Tuesday, August 06, 2013

Cowboy capitalism dispatches

The neoliberal doctrine of letting banks and other corporations run wild and "regulate" themselves continues to produce results.

Matthew Leising, Swaps Probe Finds Banks Rigged Rate at Expense of Retirees Bloomberg Businessweek 08/02/2013:

Recorded telephone calls and e-mails reviewed by the Commodity Futures Trading Commission show that traders at Wall Street banks instructed ICAP Plc brokers in Jersey City, New Jersey, to buy or sell as many interest-rate swaps as necessary to move the benchmark rate, known as ISDAfix, to a predetermined level, according to a person with knowledge of the matter.

By rigging the measure, the banks stood to profit on separate derivatives trades they had with clients who were seeking to hedge against moves in interest rates. Banks sought to change the value of the swaps because the ISDAfix rate sets prices for the other derivatives, which are used by firms from the California Public Employees' Retirement System to Pacific Investment Management Co., said the person, who asked not to be identified because the details aren't public.
When the only measure of virtue is making money, robbing widows and orphans can become part of the daily routine.

Jaime Lalinde, Michael Lewis on Goldman Sachs: The Company Would Flourish Under Totalitarian Rule (interview) Vanity Fair 08/02/2013:

The Justice Department in Manhattan, the D.A., they’re very good at certain kinds of cases. Insider trading, theft of property from a corporation, these are easier for them to take on and wrap their minds around than what was actually the center of the financial crisis.

In a funny way, the authorities, in response to not being able to prosecute the actual bad behavior that was actually really important, became more interested than they maybe should have been in peripheral cases that just happened to have Wall Street in the headline.
Liam Vaughan, Gavin Finch, and Ambereen Choudhury, Price Benchmarks Said to Be Rigged in the Foreign Exchange Market Bloomberg Businessweek 06/13/2013:

Traders at some of the world’s biggest banks have manipulated the WM/Reuters foreign exchange rates used as benchmarks to set the value of trillions of dollars of investments, according to five people with knowledge of the practice. Bank employees have been trading ahead of client orders—a practice known as front-running—and rigging the rates by pushing through trades before and during the 60-second window when the benchmarks are set, say the five, current and former traders who asked not to be identified for fear of reprisals. Dealers colluded with counterparts at different firms to boost chances of moving the rates, say two of the people.
Matthew Leising, Rigged-Benchmark Probes Proliferate From Singapore to UK Bloomberg Businessweek 06/18/2013: "if there's a chance to rig benchmark rates in world markets, someone is usually willing to try."


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