Monday 3 August 2015

Stop Press: 14 Years for LIBOR Rigging

Now this is sensational:  14 years for LBOR-rigger Tom Hayes.  Around these parts we have long advocated punitive measures against convicted banksters and this is the kind of sentence that nice middle class people can't confortably contemplate.  If it can happen to Hayes in the City - and Jeff Skilling at Enron - surely there are wider applications.

The remaining issue is: when do the senior managers find themselves coming to this salutary and bracing pass?  And what's the statute of limitations in such matters?



Electro-Kevin said...

Isn't it time that all bankers were paid a decent enough salary and their bonuses in the form of shares in their own banks, locked in for four years after leaving employment ?

This case is no deterent. The chances of being caught, let alone convicted, are still too small.

Lord Blagger said...

The big one is going to be politicians.

WHat happens when the can't pay the state pension?

It's off the books.
They have induced people to pay in - voluntary contributions
People have lost. Heck it only needs the risk of loss.

That's a fraud,

Blue Eyes said...

This one will certainly go down well with the Court of Public Opinion. I was always against moves to make fraud and other cases non-jury overseen. Theft is theft, and even us 99%ers can smell it a mile off.

Lord Blagger said...

So what happens when the BoE is caught out rigging a market?

Anonymous said...

Looks like they decided to put it all on the nerd who wouldn't get smashed with the lads after work.

Electro-Kevin said...

The issue with non-jury fraud cases is complexity. The average juror from the Clapham omnibus could not get their head around most cases.

John in Cheshire said...

Is there no hope that those who are rigging all the other markets; eg. the gold and silver markets; will also be prosecuted?

Lord Blagger said...

It's pension market that's the biggy. Particularly the one run by the DWP.

Electro-Kevin said...

Lord Blagger - It's the housing market that's the biggy.

Lord Blagger said...

No. It's not the housing market.

5.5 trillion of assets versus 1.5 trillion of loans? That's not a problem.

The state owes 9.2 trillion with no assets for its pensions. That's a problem.

MyPredictiveName said...

@Lord Blagger - I'm afraid the housing market is the biggie.
The BoE have rigged rates for nearly a decade resulting in a 'housing crisis'.

The 5.5trn of assets is a notional valuation. It'd be half that if the markets were allowed to price properly. The reason values are kept high - largely because of the pensions issue. The whole economy is predicated on pensioners having enough sense to sell up at high valuations to cover inevitable shortfalls in income.

If we assume a fair value of 2.75 trn in housing 'assets' backing up 1.5trn in loans, the picture looks a whole lot less rosy. When the turn comes - and it will come, it always does - the pensioners are only going to get half of what they expect, if that, from either source.

If they continue to exercise their political muscle and vote for high house prices - they'll suffer for lack of services at the time of their lives when they need them most.

There will be weeping and gnashing of teeth.......

Lord Blagger said...

Still assets cover the debts - on average. yep there will be lots with negative equity.

ie. Assets > liabilities.

What's are the numbers for the state pension?

Then when you have those a decent discussion can be had on the consequences.

By the way, you've left off the real cause for the low rates. The state forced gilt rates down with QE/APF

Steven_L said...

The average juror from the Clapham omnibus could not get their head around most cases.

This is what coppers always say when you present them with evidence of fraud, or worse still "the CPS won't touch this because the average juror..." or worse again "...the average juror won't have any sympathy for the victims."

Didn't you used to be a copper Kev?

Electro-Kevin said...

Lord Blagger - MyPredictiveName gets it right on 'notional' value of housing.

Everything that is happening in Britain is mitigated by record house prices. Sadly abuse and poverty among the elderly which is already with us and has been accepted by the 'great' British public.

A house price crash - and prices are almost wholly determined at the margins, where all that lovely debt is - would bring into stark focus some ugly truths.

Stephen L - Yes. I was a below average copper, too thick for fraud squad (my force's speciality, City of London) Even those working on fraud are only scratching the surface of it all.

What can be decades of expensive and painstaking investigation cannot be left to amateur jurors to deliberate. They themselves would have to undergo an education in banking or else they would have to be educated by the court at every step of the case.

Steven_L said...

But it's what they say about any fraud committed against members of the public Kev. Basically that there's no point in them investigating it.

The only fraud they do investigate tends to be fraud against the financial services industry, mortgage fraud, people using borrowed supercars to secure stocking loans etc.

Boiler room scams? Pensions liberation? Nah, the British public are too thick to deliberate on this so I won't bother to investigate (and those that do are usually scuppered by their senior officers).

Where are all these fraud cases a jury has failed to deliberate on? Whenever they do actually go to court it seems to end in a conviction.

Budgie said...

No weeping for Tom Hayes' 14 years. A lot more "bankers" (who they?) should be in jail too. However, though banker bashing will go down well on the left, the biggest culprits are politicians.

What we have seen is a pitiful few of the people who have power over us get a (very) partial nemesis; McShane being an example. Until these people are cleared out of their privileged positions we shall not be safe.

Jer said...

The problem is not so much that people aren't capable of understanding, more that people _think_ they aren't capable.

Nick Drew said...

I readily accept it's damn' convenient for the cops and the CPS to say sorry, they just won't understand

but a decent prosecuting barrister should be able to establish a case for a jury, explaining the essence of the offence (distilling + simplifying as necessary) and warning them that the defence will blow smoke at them

I often have to explain financial derivatives to some pretty *average* people, some of which is quite literally rocket-science (Ito's lemma etc, though I don't explain that!) and I have developed some slogans and heuristic devices to get the *average* person through to where they need to be

Shakespeare managed to convey all manner of sophisticated ideas to a heaving Tudor mass

some of these QCs are the cleverest and most subtle thinkers (OK, sophists) you will ever meet: it's a challenge right enough but not an insuperable one

I am willing to bet yer murderer with an expensive brief will plead a most convoluted case, but we don't shrink from prosecuting them (do we -?)

Lord Blagger said...

A house price crash - and prices are almost wholly determined at the margins, where all that lovely debt is - would bring into stark focus some ugly truths.


Trivial compared to the state not paying pensions.

CityUnslicker said...

that is just a silly comment lord blagger.

Your point about the property market is nonsense too. The property market is boosted hugely by immigration.

FACT: The commercial property market is back to 2007 highs now - because economic demand is again at the same level.

FACT: the residential market is is 30%+ where is what in 2007 - because the population is 4 million higher and the number of properties built is less than a million - plus all the jobs are not where the old housing stock is.

There is froth in the property market and another crash is due for 2019...maybe 2018 - but it will be a 20% crash not a 50% crash.

Demand totally outstrips supply.

Jan said...

What I want to know is what were Tom's bosses up to? He said they knew what he was doing and I bet they did but turned a convenient blind eye because it suited them. (Targets to reach perhaps?). I don't suppose we will see any of them in the dock. Some are savvy enough not to leave any e-mail etc trace.

I'm just guessing as this is my experience of how "the system" works and if you're young and naive you may be hung out to dry.

Anonymous said...

If Tom knew he was in line for a 14-year stretch it is odd he didn't cut a deal and name some serious names.

Lord Blagger said...

that is just a silly comment lord blagger.

Your point about the property market is nonsense too. The property market is boosted hugely by immigration.

The property market is not the problem.

Yes its been boosted by unfettered migration and low interest rates. However, 1.5 trillion of debt secured on 5.5 trillion of property isn't a problem. It's prudent.

The real problem is the state pension ponzis.

9,200 bn of pension debt with no assets is a problem.

That's 400K per tax payer increasing at 25K a year. Mr Median wage earns 27K gross.

That's the problem.

No amount of migration is going to fix that. Default fixes that with the consequences.

Anonymous said...

@ No amount of migration is going to fix that

Ah but didn't you know, Ponzi-migration fixes GDP growth, which fixes everything!

Lord Blagger said...

Given you need to pay 11.5K a year in tax to cover state spending, and another 6.3K to cover the increase in the state pension debts, Mr Average Migrant doens't even cover their own costs.

Look at the Cream report.

The left like quoting it, but they haven't got past the summary. [Paid for by the EU written by 2 migrants to use the standard kick the authors debating technique]

The interesting bits are table 4b and table 5.

Table 5 says migrants don't pay their way.

Table 4b is even more interesting.

"The table reports the estimated amount of government expenditures and revenues attributable to the native born and immigrant population when the entire cost of
public goods provision is attributed to natives. W"

Even with natives pay the entire public goods provision, they can't swing it to show migrants are economical, on average.

Look again.

"revenues from recent EEA and non-EEA immigrants are computed under the assumption that immigrants' consumption is 80% that of natives"

Yep, migrants are super humans compare to natives and they still can't get them to be net contributors on average.

The reason is there is very little difference between migrants and non mignrants. It would be racist to assume otherwise. The average Brit doesn't pay their way and neither does an average migrant.

Budgie said...

Lord Blagger said: "Swap banker for Jew and you get a lot of the sentiment."

What on Earth do you mean? The whole point of my stating "Who they" was to indicate that the term "the bankers" is imprecise. But that does not mean such sentiments are completely unjustified.

It is a fact that the collapse of the banking industry in the UK (and elsewhere) caused the near meltdown of the entire country's financial system. Failure on such an epic scale should not go unregarded, or unpunished. Those at the top got the rewards and should take the responsibility too. No-one that I know of is blaming all people who work in banking, not even on the left.

If your Godwin-esque comment was pursued to its logical end we would be unable to blame anyone for anything, which is absurd.

Nick Drew said...

Blagger will no doubt reply for himself, Budgie - but I have several times noted here that a German friend and business colleague told me years ago that caustic references in his country to "Anglo-Saxon bankers", or more usually "New York bankers", are indeed code for something altogether more sinister

Lord Blagger said...

Very easy.

Go and find a rant about bankers.

Copy the text.

Replace all references to bankers and banking with Jews and Judaism.

Then re-read what you have.

It will be pretty close to any 1930's missive.

ie. It's generalising about a group in a way that you wouldn't if it was about Jews, or Blacks etc.

Budgie said...

Lord Blagger, No, you cannot squirm out of it that easily. You made your initial Godwin-esque comment about what I said, not about some other, general, unspecified "rant about bankers". And my comment anyway included an oblique criticism of collective banker bashing.

Moreover the subject was one banker who had broken the law and has suffered due process. In other words specific crime results in particular prosecution and punishment. Therefore both my comment and the original post are actually nothing like "generalising about a group in a way that you wouldn't if it was about Jews, or Blacks etc."

You are special pleading and being precious, as well as arguing in bad faith.

Budgie said...

ND, I wonder if you mean to jump on Lord Blagger's bandwagon? The implication in your comment is that you accept Lord Blagger's perverse twisting of my original comment to mean it could be construed as akin to an attack on Jews in general, or Blacks in general. Ironically my comment wasn't even an attack on "bankers" in general: re-read it.

In the knock-about debate on your blog, I accept the ground rules that you (or others) can from time to time mis-quote me, or inadvertently misunderstand my points, to advance your views, but this goes too far. I am not responsible for your colleague's views on German racism, and you should be a lot more careful to avoid tarring me with the same brush, even by implication.

Nick Drew said...

come on Budgie, for years I have been ranting here against banksters with the best - and indeed calling for their incarceration as recently as, oh, this week

so I hardly conflate the two things, do I? and perhaps I should be as annoyed about Blagger's comments as you are

but actually I see yours, mine and his comments as a bit a triangle, each making a small point of contact with the other, but mainly saying different things: that's all

not wrong to be sensitive ...

Graeme said...

This will be lost in the noise but I am reminded of Beachcomber…In England justice must not only be seen to be done it must sometimes to be seen to be believed.

According to the Jeremy Vine programme yesterday, LIBOR was set by 1800 financial institutions supplying data in 5 currencies on a dozen or so interest rates.

Compute the permutations.

This court has decided beyond reasonable doubt that this one man was able to influence the result of this combinatorial exercise.

And. of course, it is worse than this. Depending on whether the company he worked for was a net lender or borrower, there would be a tendency to lowball the quotes or highball them. Maybe over time it all balanced out.

Some people are convinced that it worked to the detriment of some class of society…how can you possibly prove that?

A joke sentence. I accept that it woulod be good to jail a banker or 2…but please let us not fabricate justice in this stupid way.

Nick Drew said...

Graeme - points taken, particularly the observation that no-one can tell whether there is any (net) benefit/disbenefit to any particular public interest

but assessing concrete damages is not the main thing, and I shall post on this again shortly

Budgie said...

ND, I have no idea what you are talking about. I made no criticism of you for "ranting here against banksters", or for not doing so. That is not an issue I am concerned with at the moment.

What does concern me is that I made a comment (see below) which far from general "banker bashing", far from condemning all bankers, actually indicates a degree of scepticism about the phenomena, and states that politicians are more to blame (implied for the financial mess that manifested in 2008).

Lord Blagger then quoted my comment, and my comment only, (see below) and made the absurd and offensive analogy: "Swap banker for Jew and you get a lot of the sentiment."

Firstly this entirely misconstrues what I said but, worse, tars me with an attitude akin to anti-semitism. By association that tars me with anti-semitism itself, which your snide comment about some Germans being similarly anti-semitic ("New York bankers") does nothing to allay.

Lord Blagger's comment and your jumping on his bandwagon go too far.

My original comment: "No weeping for Tom Hayes' 14 years. A lot more "bankers" (who they?) should be in jail too. However, though banker bashing will go down well on the left, the biggest culprits are politicians."

Lord Blagger said...

Why is it offensive?

The reason isn't some issue about being Jewish or the Nazi analogy.

The problem is with tarring a group with the sins of individuals. That's why when you swap banker for Jew, you get a statement that is offensive. It's a test. Are people extrapolating from the sins of a few to the group.

If you don't like the Jewish angle, use black, or Irish, or any persecuted minority. Does that statement still hold water or do you find it offensive?

If you find it offensive, then there is clearly a problem with the statement.

So pick any persecuted minority you want. It doesn't matter.

On the policiticians, I agree.

Look at the flows to and from the banks.

SLS resulted in a 35 bn profit.
APF/QE all went to the state - Gilts. Not to the banks.
10 bn lost by Gordon Brown on share trading in RBS. Lloyds is break even.
65 bn a year in tax from the finance sector to the state.

So the state is up 500 bn from the banks. It's not what politicians would have you believe.

The banker bashing is that 1930s thinking. Politicians need a scapegoat.

Ask yourself why the politicians aren't blaming the people who caused it all, by not repaying their debts? They vote.

Now for the politicians sins. The key question is how much they owe. It's 11 trillion. Not that they will tell you, the big debts are hidden off the books. Eg. Pensions.

Mr Median pays in 225K of NI in today's value of money. He gets back 105K of value. He's been shafted.

It's worse. If his NI had been invested, he would have had 830K of value in a fund.

So politicians are using 1930s thinking, and politicians are the crooks. That's why when you challenge them over the debt they get very angry. They won't say.

Nick Drew said...

this is (by common consent of the punters, I think it is fair to say - yes?) a mild-mannered blog Budgie, and your distress is evident

so - sorry: my comment @3:39 was certainly not meant to apply to any of your comments