Senate panel to ask Bernanke about Libor scandal

Audit the fed couldn't have came at a better time...perhaps this will give the steam needed to push it forward. If anything it certainly highlights ole' crazy Paul's urgent message about the federal reserve and it's manipulation of currency.

marketwatch.com

WASHINGTON (MarketWatch) - Sen. Tim Johnson, the chairman of the Senate Banking Committee, said Tuesday that Federal Reserve Board Chairman Ben Bernanke should be prepared to discuss the possible illegal manipulation of the London Interbank Offered Rate, or Libor, by banks in Europe, Japan and the United States when he appears before the panel later this month. Johnson said that Treasury Secretary Timothy Geithner should also be prepared to answer senators' questions on the scandal at a separate hearing also to be held this month. Johnson said that his committee staff has begun to schedule bipartisan briefings with "relevant parties" to learn more about the Libor allegations and related enforcement actions. "It is important that we understand how any manipulation may impact American consumers and the U.S. financial system," Johnson said in a statement. The U.K. bank Barclays PLC was fined roughly $450 million for fixing Libor. Barclays has said that Bank of England and Federal Reserve officials were well aware of the issue.

To me the problem lies in how it's dealt with...Theft of trillions garners a fine of a few hundred million...Where in that equation lies the incentive to stop!!!

Originally posted by Daedal
Audit the fed couldn't have came at a better time...perhaps this will give the steam needed to push it forward. If anything it certainly highlights ole' crazy Paul's urgent message about the federal reserve and it's manipulation of currency.

Indeed.

What you should learn from this sordid episode that going down the Ron Paul Way, i.e. wholly deregulated private markets in great control of critical functions, is an insanely dangerous idea. LIBOR is a 100% private-sector rate, developed and reported by 100% private sector entities. And even though people and corporations could be sued massively for fraud and possibly go to jail, the incentive to cheat when they could was still too high.

In Ron Paul's world, what they did would be legal and an acceptable business practice. OK technically it would be against contracts but the people who were ripped off would have never known they were being ripped off---and there would be no incentive for banks to ever tell---and the remote threat of company losing lawsuits (i.e. shareholders, not employees) is nothing compared to the personal threat of direct imprisonment which only the government can impose.

The actual market that the US Federal Reserve and US Treasury participates in, Federal Funds (not LIBOR rate), is still apparently honest.

Is that because the bankers are so much better? No, it's because the Fed wields a Big Stick and doesn't like to be messed with. Not only could bankers (i.e. those low level """rogue traders""" who never ever followed encouragement from above) go to jail, but the banks could actually lose lots of business if the Fed restricted them from being Primary Dealers.