US, Britain fine six top banks nearly $6 bn for forex, Libor abuses

Yahoo – AFP, John Biers, 20 May 2015

The far-flung settlement included guilty pleas from Barclays Bank, JPMorgan

 Chase, Citicorp and the Royal Bank of Scotland for conspiring to manipulate

the massive currency market (AFP Photo/Ben Stansall)

New York (AFP) - US and British regulators fined six major global banks a total of nearly $6 billion between them Wednesday for rigging the foreign exchange market and Libor interest rates.

They said forex traders from the banks had met in an online chatroom brazenly named "the Cartel" to set rates that cheated customers while adding to their own profits in the massive global currencies market.

In the far-flung settlement, Barclays Bank, JPMorgan Chase, Citicorp and the Royal Bank of Scotland all pleaded guilty to US Justice Department charges of conspiring to manipulate the massive currency market.

Switzerland's UBS meanwhile pleaded 

guilty to violating a prior settlement of

 charges for rigging the Libor interest rate 

(AFP Photo/Fabrice Coffrini)

Switzerland's UBS meanwhile pleaded guilty to violating a prior settlement of charges for rigging the Libor interest rate.

And Bank of America was included with the other five in fines levied by the US Federal Reserve in the forex rigging case.

"They acted as partners -- rather than competitors -- in an effort to push the exchange rate in directions favorable to their banks but detrimental to many others," said US Attorney General Loretta Lynch.

"And their actions inflated the banks' profits while harming countless consumers, investors and institutions around the globe."

'The Cartel'

In Wednesday's settlement, the Department of Justice meted out its largest set of antitrust fines ever, assessing $2.5 billion against Barclays, JPMorgan, Citicorp and RBS in the forex case.

Those four, plus UBS and Bank of America, will also pay more than $1.8 billion to the US Federal Reserve over "unsafe and unsound practices" in forex markets.

Barclays, which did not take part in a previous settlement last November with various agencies, was additionally fined more than $1.3 billion by Britain's Financial Conduct Authority, the New York State Department of Financial Services, and the US Commodity Futures Trading Commission.

Combined with a $203 billion Justice Department fine for UBS in the Libor case, and other penalties, the total assessed Wednesday was almost $6 billion.

Regulators described a bold scheme by financial heavyweights to orchestrate trades in the $5.3-trillion-per-day global foreign exchange market.

JPMorgan blamed its role principally on

 a single trader who has been dismissed 

(AFP Photo/John Moore)

Traders from the banks, communicating via the "Cartel" chat room, agreed to withhold bids or offers for euros or dollars at distinct times to protect each other's trading positions, the Justice Department said.

The banks involved represented at least one-fourth of dollar-euro transactions each year and "were uniquely positioned to manipulate the market," said Assistant Attorney General Bill Baer.

A number of traders are facing charges in various countries for their roles in the scheme.

Barclays fined $2.4 billion

The size of penalties on individual banks ranged from the hundreds of millions of dollars to $2.4 billion for British bank Barclays, depending on a bank's involvement in the scheme.

The Barclays sum was high because it had not participated in the November settlement between several banks and the FCA, DFS and CFTC.

Georgina Philippou, the FCA's director of enforcement, called Barclays' role "another example of a firm allowing unacceptable practices to flourish on the trading floor."

Barclays chief executive Antony Jenkins said he regretted that "some individuals" within the bank "have once more brought our company and industry into disrepute."

"This demonstrates again the importance of our continuing work to build a values-based culture and strengthen our control environment," he said.

Citigroup, which had the second largest total fine of $1.3 billion, called the scandal "an embarrassment to our firm, and stands in stark contrast to Citi's values."

Citigroup, which had the second largest

 total fine of $1.3 billion, called the scandal

 "an embarrassment to our firm, and

 stands in stark contrast to Citi's values" 

(AFP Photo/Don Emmert)

Citigroup said it had separately reached an agreement to pay $394 million to settle related private US class action claims.

JPMorgan blamed its role principally on a single trader who has been dismissed.

"The lesson here is that the conduct of a small group of employees, or of even a single employee, can reflect badly on all of us, and have significant ramifications for the entire firm," said JPMorgan chief executive Jamie Dimon.

The Justice Department's $203 million fine against UBS, and $60 million levied on Barclays, related to their violating a 2012 settlement for conspiring to rig Libor, the global commercial interest rate benchmark used to peg millions of rate-sensitive contracts and loans around the world.

But, because it offered early cooperation in the forex rigging case, the Swiss bank earned conditional immunity from those charges.

In a settlement announced by the US Justice Department on Wednesday, the banks

agreed to pay close to $6 billion (5.3 billion euros) in fines for their manipulations.

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Six top banks fined for forex, Libor abuses

"The Recalibration of Awareness – Apr 20/21, 2012 (Kryon channeled by Lee Carroll) (Subjects: Old Energy,Recalibration Lectures, God / Creator, Religions/Spiritual systems (Catholic Church, Priests/Nun’s, Worship, John Paul Pope, Women in the Church otherwise church will go, Current Pope won’t do it), Middle East, Jews, Governments will change (Internet, Media, Democracies, Dictators, North Korea, Nations voted at once), Integrity (Businesses, Tobacco Companies, Bankers/ Financial Institutes, Pharmaceutical company to collapse), Illuminati (Started in Greece, with Shipping, Financial markets, Stock markets, Pharmaceutical money (fund to build Africa, to develop)), Shift of Human Consciousness, (Old) Souls, Women, Masters to/already come back, Global Unity.... etc.) -(Text version)

“… The Shift in Human Nature

You're starting to see integrity change. Awareness recalibrates integrity, and the Human Being who would sit there and take advantage of another Human Being in an old energy would never do it in a new energy. The reason? It will become intuitive, so this is a shift in Human Nature as well, for in the past you have assumed that people take advantage of people first and integrity comes later. That's just ordinary Human nature.

In the past, Human nature expressed within governments worked like this: If you were stronger than the other one, you simply conquered them. If you were strong, it was an invitation to conquer. If you were weak, it was an invitation to be conquered. No one even thought about it. It was the way of things. The bigger you could have your armies, the better they would do when you sent them out to conquer. That's not how you think today. Did you notice?

Any country that thinks this way today will not survive, for humanity has discovered that the world goes far better by putting things together instead of tearing them apart. The new energy puts the weak and strong together in ways that make sense and that have integrity. Take a look at what happened to some of the businesses in this great land (USA). Up to 30 years ago, when you started realizing some of them didn't have integrity, you eliminated them. What happened to the tobacco companies when you realized they were knowingly addicting your children? Today, they still sell their products to less-aware countries, but that will also change.

What did you do a few years ago when you realized that your bankers were actually selling you homes that they knew you couldn't pay for later? They were walking away, smiling greedily, not thinking about the heartbreak that was to follow when a life's dream would be lost. Dear American, you are in a recession. However, this is like when you prune a tree and cut back the branches. When the tree grows back, you've got control and the branches will grow bigger and stronger than they were before, without the greed factor. Then, if you don't like the way it grows back, you'll prune it again! I tell you this because awareness is now in control of big money. It's right before your eyes, what you're doing. But fear often rules. …”

US regulator sues 16 banks for alleged Libor rigging

BBC News, 14 March 2014

 

Some of the world's biggest banks have been accused of colluding to fix Libor

Libor scandal

• Former trader charged over Libor
• Libor change responds to scandal
• EU proposals to take control of Libor
• Can we ever trust bankers again?

A US regulator has sued 16 banks for allegedly manipulating the London interbank offered rate (Libor).

The Libor rate is used to set trillions of dollars of financial contracts, including mortgages and financial transactions around the world.

The regulator said the manipulation caused substantial losses to 38 US banks which were shut down during and after the 2008 financial crisis.

The sued banks include Barclays, HSBC, Citigroup and Royal Bank of Scotland.

The British Bankers' Association (BBA) has also been sued by the regulator - the US Federal Deposit Insurance Corporation (FDIC).

"BBA participated in the alleged scheme to protect the revenue stream it generated from selling Libor licenses and to appease the Panel Bank Defendants that were members of the BBA," it was quoted as saying by the AFP news agency.

The FDIC alleged that the banks mentioned in its lawsuit rigged the rate from August 2007 to at least mid-2011.

Other banks named in the lawsuit include Bank of America, JPMorgan Chase, Deutsche Bank, Lloyds Bank, Credit Suisse, UBS, and Rabobank.

Growing pressure

Libor is the average rate at which banks lend money to one another and is decided on a daily basis.

Most of the world's biggest banks contribute estimates to form the Libor.

But there have been allegations that some have looked to profit from it by understating or overstating their submissions.

Over the past two years, regulators across the globe have been investigating the manipulation of the rate and there have been $3.7bn (£2.26bn) in fines to date.

A string of international banks and brokers, including Barclays and the Royal Bank of Scotland, have faced both criminal and civil penalties for their involvement in the scandal.

Some banks have also been found to have understated their submissions in the period during and after the financial crisis.

They did so in order to avoid the perception that they were having to borrow at higher interest rates than their peers and might therefore be in financial difficulty.

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Too Big To Jail: Wall Street Executives Unlikely To Face Criminal Charges, Source Says

The Huffington Post, Ben Hallman, 09/08/2012

New York Attorney General Eric Schneiderman, accompanied by Attorney
 General Eric Holder, speaks at the Justice Department in Washington,
Friday, Jan. 27, 2012, after Holder announced the formation of the Residential
Mortgage-Backed Securities Working Group. (AP Photo/Cliff Owen)

A last-ditch effort by federal and state law enforcement authorities to hold Wall Street accountable for nearly bringing down the U.S. economy is unlikely to lead to any criminal charges against big bank executives, according to a source close to the investigation.

Barring a "hail mary pass," said the source, who spoke on the condition of anonymity because the investigation is still ongoing, the members of a task force President Barack Obama formed in January to investigate fraud in the residential mortgage bond industry will instead most likely bring civil lawsuits against some of the banks involved, though it isn't clear when these cases might come.

That means any penalties for those accused of fraud or other misconduct would be measured in dollars, not jail terms.

A spokesman for New York Attorney General Eric Schneiderman, a co-head of the task force and the driving force behind its formation, declined to comment.

Adora Andy, a Department of Justice spokeswoman, said in a statement that "all appropriate remedies, civil and criminal, are on the table."

"As always, if working group members uncover evidence of fraud or other illegal conduct, we will pursue such conduct aggressively," Andy said.

The subprime mortgage bubble popped more than five years ago, triggering a full-fledged economic meltdown. Since then, the question confronting regulators and government prosecutors has been whether the banks that drove the market's expansion simply made terrible business decisions, or committed fraud in order to reap short-term profits. 

The Securities and Exchange Commission, in a number of civil lawsuits, has alleged the latter (as a regulatory agency, the SEC cannot bring criminal suits). But with the exception of one failed case against Bear Stearns in 2009, the Department of Justice, which historically would lead any criminal effort, has declined to criminally prosecute those who created the financial instruments built out of toxic mortgage loans.

By pooling investigative resources, it was hoped that the Justice Department, the SEC and a handful of state attorneys general, led by Schneiderman, could accomplish what the agencies had mostly failed to deliver on their own: a sense of justice, however fuzzily defined.

But from the start, the task force -- officially, the Residential Mortgage-Backed Securities Working Group -- has been dogged by critics questioning the seriousness of the effort, and by concerns that the legal timeframe in which investigators must bring cases is coming to a close.

Civil cases, if and when they are filed, could lead to large financial penalties and possibly aid for struggling homeowners. Yet it seems unlikely that such a result will satisfy those whose anger sparked the Occupy Wall Street movement, or even many middle-class Americans who may wonder how, in contrast to other financial crises, this one could end with none of the people who seemingly helped orchestrate it behind bars.

"Without accountability, the unending parade of megabank scandals will inevitably continue," Neil Barofsky, the former watchdog over the $700 billion bank bailout fund and a frequent critic of the Obama administration's response to the financial crisis, recently told The Huffington Post.

How and why the government chose this path will be the subject of debate for years to come. Some say prosecutors lacked resources. Others assert that the complexity of the financial transactions makes it virtually impossible to prove criminal intent in court, where prosecutors must convince a jury of guilt "beyond a reasonable doubt." In a civil action, by contrast, the bar is lower: jurors need only conclude that "a preponderance of evidence" indicates guilt.

One former prosecutor said a simpler human dimension may also be preventing government lawyers from filing criminal charges: the basic fear of losing a big case.

"Losing has a chilling effect, because no one wants to take a spin like that and come out on the short end," said Cliff Stricklin, a former prosecutor who worked on the Enron task force and also successfully prosecuted Qwest Communications chief executive Joseph Nacchio for accounting fraud. (Nacchio is currently serving a seven-year sentence in a federal prison.)

"[Losing a case] makes you wonder if there was indeed a crime, and if so, how you go about proving it," Stricklin said. "It is a signal to the public that either the government is jumping to conclusions or isn't competent."

CATASTROPHE OR CRIME?

Mary Jo White, a former U.S. attorney for the Southern District of New York, adheres mostly to the view that the financial crisis was a catastrophe, but not a crime. Now a prominent defense attorney at the law firm Debevoise & Plimpton, White said she thinks calls from some quarters for more criminal prosecutions are unwarranted.

"The financial crisis was so expensive and so many people were injured that one's instinct is to think that there must have been massive wrongdoing from the top on down," she said.

But criminal cases must be built on compelling evidence, not suppositions, and evidence of broad-based misconduct that would rise to that level doesn't exist, White said.

"I don't think the criticism is fair," White said.

William Black, a law professor at the University of Missouri-Kansas City and a prominent former bank regulator, is in the camp that thinks prosecutors have missed a massive opportunity.

"They don't get the whole concept of looting," he said.

Black, who worked with prosecutors to develop some of the 1,100 criminal cases that emerged from the Savings & Loan crisis of the late 1980s and early 1990s, said that Wall Street accounting fraud flows from a simple recipe: grow by buying high-interest loans, leverage the business by borrowing lots of money and keep next to nothing in reserve against losses.

"You are mathematically guaranteed to report record profits," he said.

But those profits are based on a fiction, he said, one that costs investors when the bank collapses -- and in some cases, can cost taxpayers too.

Financial firms like Goldman Sachs profited tremendously by purchasing loans described widely in the industry as "liar's loans," Black said. These loans were made without the borrower having to prove income, or even that he or she had a job.

"It makes no sense that an honest lender would ever make liar's loans," he said. Nor does it make sense that a sophisticated bank like Goldman, which runs an entire business based on the ability to calculate risk, would purchase such dangerous loans without knowing that they were toxic, he said.

Indeed, the Financial Crisis Inquiry Commission produced evidence last year which suggests that Goldman Sachs traders knew these investments were more dangerous than they were letting on to their customers. Internally, they characterized offerings as "junk" and "monstrosities" even as they offloaded the mortgage bonds onto investors, according to the report.

The SEC came to the same conclusion when investigating whether the bank had misled investors about a product known as Abacus. That probe led to a $550 million settlement in 2010.

The SEC has won $2.2 billion in penalties stemming from financial crisis-related cases, though it has been dogged by complaints -- most notably from federal judge Jed Rakoff -- that its fines are too small and that it doesn't target individuals often enough. An SEC spokesman declined comment.

Still, the agency's efforts to pursue financial crisis fraud far outstrip those of the Justice Department.

The government's lone criminal case related to the creation of complex mortgage investments came in 2009, when a federal jury declined to convict two former Bear Stearns hedge fund managers accused of lying to investors about the soundness of the securities they were selling.

Last month, the Justice Department announced that it had dropped a probe of Goldman Sachs, launched after the Senate’s Permanent Subcommittee on Investigations found that the bank sold investments "in ways that created conflicts of interest with the firm’s clients and at times led to the bank's profiting from the same products that caused substantial losses for its clients.”

There was "not a viable basis" to bring criminal charges against the bank or its employees, the Justice Department said in a statement explaining its decision.

LAST CHANCE FOR PROSECUTORS

Obama's multi-agency mortgage task force was supposed to succeed where previous investigations had failed.

"This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans," Obama said in his State of the Union address in January.

The goal of the new unit was to drill down into the sophisticated financial instruments the banks created to package and sell mortgages in a search for fraud. But the group was met with skepticism from many legal experts, who wondered how this effort would be any different from previous investigations.

The group got off to a rocky start. Three months after its formation, it had failed even to secure office space. In May, Schneiderman told the Wall Street Journal that he wanted more resources and wished that investigators at his partner agencies would pick up the pace.

According to the Justice Department, the investigation is now in full swing.

More than 200 investigators are on the job, "devoting significant resources to investigate and prosecute misconduct by financial institutions in the origination and securitization of mortgages," the agency said in a statement.

The DOJ has issued 30 civil subpoenas in the past four months, it said, and the SEC has issued more than 300 -- though that number includes pre-existing investigations.

The New York attorney general's office, HuffPost previously reported, is now investigating several major institutions.

But if none of these cases yield a criminal indictment, who, if anyone, is to blame?

Schneiderman, though he never promised criminal cases, is likely to attract some criticism for the lack of prosecutions due to his aggressive advocacy for the task force. Last year, Schneiderman led an insurgency against a robo-signing settlement shaping up between state attorneys general and five large banks. His goal, he said, was to preserve his ability to continue an investigation he had opened in the spring into possible fraud that led to the housing bubble and crash.

The states leading the negotiations dispute that Schneiderman's ability to continue his investigation was ever in doubt. Nevertheless, his initial opposition to what became a $25 billion deal led directly to the creation of the task force

Schneiderman co-leads the task force, along with Robert Khuzami, the enforcement director of the SEC; Lanny Breuer, the head of the criminal division at the Justice Department; Stuart Delery, the head of Justice's civil division; and John Walsh, the U.S. Attorney for the District of Colorado.

Though each of these entities are sharing documents and resources, it is up to the individual agencies to file charges.

The biggest challenge for Schneiderman, who took office in January 2011, was the ticking clock. Most mortgage bonds were packaged and sold in 2006 or earlier, and the statute of of limitations on most types of fraud cases is five years from the commission of the alleged wrongdoing.

It is possible to extract "tolling" agreements from a business or individual under investigation that effectively extends the allotted time in which to bring a case, in exchange for more lenient treatment. But Schneiderman would have had to enact tolling agreements in very short order after taking office. It isn't clear whether a bank or an individual would accept such an agreement in a criminal case if they knew the statute of limitations was about to run out.

It is also true that while the New York attorney general's office has the authority to bring criminal fraud cases, it historically almost never does. Like the SEC, the office instead typically files lawsuits with the expectation of wringing a settlement -- and political bragging points -- out of a Wall Street firm. It's part of the recipe that both Andrew Cuomo and Eliot Spitzer used to pave their way to a governorship.

Instead, the attorney general's office typically defers to the Department of Justice, which has a large team of experts parked in the U.S. attorney's office just a few blocks away in lower Manhattan. But instead of taking on Wall Street's top executives, that office has focused on alternate cases -- such as the recent prosecution of hedge fund king Raj Rajaratnam, who was convicted of insider trading.

Stricklin, now in private practice at the Bryan Cave law firm in Denver, said that he doesn't know whether there was criminal conduct in the run-up to the financial crisis.

"The truth is more complicated than can be explained in sound bites," he said.

But he has seen, he said, a decline in the talent level of those working white-collar cases at agencies like the Federal Bureau of Investigation and the Justice Department, which over the past decade have diverted some of the most talented people over to counterterrorism.

"The government needs to decide if it is really going to tackle white-collar crime or not, and if so it needs to allocate resources," he said.

Otherwise, the result will be fewer cases, and more losses, Stricklin said.

"It always matters to bring solid criminal cases where you are holding people accountable," he said. "But the worst signal is not to do nothing, but to do something partway."

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(Religions – Zionism - March 1, 2012 - Matthew Channelled by Suzanne Ward)

9. It can be no other way—simply, this is the physics that governs life in this universe. As Earth continues apace into successively higher planes, nothing with low vibrations in any form—physical bodies, subversive plans, theft, dishonesty, unjust laws and imprisonment, bigotry, cruel customs and deeds—can survive.

10. Moving on, no, it will not be quite like religions being “totally discarded and replaced by universal laws in the Golden Age.” When the truths come forth that science and spirit are one and the same and that religious dogmas were originated by early leaders of church and state to control the masses, people whose consciousness has risen beyond the constraints of third density will adhere to the spiritual aspects of their respective religions and the devised, controlling aspects will fall by the wayside.

11. One of the truths to come forth is that Zionism, which by dark intent has been made synonymous with Judaism, actually is a bellicose political movement within the Illuminati, and its aim for more than six decades has been to create conflict and instability in the entire Middle East. Zionists, who have wielded powerful influence within and behind major governments and their military forces, do NOT represent the Jewish peoples in Israel or anywhere else. And, like all other Illuminati factions, they have been committed to that cabal’s goal of global domination.

12. Although Semites are of diverse national origins and religions, the Zionists have been successful in convincing many that “anti-Semitic” is exclusively prejudice against the Jewish peoples and opposition to Israel’s right to defend itself from its “enemies.” By means of that blatant distortion, they obtained not only world sympathy, but also massive defense funding from Israel’s allies, most especially the United States, all of which served to increase the Illuminati’s vast profits from their industrial-military machine.

13. In addition to controlling the masses through dogmatic teachings, religions have served the dark purpose of divisiveness to such an extent that it resulted in centuries of trauma and bloodshed. Witness the Crusades, wars between Catholics and Protestants, pogroms against Jews, executions of “blasphemous” individuals who refused to “recant.”  (Read More …)

Libor scandal: Seven banks summoned in US probe

BBC News, 15 August 2012 

Barclays was fined for trying to
manipulate the Libor rates

Seven banks, including HSBC and Royal Bank of Scotland, are to be questioned in the US for alleged manipulation of the Libor inter-bank lending rate.

The other banks receiving subpoenas by the New York attorney general are Barclays, Citigroup, Deutsche Bank, JPMorgan and UBS.

Last month, Barclays was fined £290m by UK and US regulators for rigging Libor.

Some of the world's biggest banks have been embroiled in a number of scandals in recent months.

Following the Barclays fine, US regulators said they were investigating a number of other banks for potential Libor rigging.

A government-ordered review into Libor is currently being conducted by the managing director of the Financial Services Authority, Martin Wheatley.

The Wheatley review is examining how the Libor rate, the benchmark interest rate for trillions of financial contracts including some mortgages, is calculated and regulated.

The current Libor system is no longer a "viable option", Mr Wheatley said.

Libor is calculated using rates submitted by a group of leading banks who estimate how much it costs them to borrow in 10 currencies and 15 lengths of loans, ranging from overnight to 12 months.

There have been a series of allegations over the trading policies of banks in recent months.

Bank woes

On Tuesday, Standard Chartered agreed to pay $340m (£217m) to New York regulators to settle claims that it hid transactions worth $250bn with Iran.

Standard Chartered shares rallied on Wednesday after it agreed to settle the claims, after the institution had been threatened with having its US banking licence revoked.

Last week, New York's DFS alleged that the US unit of the bank had illegally hidden 60,000 transactions with Iran worth $250bn over nearly a decade.

It accused the London-based bank of being a "rogue institution" for breaking US sanctions against Iran.

The bank's chief executive Peter Sands.

HSBC has also been accused of failing to prevent money laundering by the US Senate.

According to the Senate report, the US unit of HSBC carried out 28,000 undisclosed sensitive transactions between 2001 and 2007, an internal audit commissioned by the bank found. The vast majority of those transactions - worth $19.7bn - involved Iran.

As for Barclays, the Libor scandal led to the resignation of chief executive Bob Diamond as well as chairman Marcus Agius.

Last week, Sir David Walker was appointed as the new chairman.

He said he wants to review the way the bank operates and will begin his search for a new chief executive "within days".

Sir David is a senior banker who led the 2009 government inquiry into the rules governing how banks are run.

RBS has already admitted it is being investigated for fixing Libor.

It said: "RBS Group continues to receive requests from various regulators investigating the setting of libor and other interest rates.

"We are cooperating with the investigations and are keeping relevant regulators informed."

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Libor Fraud Was Happening In 1991, Trader Says, 17 Years Before Timothy Geithner Claims He Knew

The Huffington Post, Mark Gongloff, Chief financial writer, Jul 27, 2012 

Tim Geithner claims he learned of Libor manipulation when the rest of us commoners did, in 2008. New evidence keeps coming out suggesting he should have known much, much earlier.

The latest example -- which puts the earliest time-stamp on Libor manipulation we've seen yet -- is a Financial Times op-ed by former Morgan Stanley trader Douglas Keenan. He claims that Libor, a key short-term bank lending rate that affects mortgages and other interest rates throughout the economy, was being jerked around for fun and profit as long ago as 1991.

Let that sink in for just a minute: Libor was being manipulated 17 years before the financial crisis and Geithner's babe-in-the-woods discovery of it, according to Keenan. Geithner wasn't in charge of the New York Fed at the time, but if this was widespread knowledge years before his arrival, it makes you wonder how he could not have heard about it for so long.

Now here's another Keenan allegation that will blow your mind. He notes that the guy running Morgan Stanley's rate-trading desk back then was none other than Bob Diamond. Yes, the same Bob Diamond that ended up becoming Barclays CEO, only to step down because his bank manipulated Libor like most people change socks.

Keenan doesn't say he has any evidence that Diamond was some sort of Libor-manipulatin' Ninja back in 1991. But Keenan does say that it was widespread knowledge even then that banks lied habitually about Libor.

He found this out when, in his early days on the trading desk, he noticed that Libor fixings -- set by a panel of banks, who declare, on a hilarious honor system, what their borrowing costs are -- were noticeably different from what financial markets predicted they should be:

Futures contracts on three-month Libor were -- and are -- traded on the London International Financial Futures Exchange (Liffe, now part of NYSE Euronext). There was a standard contract for the month of September. That contract had its rate settled on the third Wednesday of the month, at 11 o'clock.

In 1991, I had live trading screens that showed the Libor rates. In September of that year, on the third Wednesday, at 11 o'clock, I watched those screens to see where the futures contract should settle. Shortly afterwards, Liffe announced the contract settlement rate. Its rate was different from what had been shown on my screens, by a few hundredths of a per cent.

That few hundredths of a percentage point doesn't sound like a very big deal, but it adds up, day after day after day, on hundreds of trillions of dollars' worth of loans and derivatives contracts. Keenan says it was costing him money on his trades, and he complained to Liffe about it, getting nowhere.

Then he complained about it to his new buddies on the trading desk, who all laughed and laughed at him (emphasis mine):

I talked with some of my more experienced colleagues about this. They told me banks misreported the Libor rates in a way that would generally bring them profits. I had been unaware of that, as I was relatively new to financial trading. My naivety seemed to be humorous to my colleagues.

Imagine how hilarious Tim Geithner's naivete must seem to them! He had, after all, been in charge of the New York Federal Reserve since 2003. That organization runs point in the financial markets for the Fed and thus has intimate knowledge of and involvement in interest rates, including Libor. New York Fed officials talk all the time to people in the market. Somewhere along the way you might think they'd have heard about Libor manipulation.

In fact, they definitely heard about it at least once, in 1998, from Fed analyst Jeremy Berkowitz, who wrote a paper raising alarms about the accuracy of Libor and the ease with which it could be manipulated. Anecdotes in his paper dated back to 1996.

As Business Insider's Simone Foxman wrote, the report "suggests that the Fed was already ... concerned about the effects of inaccurate reporting by banks about their lending practices ten years before the financial crisis. Further, acknowledgments that a very small contingent of banks potentially could manipulate rates suggests that the Fed may very well have seen this coming."

And yet somehow Geithner only found out about Libor manipulation in 2008, a decade later.

This is an extraordinary missed opportunity, if it's true. Although it's hard to imagine what Geithner would have done about Libor manipulation had he learned earlier, considering his "actions" after his late discovery of it. He apparently didn't tell British regulators that the New York Fed had direct evidence that Barclays had admitted to not submitting an "honest" Libor. He didn't raise alarm bells in the market about the possibility that Libor was not accurate. He didn't tell U.S. banks to cool it with the Libor fraud.

What's more, he allowed Libor to be used in loans to banks under the Term Asset-Backed Securities Loan Facility and to American International Group, rubber-stamping Libor's legitimacy and potentially costing taxpayers millions, if not billions, of dollars.

Geithner's response raises questions about just how cozy he and other regulators have been with the banks they're supposed to be regulating -- and makes it even harder to believe his claim of utter cluelessness about Libor manipulation before 2008.

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