|The News Line: Editorial
Tuesday, 11 April 2017
Bank of England implicated in illegal Libor rigging
THE Bank of England, the UKs central bank and guardian of the country’s banking system, along with being responsible for the running of British capitalism, has been implicated in being up to its neck in the Libor rigging scandal first revealed in 2012.
Libor is the London inter-bank lending rate, a benchmark interest rate that dictates the price of financial deals estimated to be worth $450 trillion, it fixes the rate at which banks lend to each other and thereby fixes the interest rate paid by ordinary people with mortgages or bank loans.
The scandal erupted when it was uncovered that the people at the main banks responsible for setting the rate were submitting false figures used in the calculation in order to boost the profits of the bankers and traders either by artificially keeping rates high or by pushing them down.
The other important aspect of Libor rates is that it is taken as an indicator of the overall health and strength of individual banks. If other banks are unwilling to lend at low interest rates to another it is a clear sign that they know that this bank is in serious trouble.
Illegal Libor rate fixing served the dual purpose of making fortunes for banks and individual traders while covering up the fact that these banks were on the brink of collapse. At the time in 2012, and subsequently, the banks have been quick to blame this illegal practice on ‘rogue’ individual employees.
Politicians jumped in to denounce these rogue individuals as common criminals and demand severe penalties for their crimes. Banks received fines totalling £6 billion (a drop in the ocean) for ‘allowing’ their employees to manipulate the rate while the individuals directly involved ended up in court on fraud charges.
One trader, Tom Hayes, was found guilty in 2015 of rigging the Libor rate and sentenced to 14 years in prison. His defence was basically that everyone else was doing it and that he was ‘pressurised’ into doing it by his bosses and those much higher up the chain.
Just how high this pressure came from has now been exposed by the BBC in last night’s Panorama programme. Panorama released a secret recording from 2008 that directly implicates the Bank of England and the Labour government of Gordon Brown in the illegal fixing of Libor.
In this recording a senior Barclays manager, Mark Dearlove, instructs the bank’s Libor submitter Peter Johnson to lower his Libor rates, telling him: ‘The bottom line is you’re going to absolutely hate this . . . but we’ve had some serious pressure from the UK government and the Bank of England about pushing our Libor lower.’
Johnson is heard objecting to manipulating the rate, to which his boss replies: ‘The fact of the matter is we’ve got the Bank of England, all sorts of people involved in the whole thing . . . I am as reluctant as you are . . . these guys have just turned around and said just do it.’
The implications are clear – it’s not just individual traders like Hayes who should be in jail but every banker right up to the Bank of England should be there with him. In adjoining cells should be the politicians who have covered up the banks’ insolvency by demanding the Libor rate be fixed and by bailing them out with trillions of pounds of free money through Quantitative Easing.
Brown ‘saved’ the banks from collapse in 2008 by nationalising their debt, a debt that both Labour and Tory governments are determined will be paid for by the working class. While workers and their families have suffered cuts in pay reducing them to poverty levels unseen in modern times, cuts in every benefit and the destruction of the NHS as a result of austerity, these bankers have been living the high life on their backs, breaking the law with impunity in search of profit.
The fact is the only way to curb the banks and the capitalist system they dominate is for the working class take power and advance to a workers government that will expropriate the bosses and bankers and bring in socialism.
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