Every Single Bloody Market Is Manipulated!

The Credit Market Is Manipulated

Giant American banks said they had to be bailed out or else the American economy would crash.

It wasn’t just the $700 billion “Tarp” bailout in 2008. In reality, a large portion of the big banks’ profits come from taxpayer bailouts and subsidies (see this, this and this).

At the same time, the big banks have sat on the money the government threw at them – with the encouragement of the Fed – instead of loaning it out to Main Street to kickstart the economy.

As we noted in 2012, small banks are much more interested in making loans to the little guy than the TBTFs:

USA Today points out:

Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn’t get aid, a USA TODAY/American University review found.

Dennis Santiago – CEO and Managing Director of Institutional Risk Analytics … notes:

The vast majority of this contraction of credit availability to American industry has been by the larger banks ….

Fortune reports that smaller banks are stepping in to fill the lending void left by the giant banks’ current hesitancy to make loans. Indeed, the article points out that the only reason that smaller banks haven’t been able to expand and thrive is that the too-big-to-fails have decreased competition ….

BusinessWeek notes:

As big banks struggle, community banks are stepping in to offer loans and lines of credit to small business owners….

Fed Governor Daniel K. Tarullo said:

The importance of traditional financial intermediation services, and hence of the smaller banks that typically specialize in providing those services, tends to increase during times of financial stress. Indeed, the crisis has highlighted the important continuing role of community banks….

[Federal Reserve Bank of Kansas President] Thomas M. Hoenig pointed out in a speech at a U.S. Chamber of Commerce summit in Washington:

During the recent financial crisis, losses quickly depleted the capital of these large, over-leveraged companies. As expected, these firms were rescued using government funds from the Troubled Asset Relief Program (TARP). The result was an immediate reduction in lending to Main Street, as the financial institutions tried to rebuild their capital. Although these institutions have raised substantial amounts of new capital, much of it has been used to repay the TARP funds instead of supporting new lending.

On the other hand, Hoenig pointed out:

In 2009, 45 percent of banks with assets under $1 billion increased their business lending.

45% is about 45% more than the amount of increased lending by the too big to fails.

Indeed, some very smart people say that the big banks aren’t really focusing as much on the lending business as smaller banks.

Specifically since Glass-Steagall was repealed in 1999, the giant banks have made much of their money in trading assets, securities, derivatives and other speculative bets, the banks’ own paper and securities, and in other money-making activities which have nothing to do with traditional depository functions.

Failing to break up the big banks is strangling the ability of Main Street to access the credit market … and thus killing the American economy.

Yet the big banks and their lackeys in government are doing everything they can to drive small banks out of business. That’s distorting the credit market, letting the fatcats obtain credit for very low interest rates … while the little guy has to pay high interest rates to borrow money.

Economics professor Richard Werner – who created the concept of quantitative easing – has documented that central banks intentionally impoverish their host countries by artificially drying up available credit to justify economic and legal changes which allow looting by foreign interests.

Werner has documented this manipulation of the credit markets in Japan, Europe, Thailand and other countries.

Similarly, Nobel prize-winning economist, former chief economist and senior vice president of the World Bank, and chairman of the President’s council of economic advisers (Joseph Stiglitz) says that the International Monetary Fund and World Bank loan money to third world countries as a way to force them to open up their markets and resources for looting by the West.

And two officials of the IMF said in March that they needed the threat of an imminent financial catastrophe to force other players into accepting its measures such as cutting Greek pensions and working conditions, and – as the Greek government put it (via Bloomberg) – the IMF was “considering a plan to cause a credit event in Greece and destabilize Europe.”

This is also, at least indirectly, a manipulation of the credit markets. Specifically, the IMF and World Bank will only allow credit to flow into target countries if those countries agree to distort and destroy their own markets for the benefit of others.

Banks Rig Currency Markets

It has long been known that currency markets are massively rigged. And see this, this, and this.

The U.S. Commodity Futures Trading Commission, U.K. Financial Services Authority and Singapore’s central bank and financial regulator found “smoking gun” evidence of a massive conspiracy by the big banks to rig the prices of financial derivatives based on the  Singapore  Interbank Offered Rate and Singapore Swap Offer Rate … which in turn warped international currency markets.

In a separate incident, a number of giant banks pleaded guilty to manipulating currency markets, and agreed to pay a $7.5 billion dollar fine. New York’s state financial regulator called it “a brazen ‘heads I win, tails you lose’ scheme to rip off their clients.”

The formal admissions by the banks include a trader saying, “We trying to manipulate it a bit more in ny now . . . a coupld buddies of mine and I.” And a vice president of a big bank said:

  • “If you aint cheating, you aint trying.”

Indeed, not only do the banks share confidential information with each other … they also shared it with a giant oil company.

Banks Rig Treasury Market

Bloomberg reported last September:

The same analytical technique that uncovered cheating in currency markets and the Libor rates benchmark [details below] — resulting in about $20 billion of fines — suggests the dealers who control the U.S. Treasury market rigged bond auctions for years, according to a lawsuit.

***

The plaintiffs built their case against the 22 primary dealers who serve as the backbone of Treasury trading — including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley — using data from Rosa Abrantes-Metz, an adjunct associate professor at New York University who has provided expert testimony in rigging cases.

Her conclusion: More than two-thirds of a certain type of Treasury auction appear to have been rigged. She found issues with other auctions, too.

***

Treasury traders at some banks learn of customer demand hours before auctions, and were communicating with their counterparts at other firms via chat rooms as recently as last year, Bloomberg News reported earlier this year.

***

Among the lawyers representing the investors is Daniel Brockett, a Quinn Emmanuel attorney who recently won a $1.87 billion settlement against Wall Street’s largest banks in a case alleging they conspired to limit competition in the market for credit-default swaps.

***

Another group of investors, including Boston’s public employee retirement system, has filed a similar suit against Wall Street primary dealers. Experts interviewed by Labaton Sucharow LLP, the law firm that filed that suit, analyzed auctions and the market for when-issued securities, which are essentially agreements to buy or sell Treasury bonds, notes or bills once they’re issued.

They claim that banks colluded to push prices artificially low at auctions, and to drive prices for when-issued securities to artificially high levels, until December 2012, when news broke of investigations into how Libor was set.

“These scenarios all turn on a very simple conflict of interest,” attorney Michael Stocker said in a telephone interview. “You had banks who were auction participants who also had the power to move the prices that those markets depended on.”

High-frequency trading has also long been used to manipulate the treasury market.

Derivatives Are Manipulated

Runaway derivatives – especially credit default swaps (CDS) – were one of the main causes of the 2008 financial crisis. Congress never fixed the problem, and actually made it worse.

The big banks have long manipulated derivatives … a $1,200 Trillion Dollar market.

Indeed, many trillions of dollars of derivatives are being manipulated in the exact same same way that interest rates are fixed (see below) … through gamed self-reporting.

Reuters noted in 2014:

A Manhattan federal judge said on Thursday that investors may pursue a lawsuit accusing 12 major banks of violating antitrust law by fixing prices and restraining competition in the roughly $21 trillion market for credit default swaps.

***

“The complaint provides a chronology of behavior that would probably not result from chance, coincidence, independent responses to common stimuli, or mere interdependence,” [Judge] Cote said.

The defendants include Bank of America Corp, Barclays Plc, BNP Paribas SA, Citigroup Inc , Credit Suisse Group AG, Deutsche Bank AG , Goldman Sachs Group Inc, HSBC Holdings Plc , JPMorgan Chase & Co, Morgan Stanley, Royal Bank of Scotland Group Plc and UBS AG.

Other defendants are the International Swaps and Derivatives Association and Markit Ltd, which provides credit derivative pricing services.

***

U.S. and European regulators have probed potential anticompetitive activity in CDS. In July 2013, the European Commission accused many of the defendants of colluding to block new CDS exchanges from entering the market.

***

“The financial crisis hardly explains the alleged secret meetings and coordinated actions,” the judge wrote. “Nor does it explain why ISDA and Markit simultaneously reversed course.”

In other words, the big banks are continuing to fix prices for CDS in secret meetings … and have torpedoed the more open and transparent CDS exchanges that Congress mandated.

The managing director at Graham Fisher & Co. (Joshua Rosner) said that the big banks are frontrunning CDS trades … and manipulating decisions on whether a the party “insured” by CDS has defaulted on its obligations, thus triggering an “event” requiring payment on the CDS.

By way of analogy, whether or not an insurance company pays to rebuild a house which has burned to the ground may turn on whether it finds the fire was arson or accidental.

This is a big deal … while hundreds of thousands of dollars might be at stake in the home fire example, many tens or even hundreds of billions of dollars ride on whether or not a country like Greece is determined to have suffered a CDS-triggering event.

Rosner notes:

The potential use of CDS to artificially manipulate corporate solvency, the imbalances in the amounts of CDS outstanding relative to referenced debt and ongoing allegations that ISDA’s Determinations Committee is deeply conflicted and “operates as a quasi-Star Chamber or cartel”, are finally being scrutinized.

As one source recently suggested, “It would be a surprise if determinations of default, made by a committee of interested parties, don’t lead to findings of manipulation similar to those found in LIBOR and FOREX”.

***

The fact that Pimco’s Chief Investment Officer criticized the determination that Greece had not triggered its CDS, even though Pimco was part of the unanimous vote making that determination, is profoundly troubling to say the least.

***

The fact that the [ISDA’s Determinations Committees] has no obligation to “research, investigate, supplement or verify the accuracy of information on which a determination is based” and members “may have an inherent conflict of interest in the outcome of any determinations” only adds credence to suggestions that the “CDS market is being manipulated and gerrymandered by the all-powerful investment banks”.

Interest Rates Are Manipulated

Bloomberg reported in 2014:

Royal Bank of Scotland Group Plc was ordered to pay $50 million by a federal judge in Connecticut over claims that it rigged the London interbank offered rate.

RBS Securities Japan Ltd. in April pleaded guilty to wire frauda s part of a settlement of more than $600 million with U.S and U.K. regulators over Libor manipulation, according to court filings. U.S. District Judge Michael P. Shea in New Haventoday sentenced the Tokyo-based unit of RBS, Britain’s biggest publicly owned lender, to pay the agreed-upon fine, according to a Justice Department statement.

Global investigations into banks’ attempts to manipulate the benchmarks for profit have led to fines and settlements for lenders including RBS, Barclays Plc, UBS AG and Rabobank Groep.

RBS was among six companies fined a record 1.7 billion euros ($2.3 billion) by the European Union last month for rigging interest rates linked to Libor. The combined fines for manipulating yen Libor and Euribor, the benchmark money-market rate for the euro, are the largest-ever EU cartel penalties.

Global fines for rate-rigging have reached $6 billion since June 2012 as authorities around the world probe whether traders worked together to fix Libor, meant to reflect the interest rate at which banks lend to each other, to benefit their own trading positions.

To put the Libor interest rate scandal in perspective:

  • Even though RBS and a handful of other banks have been fined for interest rate manipulation, Libor is still being manipulated. No wonder … the fines are pocket change – the cost of doing business – for the big banks

Energy Prices Manipulated

Energy markets are manipulated as well …

The U.S. Federal Energy Regulatory Commission says that JP Morgan has massively manipulated energy markets in California and the Midwest, obtaining tens of millions of dollars in overpayments from grid operators between September 2010 and June 2011.

And Pulitzer prize-winning reporter David Cay Johnston noted in 2014 that Wall Street is trying to launch Enron 2.0.

And the Senate’s Permanent Subcommittee On Investigations found that Enron itself (which massively manipulated energy markets) was enabled by the fraud of big banks such as Citigroup and Chase.

(And as noted above, oil prices are manipulated.)

Gold and Silver Are Manipulated

Deutsche Bank admitted this year that it participated with other big banks in manipulating gold and silver prices.

In 2014, Switzerland’s financial regulator (FINMA) found “serious misconduct” and a “clear attempt to manipulate precious metals benchmarks” by UBS employees in precious metals trading, particularly with silver. Reuters reported:

Swiss regulator FINMA said on Wednesday that it found a “clear attempt” to manipulate precious metals benchmarks during its investigation into precious metals and foreign exchange trading at UBS …

And the UK’s Financial Conduct Authority found that Barclays manipulated the price of gold for a decade, sending “bursts” of sell orders to manipulate the market.

Gold and silver prices have been “fixed” in daily conference calls by the powers-that-be for a long time.

Bloomberg reported in 2013:

It is the participating banks themselves that administer the gold and silver benchmarks.

So are prices being manipulated? Let’s take a look at the evidence. In his book “The Gold Cartel,” commodity analyst Dimitri Speck combines minute-by-minute data from most of 1993 through 2012 to show how gold prices move on an average day (see attached charts). He finds that the spot price of gold tends to drop sharply around the London evening fixing (10 a.m. New York time). A similar, if less pronounced, drop in price occurs around the London morning fixing. The same daily declines can be seen in silver prices from 1998 through 2012.

For both commodities there were, on average, no comparable price changes at any other time of the day. These patterns are consistent with manipulation in both markets.

The Oil Market Is Manipulated

The big banks aided Unaoil in bribing governments worldwide to manipulate oil prices. The Age notes:

Bankers in New York and London have facilitated Unaoil’s money laundering ….

The European Commission says oil prices have been manipulated for many years.

And many commentators note that big banks play a big role in the mediation.

Other Commodities Are Manipulated

The big banks and government agencies have been conspiring to manipulate commodities prices for decades.

The big banks are taking over important aspects of the physical economy – including uranium mining, petroleum products, aluminum, ownership and operation of airports, toll roads, ports, and electricity – to manipulate market prices.

And they are using these physical assets to massively manipulate commodities prices … scalping consumers of many billions of dollars each year. (More from Matt Taibbi, FDL and Elizabeth Warren.)

The Mortgage Market Is Manipulated

Goldman Sachs and Wells Fargo admitted this year that they fraudulently manipulated the mortgage and mortgage backed securities markets.

Indeed, the entire housing bubble which crashed in 2007 was caused by manipulation.

The big banks committed massive and pervasive fraud both when they initiated mortgage loans and when they foreclosed on them (and see this).

And they pledged the same mortgage multiple times to different buyers. See this, this, this, this and this. This would be like selling your car, and collecting money from 10 different buyers for the same car.

Everything Can Be Manipulated through High-Frequency Trading

Traders with high-tech computers can manipulate stocks, bonds, options, currencies and commodities. And see this.

Manipulating Numerous Markets In Myriad Ways

The big banks and other giants manipulate numerous markets in myriad ways, for example:

  • Engaging in mafia-style big-rigging fraud against local governments. See this, this and this
  • Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here, here, here, here, here, here, here and here
  • Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this
  • Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this
  • Bribing and bullying ratings agencies to inflate ratings on their risky investments

And the big banks engaged in pervasive criminal behavior as well, by engaging in shenanigans such as:

  • Funding the Nazis (while we’re referring to funding the original Nazis many decades ago, the U.S. is now backing the neo-Nazis in Ukraine, and banks are undoubtedly involved in some of the support)
  • Launching a coup against the President of the United States (an old – but vital – story)

The Big Picture

The experts say that big banks will keep manipulating markets unless and until their executives are thrown in jail for fraud.

Why? Because the system is rigged to allow the big banks to commit continuous and massive fraud, and then to pay small fines as the “cost of doing business”. As Nobel prize winning economist Joseph Stiglitz noted years ago:

“The system is set so that even if you’re caught, the penalty is just a small number relative to what you walk home with.

The fine is just a cost of doing business. It’s like a parking fine. Sometimes you make a decision to park knowing that you might get a fine because going around the corner to the parking lot takes you too much time.”

Indeed, Reuters points out:

Switzerland’s regulator FINMA ordered UBS, the country’s biggest bank, to pay 134 million francs ($139 million) after it found serious misconduct in both foreign exchange and precious metals trading. It also capped bonuses for dealers in both units at twice their basic salary for two years.

Capping bonuses at twice base salary? That’s not a punishment … it’s an incentive.

Experts say that we have to prosecute fraud or else the economy won’t ever really stabilize.

But the government is doing the exact opposite. Indeed, the Justice Department has announced it will go easy on big banks, and always settles prosecutions for pennies on the dollar (a form of stealth bailout. It is also arguably one of the main causes of the double dip in housing.)

Indeed, the government doesn’t even force the banks to admit any criminal guilt as part of their settlements. In fact:

The banks have been allowed to investigate themselves,” one source familiar with the investigation told Reuters. “The investigated decide what they want to investigate, what they admit to, and how much they will pay.

Wall Street has manipulated virtually every other market as well – both in the financial sector and the real economy – and broken virtually every law on the books.

And they will keep on doing so until the Department of Justice grows a pair.

The criminality and blatant manipulation will grow and spread and metastasize – taking over and killing off more and more of the economy – until Wall Street executives are finally thrown in jail.

It’s that simple …

 

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  • Evil Genius

    Saw report a few years ago on UN web site. Office on poverty report.
    Said “more than 100 million forced into poverty as direct result of libor scandal”.

    Poverty kills.
    How many died?
    1%?

    Genocide by depraved indifference.

  • jadan

    This is privatization. Since Reagan privatization has been going forward as a way to “get government off our backs”. The US Post Office is being destroyed by privatizers, for example, in the name of more efficient services like Fex Ex and UPS, which are not actually more efficient, but higher priced with less service. In every case, private industry costs more to deliver public services and provides less service. The most egregious example is the Federal Reserve System. Per the Constitution, the Treasury Department should issue money, which would be debt-free money, if the Constitution were to be followed. But the original privatizer, Alexander Hamilton, placed the new nation’s money in the hands of a private central bank. The people’s money has always been in the hands of unscrupulous financiers and that is the case today. The American people are but widows & orphans to rich slimeballs in impeccable suits. The scale of the fraud was set out in bold relief after the 2008 debacle. The private money club, the insiders by invitation only club, called the Fed, handed out 16 trillion to deserving banks and corporations. And you’re surprised that all the markets are fixed?

  • madrino

    Derivatives are a contrivance of ownership without taking possession. “High” end universities have resources on many such exercises in; finance, land, water, other commodities, you name it, you can model it. It helps to have had a decision sciences/analytics type of degree.

  • Brockland A.T.

    The protocol on discussing the DoJ’s and particularly Attorney General Lynch’s pair is not clear.

    ‘Growing a pair’ references different body regions for men and women, but can mean basically the same thing.

    However, its possible that Lynch does have a pair, and possibly Trump didn’t quite get it when Clinton took the time to talk to Lynch about her grandkids. Or their grandkids. Clinton imparted a message, reminding her, perhaps, that some things are more important than having a pair.

    http://www.realclearpolitics.com/video/2016/07/05/trump_mocks_golf_and_grandchildren_summit_did_the_clintons_bribe_lynch_its_a_disgrace.html

    Which is why public pressure and enabled democracy are important, to force forced hands back where they belong.