The Market Has Spoken, and It Is Rigged (Simon Johnson) [View all]

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http://economix.blogs.nytimes.com/2012/07/12/the-market-has-spoken-and-it-is-rigged/?partner=socialflow&smid=tw-nytimesbusiness

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The behavior at Barclays has all the hallmarks of fraud – intentional deception for personal gain, causing significant damage to others.

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The commission’s order portrays a wide-ranging conspiracy (or perhaps a set of conspiracies) to rig markets, including, but not limited to, any securities for which the price is linked to a particular set of short-term interest rates.

The collective term for these rates is the London Interbank Offered Rate, known as Libor, but the use of this nomenclature sometimes hides the fact that there is a separate Libor daily for each of 10 currencies at 15 maturities, from overnight to 12 months, according to the British Bankers Association. The notional size of the derivatives involved is on the order of $360 trillion.

Barclays could not have manipulated those rates by themselves – and that is not what the C.F.T.C. found or the basis of the Barclays settlement. Rather, some Barclays employees colluded with people at other banks in a way that, over a period of years, moved Libor rates up and down, depending on what would favor the trading positions of the people and organizations involved.

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Anyone who takes personal responsibility seriously should want all those involved to be held accountable – to the full extent of the law in all jurisdictions. Anything that lets individuals escape consequences will further undermine the legitimacy that underpins all markets. Bankers should be leading the charge to clean up their industry.

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