Financial Futures Exchange, which is where the contract traded]. Liffe explained that the settlement rate was not determined by what rates were actually in the market. Instead, the British Banker’s Association polled banks, asking them what the rates were. The highest and lowest quoted rates were discarded and the rest were averaged, giving the settlement rate. Liffe explained that, in doing this, they were adhering to the terms of the contract.
I talked with some of my more experienced colleagues about this. They told me banks misreported the Libor rates in a way that would generally bring them profits. I had been unaware of that, as I was relatively new to financial trading. My naivety seemed to be humorous to my colleagues.
So consider what this tells us:
1. Libor manipulation was already recognized by market participants in 1991 as a common phenomenon. That implies it had been going on at least a few years before that
2. The manipulation appears to have more than occasionally been more than a single basis point (Keenan says here the effect was “several” basis points, which I take to be three or more)
Oh, an an additional tidbit: Bob Diamond was in Morgan Stanley London as of then, in charge of interest rate trading, which means his claim that he had found out about Libor manipulation at Barclays mere weeks before his Treasury Select testimony was bollocks.
Read more at http://www.nakedcapitalism.com/2012/07/libor-manipulation-well-known-in-london-by-1991.html#D4e3c6TwmCFcWdBg.99—————————————————–External trader to a Barclay’s trader, asking for a lower Libor submission: “If it comes in unchanged I’m a dead man.”Barclay’s trader promises to “have a chat”.External trader to Barclay’strader later that day: “Dude. I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger.”
As in the case of the Irish Financial Regulator’s window-dressing exercise in introducing more laws & regulations for the banks, this means absolutely nothing if the appetite to enforce the law is nil. As a banker of many years I can safely say that the problem has never been the lack of legislation, but rather the complete lack of proper law enforcement when it comes to the conduct of banks. Fred the Shred of RBS (owners of Ulster Banks) lost his knighthood, but is he in jail? Can the FSA say that RBS never broke any laws & regulations while Fred drove it into the ground and onto the lap of the British tax payer?
Five years ago I resigned from my position at the risk manager of UniCredit Bank Ireland – the Irish subsidiary of Italy’s biggest bank. I had officially notified the regulator’s office that we were ‘cooking the books’ by BILLIONS of Euros. Brian Hillery, the chairman of UniCredit Ireland at the time, now sits on the board of directors of the Central Bank of Ireland. The Irish bank guarantee and the subsequent bail out were a result of Ireland’s banks running completely dry of liquidity. The Financial Regulator’s own documents stipulate a possible prison sentence of up to 5 years for breaching liquidity requirements. I resigned from UniCredit Bank Ireland specifically over this issue. How many Irish bank executives are in prison for running their banks into the ground?
Jonathan Sugarman 2 October 2012
Happy that “Its A Political World” is a finalist in this year’s Irish Blog Awards in the Best Political Blog category. Hi and congrats too to The Mire and the East Belfast Diary – the other finalists.
Thanks to the organisers and judges and to all who have contributed and commented on the 100 + blog posts posted here.
Abercrombie and Fitch (A & F), the huge American retail outlet, is to open its first Irish branch soon in Dublin on the old Bank of Ireland building in Dublin’s College Green. Already there is a huge bill board with a model up on the building, and a lot of people are eager to get their hands on the A & F gear which is proving very popular amongst Dublin’s haute couture- aware youth, eager for the latest hoodie and top. Over the years though, A & F have been embroiled in a number of storms from being hauled through the courts – from accusations that it hid back room staff who were non white to the treatment of staff in the sweat shops that manufacture their goods in the Philippines. The Irish Times published an article recently which highlighted the issues surrounding employment. It goes on..
This notion that only good-looking people need apply has done the company no favours in recent years, and its employment policies have led to a number of court cases. In 2009 a former employee of a London store took it to an employment tribunal claiming she had been forced to work in the stockroom because she didn’t match the company’s strict “look policy”, a guide to the appearance of its shop-floor staff. She was born with the lower part of her arm missing. She won the case, and A & F had to pay her £8,000.
A much more damaging action was taken against the company in the US in 2003. Several Hispanic, black and Asian employees and applicants sued the company saying they had been put into less visible backroom jobs. The company disputed the claims but settled in 2005. As part of the deal it agreed to pay more than €30 million to black and Hispanic groups across the US while admitting no wrongdoing.
A & F hired a diversity officer to increase its share of the workforce from 10% being minorities in 2004 to now having approx 50% of its workforce being from minorities. The issues above are not confined however to people whom may work in its branches, there have been accusations that the company’s suppliers have ill treated staff that manufacture goods for A & F. Labour Rights.org carried the news that the Alta Mode factory, where A & F clothing is made, has done its best to stifle the rights of workers who sought to form a Union. The workers at the factory were looking for better rights but Alta Mode thought differently and suspended the workers and even had the audacity to bring a case against them in what was a flagrant breach of the workers’ rights to form a union without being subject to harassment for such actions.
However all may not be lost for such a big brand as they recently bowed to pressure to stop using cotton from Afghanistan thanks to a petition by the International Labour Rights Forum. A petition calling on A & F proved successful to the point that they bowed to pressure and stopped using cotton from child labourers in Uzbekistan . They may have been a bit behind though with the times and only caught up as other companies had signed up and installed policies to deal with such issues.
While over 65 of the world’s largest apparel brands and retailers have developed policies related to Uzbek cotton, two companies have remained silent.
One of these the site alleges was A & F until they signed up.
Next time someone goes shopping for Abercrombie and Fitch in Dublin, think of the rights that people have and where your clothing was made. Was it made ethically? Would you like to work in a company with such policies?
Ponder for a minute, would you work somewhere where the staff recruited seem to be just models?
Read the following report from an ex employee from jezebel.com
There is a “style guide” that hiring managers get to see. It contains almost no text – just a few dozen pages, each with a full-sized color photograph of different ethnicities – a male and a female for each. They are supposed to serve as examples of the kind of people you should hire. Presumably so the managers will know what good-looking minorities look like. They’re amongst the confidential files that are never meant to leave the office, but I’m surprised none have ever surfaced
In 2009 the Guardian reported on the flagship store in Saville Row in London where it seemed so out of place with all of the other shops. Benoit Denizet-Lewis who writes articles for the NYT magazine tells the Guardian that Mike Jeffries (CEO of A & F) came out with the following line when he interviewed him:
We go after the attractive, all-American kid with a great attitude and a lot of friends. A lot of people don’t belong [in our clothes], and they can’t belong.
Wonder what would happen if this 23 st lump of lard walked brazenly in and demanded a job. I could include on the application “I have the body of a God”…just neglect to tell them its a body like this…
Photo: Chinese Buddha (Wikicommons)
fluffybiscuits 19 September 2012