How They Rule
by Dr. William L. Pierce
YOU KNOW, it’s a frustrating and infuriating thing watching Clinton and his crew of nation-wreckers gloating over their successful bullying of Serbia. Madeleine has been screeching and squawking like the Wicked Witch of the West, and Bill has been wagging his finger at the Serbs, looking serious, and telling them that they will not get a cent to help them repair the damage done by NATO until they get rid of Slobodan Milosevic and choose an “approved” president.
You know, I was pretty disappointed in Milosevic for caving in to the NATO gangsters, and I was about to write him off. I mean, what can you expect from a former communist? But if Clinton and his Jews hate Milosevic so much, then maybe there’s something good about him after all. I remember how the Clinton gang a few years ago was applying pressure to Russia in every way it could to get Boris Yeltsin elected and then reelected. The message was essentially, “No loans from the West unless Boris is your president.”
I’ve said this before, but it’s a pretty good rule to remember, a rule which has been confirmed over and over again by events: If the Jews hate someone, then he can’t be all bad, and anyone they praise in public needs to be shot as quickly as possible.
Anyway, it’s pretty much out in the open now how the New World Order gang intend to get control of things: they wreck a country with bombs and missiles — or they simply steal its wealth without using bombs and missiles; then when the country’s people are sufficiently miserable and desperate, they hold out the offer of money for rebuilding if the people will elect the leaders chosen by the gangsters. That’s what they call democracy: the will of the people — the will of the Chosen People, that is. And of course, it’s our money, our hard-earned tax money, that’s used for the bribes to subvert the democratic process in other people’s countries. In Russia they used communism and corruption — stealing — to bankrupt the country, and then when it was bled dry they began clearing out for Israel and the United States. In Serbia there were very few of the Chosen People to start with, so they used bombs and missiles to wreck the country: faster that way.
They’re even collecting subsidiary benefits from Russia and Ukraine now: an estimated 2,000 attractive young Russian and Ukrainian women every year are taken to Israel by the Chosen People and forced into prostitution.
That’s not my estimate, by the way; the figure of 2,000 Russian and Ukrainian women a year comes from the Jerusalem Post. I’m reading now from a copy of the December 28, 1998, issue of the Jerusalem Post: “Women are sold into the sex business in Israel for between $5,000 and $15,000, while the pimps who buy them can earn between $10,000 and $50,000 a year per woman…. According to the Israel Women’s Network, 2,000 women are brought to Israel a year from the CIS and forced to work as prostitutes.” “CIS” is an abbreviation for Commonwealth of Independent States, primarily Russia and Ukraine.
You know, the Clinton government is full of “humanitarians” who justified their destruction of Serbia on the grounds that the Serbs were persecuting the Albanians in Serbia. When do you think these “humanitarians” will get around to doing something about the persecution of Russian and Ukrainian women in Israel? Did you know that it is legal to buy and sell human beings in Israel today? Non-Jewish human beings, that is.
If the New World Order bribery is successful in Serbia — “we’ll lend you money for repairing the damage we did with our bombs and missiles if you get rid of Milosevic and choose the right president for your country,” was the way Mr. Clinton so subtly put it on television the other day — if the New World Order gang get one of their creatures in to run Yugoslavia like they got Boris Yeltsin in to run Russia, then I expect that we’ll see a steady stream of attractive, young Serb women being smuggled out of Serbia while corrupt Serb officials look the other way, being taken to Israel, and providing even more $50,000-a-year-per-woman business opportunities for enterprising young Jewish businessmen that the Jerusalem Post can write about.
You know, the wrecking crew did their job on America back in the 1960s — actually from the late 1950s through the mid-1970s — not with missiles and bombs, but just as effectively with television and the music industry and their influence in our universities. Among young people they promoted marijuana and LSD and beads and long hair and the idea that the world owes us all a living, and we owe respect to nothing. They gave us all sorts of new “civil rights” laws and “affirmative action” and wide-open borders, so that the wretched refuse of the Third World’s teeming shores could come flooding into America and shift our electoral demographics in a democratic direction. They taught us that “gay” is good, and the cause of all the world’s problems is White racism. They began the feminization and multiculturalization of America.
Older listeners may remember how they screamed and moaned about “McCarthyism” back at that time: “witch hunt!” they whined; “anti-Semitism!” In fact, they still moan about it every time they have a chance: “Hollywood blacklist! Oy, veh!” You know, if it hadn’t been for McCarthyism making them keep their heads down a bit, they would have done an even worse wrecking job on America.
God, how I wish we’d killed the whole bunch of them back in the 1960s, instead of spending all our time trying to figure out what they were up to. Think how many of our own people could have avoided having their lives ruined. Think how much better off America and the world would be today. But of course, we didn’t kill them. Even if we had figured out exactly what they were up to in the 1960s, we didn’t have the means to oppose them effectively. They had the mass media just as much in their hands then as now; they had half the government secretly helping them with their wrecking job; and the other half was too afraid of being tarred as “anti-Semitic” to oppose them.
So here we are today: The United States is still rich and prosperous primarily because the groundwork for our prosperity was laid before 1960 — the building of an enormously productive agricultural enterprise, for one thing, and the beginning of the microelectronics revolution based on the work of the late William Shockley and his colleagues, for another thing. With our wealth and our technological head start, we were able to equip our armed forces with high-tech weaponry that permit us today to destroy any country which lacks such weapons, even if man for man their soldiers are better fighters than ours. Of course, there’s more to a military operation such as our destruction of Serbia than the fact that we have high-tech weapons and the Serbs don’t. There’s the fact that the Jews could count on their man Boris Yeltsin not to provide any Russian assistance to the Serbs — not even to let them have any modern air-defense missiles while we were bombing Serbia.
Well… at least they can count on Yeltsin when he’s sober and has Boris Abramovich Berezovsky at his side to whisper instructions in his ear. Admittedly, that’s not a perfect system, and it becomes a bit shaky at times, as when those Russian troops showed up unexpectedly at the airport in Pristina ahead of NATO last week and refused to budge. I think that we can attribute that to Yeltsin’s need to bolster his image with the Russian people. He doesn’t want it to be too obvious that he’s the Jews’ lapdog, so he throws a tantrum now and then and pretends to be refusing to cooperate. That sort of little-league defiance goes over well with the Russian public, but on really substantive matters he does what he’s told. Even the Russian troops at the Pristina airport, however, caused his masters to reveal their hand a bit. They had to reprimand Yeltsin and tell him to behave himself, or there would be no more handouts from the West. Last Sunday Tony Blair’s defense secretary, George Robertson, said on BBC television that if Yeltsin continued to act up then the world’s financial bosses might decide to withhold his allowance when they meet in Cologne next week.
And of course, they’re already dangling the promise of loans in front of the Serbs in an effort to gain the same sort of control through corruption over Serbia that they have over Russia. To a large degree, it’s a similar sort of corruption which holds NATO together and allows people like Madeleine Albright to manipulate it. In some cases they have arranged to have a Gentile member of their New World Order gang running things: Tony Blair, for example, is a corrupt, trendy, ambitious little jack-in-the-box who is sort of a British version of Bill Clinton and really is counting on being allowed to be one of the owners of the New World Order’s global plantation after the rest of the pieces are in place.
In other cases, they have simply managed to keep genuine patriots away from the centers of power and keep men — or women — they can deal with in charge. Whenever a nationalist anywhere begins attracting enough votes to be considered dangerous, they unleash all of their trained media hounds on him and begin supporting his rivals. So far that has been sufficient. That’s why they love democracy so much and insist on it as the form of government everywhere. It’s so easy to manipulate most voters with the mass media.
In summary, the enemies of our people base their power on three things: First and by far the most important is their control of the mass media. Even in countries where they don’t actually own the major newspapers and the television stations and control the content and slant of news programs, the Jews are able to extend their influence through the entertainment media. Most of the countries in the world — certainly, every country in Europe — receives much of its entertainment from Hollywood. And everything which comes from Hollywood contains the Jews’ spiritual poison: their sometimes subtle and sometimes not at all subtle propaganda for equality and multiculturalism and racial mixing and feminism and passivity and White guilt and surrender.
It was Jewish entertainment from Hollywood as much as anything else which destroyed South Africa. Until 1977 there was no television entertainment in South Africa, because the White apartheid government there, fearing its subversive influence, would not permit it. The government finally gave in to the pressure in 1977 and permitted commercial television broadcasting, and it took just 16 years of television viewing, much of the material coming from Hollywood, for White South Africans to have enough Jewish spiritual poison pumped into them so that they could be persuaded to vote for mass White suicide in 1993. Most of them still haven’t figured out what happened to them.
The second element in the Jews’ power base is money. They have an uncanny drive and ability to acquire money — an inherited drive and ability, I believe — and, what is at least as important, an understanding of how to use money to buy power and a willingness to do it. There are many very wealthy Gentiles, of course, men whose wealth in the past was based in land and these days is based primarily in enterprise: Carnegie, Ford, Gates. But there still is a special relationship between Jews and money. Whenever you see a breakdown of wealth according to ethnicity or religion, you will see the Jews at the top of the list. Why is it that Jews never go into farming, for example? Did you ever in your life meet a Jewish farmer or even hear of one? Why do they all want to be lawyers or merchants? Or lacking that, cosmetic surgeons or psychiatrists? They do have an instinct for money. You begin reading a news story about some huge Medicare swindle broken up by the FBI that has bilked the government of hundreds of millions of dollars, or some crooked telemarketing scheme that has robbed thousands of retirees of their life savings, or some Wall Street insider-trading racket that has raked in billions of illicit dollars, and even before you get to the names of those who were arrested, you can guess what those names will be: Boesky, Levine, Goldblatt, Kaplan, Milken, Cohen, and the like.
The third element in their power base is organization. Lock any three Jews in a room together, and within a week they will have formed six different Jewish organizations. Look in the Yellow Pages or in the Encyclopedia of Associations, which you can find in nearly every library, count the number of specifically Jewish organizations listed, and compare that with the number of, say, Lutheran or Baptist organizations and with the percentages of these groups in the population. You’ll find that the Jews have a far larger number of organizations per capita than any other ethnic or religious group. Some of these organizations focus on the Jewish community itself — on maintaining a high level of Jewish self-consciousness, a high level of ethnic identity — and others focus on applying organized pressure to the Gentile community. These organizations allow the Jews to use their small numbers much more effectively. And the Jews support these organizations. They understand that in organization lies strength — which is something it would behoove our people to learn.
Jews not only put their money into Jewish organizations, they use it, in conjunction with their mass media, to determine the outcome of the electoral process. A dirty, little secret which every politician in Washington knows, but which no one is supposed to talk about is that Jewish money is the key to winning elections. Approximately a quarter of all the money donated to Republican political candidates comes from the two and a half per cent of the U.S. population which is Jewish. For Democratic candidates, approximately sixty per cent of the money comes from Jews. Amazing, isn’t it? Anyway, it helps us to understand why the majority of Bill Clinton’s appointments to ambassadorships, to Cabinet posts, to the Supreme Court, and to other high government positions have gone to the Jewish minority.
And of course, it’s not just individual bribery or just political campaigns that the Jews’ money is used for — and it’s not just their money. When Madeleine Albright was running around from one country to another during the bombing of Serbia, bribing the various political leaders to keep them from responding to public demand and pulling out of NATO, it wasn’t her personal money she was promising them. It was our money, our taxes.
So that’s the essence: media, money, and organization. That’s what makes up the apparatus of power. That’s what allows a tiny minority to control the majority — and to wreck nations and to commit genocide and get away with it and to aspire to total world domination under the aegis of the New World Order.
There’s more to it, of course. There’s the unique inner nature of the Jews. I’ve just described for you the external apparatus. It’s the apparatus they use to control the Clinton administration — and more generally, to control America.
And with a few modifications it’s the apparatus they plan to use to acquire total world domination. It is adapted especially to the control of democracies, but whenever they encounter a country which is insufficiently democratic to be controlled by propaganda and bribery, then they use bombs to soften things up to the point that their style of controlled democracy can prevail. What has happened — and is happening — to Serbia is a perfect example. “Get rid of Milosevic and choose a politician acceptable to us as your leader, or you’ll freeze in the dark this winter.”
As I said before, this system of the Jews, although it has been successful so far to a large extent, is a bit shaky, like any highly leveraged system. There are several things which can go wrong with it: several things which provide hope for us. In some of the countries where the habit of democracy has not sapped the strength of the people as much as it has in the West — in Serbia, say, or even more hopefully in Russia — there remains the possibility of nationalist resurgence. Perhaps Slobodan Milosevic is a nationalist, but there are other political leaders in Serbia who are far more nationalist than he. Two weeks ago the Serb Radical Party, under Serbian Deputy Prime Minister Vojislav Seselj, resigned their parliamentary positions and vowed to carry on the fight for Serb freedom by other means when Milosevic caved in. Let’s hope that they do — and do so effectively. And within the next year we may see a really dramatic move toward nationalism in Russia, and what the Jews have done to Serbia may make a nationalist victory in Russia more likely.
Everywhere there will be a much greater incentive than before to acquire or produce weapons of mass destruction. Little countries certainly understand now, if they didn’t before, that if they want to retain their freedom they must have some way of fighting back against NATO or whatever other guise the New World Order may appear in when it tells them how to run their internal affairs. Since they can’t hope to match America’s high-tech conventional weapons they will turn to unconventional weapons.
The threat of massive retaliation by the United States eventually will cease to be an effective deterrent. When a small country with a genuine nationalist leader has its back to the wall and is threatened with conquest, it may do whatever it must to punish the aggressor. And as the number of small countries which have learned to hate and fear America grows, it may be difficult for the folks in the CIA to figure out which one of them has unleashed an unconventional weapon of mass destruction on the United States.
And believe me, that’s coming. What Madeleine Albright and her pals have done to Serbia guarantees it. The bright side of that is that it will do Americans good to freeze in the dark a bit themselves. It will weed out a lot of those who voted for Clinton, and it will strengthen the spines of the rest.
Anyway, while we’re waiting for that just retribution to strike, what we must do is continue building our means to reach all our people. We must continue building our media of communication, building our organizational strength, building our financial strength. As things are now, it will take a long time — too long — for us to build our media or our organizational strength or our financial strength to the point where we can compete effectively with the Jews. But you know, things are not likely to remain as they are — certainly not as likely as before the Clinton government’s recent campaign of mass murder against the Serbs.
* * *
Source: American Dissident Voices broadcast, June 1999
ROLLING STONE: “Conspiracy Theorists Of The World, Believers In The Hidden Hands Of The Rothschilds, We Skeptics Owe You An Apology.”
Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct:
The world is a rigged game.
We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world’s largest banks may be fixing the prices of, well, just about everything.
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You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that’s trillion, with a “t”) worth of financial instruments.
When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it “dwarfs by orders of magnitude any financial scam in the history of markets.”
That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world’s largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess.
Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world’s largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.
Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It’s about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.
It should surprise no one that among the players implicated in this scheme to fix the prices of interest-rate swaps are the same megabanks – including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland – that serve on the Libor panel that sets global interest rates.
In fact, in recent years many of these banks have already paid multimillion-dollar settlements for anti-competitive manipulation of one form or another (in addition to Libor, some were caught up in an anti-competitive scheme, detailed in Rolling Stone last year, to rig municipal-debt service auctions).
Though the jumble of financial acronyms sounds like gibberish to the layperson, the fact that there may now be price-fixing scandals involving both Libor and ISDAfix suggests a single, giant mushrooming conspiracy of collusion and price-fixing hovering under the ostensibly competitive veneer of Wall Street culture.
Why? Because Libor already affects the prices of interest-rate swaps, making this a manipulation-on-manipulation situation. If the allegations prove to be right, that will mean that swap customers have been paying for two different layers of price-fixing corruption.
If you can imagine paying 20 bucks for a crappy PB&J because some evil cabal of agribusiness companies colluded to fix the prices of both peanuts and peanut butter, you come close to grasping the lunacy of financial markets where both interest rates and interest-rate swaps are being manipulated at the same time, often by the same banks.
“It’s a double conspiracy,” says an amazed Michael Greenberger, a former director of the trading and markets division at the Commodity Futures Trading Commission and now a professor at the University of Maryland. “It’s the height of criminality.”
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The bad news didn’t stop with swaps and interest rates. In March, it also came out that two regulators – the CFTC here in the U.S. and the Madrid-based International Organization of Securities Commissions – were spurred by the Libor revelations to investigate the possibility of collusive manipulation of gold and silver prices. “Given the clubby manipulation efforts we saw in Libor benchmarks, I assume other benchmarks – many other benchmarks – are legit areas of inquiry,” CFTC Commissioner Bart Chilton said.
But the biggest shock came out of a federal courtroom at the end of March – though if you follow these matters closely, it may not have been so shocking at all – when a landmark class-action civil lawsuit against the banks for Libor-related offenses was dismissed. In that case, a federal judge accepted the banker-defendants’ incredible argument:
If cities and towns and other investors lost money because of Libor manipulation, that was their own fault for ever thinking the banks were competing in the first place.
“A farce,” was one antitrust lawyer’s response to the eyebrow-raising dismissal.
“Incredible,” says Sylvia Sokol, an attorney for Constantine Cannon, a firm that specializes in antitrust cases.
All of these stories collectively pointed to the same thing: These banks, which already possess enormous power just by virtue of their financial holdings – in the United States, the top six banks, many of them the same names you see on the Libor and ISDAfix panels, own assets equivalent to 60 percent of the nation’s GDP – are beginning to realize the awesome possibilities for increased profit and political might that would come with colluding instead of competing.
Moreover, it’s increasingly clear that both the criminal justice system and the civil courts may be impotent to stop them, even when they do get caught working together to game the system.
If true, that would leave us living in an era of undisguised, real-world conspiracy, in which the prices of currencies, commodities like gold and silver, even interest rates and the value of money itself, can be and may already have been dictated from above. And those who are doing it can get away with it. Forget the Illuminati – this is the real thing, and it’s no secret. You can stare right at it, anytime you want.
The banks found a loophole, a basic flaw in the machine. Across the financial system, there are places where prices or official indices are set based upon unverified data sent in by private banks and financial companies. In other words, we gave the players with incentives to game the system institutional roles in the economic infrastructure.
Libor, which measures the prices banks charge one another to borrow money, is a perfect example, not only of this basic flaw in the price-setting system but of the weakness in the regulatory framework supposedly policing it. Couple a voluntary reporting scheme with too-big-to-fail status and a revolving-door legal system, and what you get is unstoppable corruption.
Every morning, 18 of the world’s biggest banks submit data to an office in London about how much they believe they would have to pay to borrow from other banks. The 18 banks together are called the “Libor panel,” and when all of these data from all 18 panelist banks are collected, the numbers are averaged out. What emerges, every morning at 11:30 London time, are the daily Libor figures.
Banks submit numbers about borrowing in 10 different currencies across 15 different time periods, e.g., loans as short as one day and as long as one year. This mountain of bank-submitted data is used every day to create benchmark rates that affect the prices of everything from credit cards to mortgages to currencies to commercial loans (both short- and long-term) to swaps.
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Dating back perhaps as far as the early Nineties, traders and others inside these banks were sometimes calling up the company geeks responsible for submitting the daily Libor numbers (the “Libor submitters”) and asking them to fudge the numbers.
Usually, the gimmick was the trader had made a bet on something – a swap, currencies, something – and he wanted the Libor submitter to make the numbers look lower (or, occasionally, higher) to help his bet pay off.
Famously, one Barclays trader monkeyed with Libor submissions in exchange for a bottle of Bollinger champagne, but in some cases, it was even lamer than that. This is from an exchange between a trader and a Libor submitter at the Royal Bank of Scotland:
- SWISS FRANC TRADER: can u put 6m swiss libor in low pls?…
- PRIMARY SUBMITTER: Whats it worth
- SWSISS FRANC TRADER: ive got some sushi rolls from yesterday?…
- PRIMARY SUBMITTER: ok low 6m, just for u
- SWISS FRANC TRADER: wooooooohooooooo. . . that’d be awesome
Screwing around with world interest rates that affect billions of people in exchange for day-old sushi – it’s hard to imagine an image that better captures the moral insanity of the modern financial-services sector.
Hundreds of similar exchanges were uncovered when regulators like Britain’s Financial Services Authority and the U.S. Justice Department started burrowing into the befouled entrails of Libor. The documentary evidence of anti-competitive manipulation they found was so overwhelming that, to read it, one almost becomes embarrassed for the banks. “It’s just amazing how Libor fixing can make you that much money,” chirped one yen trader. “Pure manipulation going on,” wrote another.
Yet despite so many instances of at least attempted manipulation, the banks mostly skated. Barclays got off with a relatively minor fine in the $450 million range, UBS was stuck with $1.5 billion in penalties, and RBS was forced to give up $615 million. Apart from a few low-level flunkies overseas, no individual involved in this scam that impacted nearly everyone in the industrialized world was even threatened with criminal prosecution.
Two of America’s top law-enforcement officials, Attorney General Eric Holder and former Justice Department Criminal Division chief Lanny Breuer, confessed that it’s dangerous to prosecute offending banks because they are simply too big. Making arrests, they say, might lead to “collateral consequences” in the economy.
The relatively small sums of money extracted in these settlements did not go toward reparations for the cities, towns and other victims who lost money due to Libor manipulation.
Instead, it flowed mindlessly into government coffers. So it was left to towns and cities like Baltimore (which lost money due to fluctuations in their municipal investments caused by Libor movements), pensions like the New Britain, Connecticut, Firefighters’ and Police Benefit Fund, and other foundations – and even individuals (billionaire real-estate developer Sheldon Solow, who filed his own suit in February, claims that his company lost $450 million because of Libor manipulation) – to sue the banks for damages.
One of the biggest Libor suits was proceeding on schedule when, early in March, an army of superstar lawyers working on behalf of the banks descended upon federal judge Naomi Buchwald in the Southern District of New York to argue an extraordinary motion to dismiss.
The banks’ legal dream team drew from heavyweight Beltway-connected firms like Boies Schiller (you remember David Boies represented Al Gore), Davis Polk (home of top ex-regulators like former SEC enforcement chief Linda Thomsen) and Covington & Burling, the onetime private-practice home of both Holder and Breuer.
The presence of Covington & Burling in the suit – representing, of all companies, Citigroup, the former employer of current Treasury Secretary Jack Lew – was particularly galling. Right as the Libor case was being dismissed, the firm had hired none other than Lanny Breuer, the same Lanny Breuer who, just a few months before, was the assistant attorney general who had balked at criminally prosecuting UBS over Libor because, he said, “Our goal here is not to destroy a major financial institution.”
In any case, this all-star squad of white-shoe lawyers came before Buchwald and made the mother of all audacious arguments. Robert Wise of Davis Polk, representing Bank of America, told Buchwald that the banks could not possibly be guilty of anti- competitive collusion because nobody ever said that the creation of Libor was competitive. “It is essential to our argument that this is not a competitive process,” he said. “The banks do not compete with one another in the submission of Libor.”
If you squint incredibly hard and look at the issue through a mirror, maybe while standing on your head, you can sort of see what Wise is saying. In a very theoretical, technical sense, the actual process by which banks submit Libor data – 18 geeks sending numbers to the British Bankers’ Association offices in London once every morning – is not competitive per se.
But these numbers are supposed to reflect interbank-loan prices derived in a real, competitive market. Saying the Libor submission process is not competitive is sort of like pointing out that bank robbers obeyed the speed limit on the way to the heist. It’s the silliest kind of legal sophistry.
But Wise eventually outdid even that argument, essentially saying that while the banks may have lied to or cheated their customers, they weren’t guilty of the particular crime of antitrust collusion.
This is like the old joke about the lawyer who gets up in court and claims his client had to be innocent, because his client was committing a crime in a different state at the time of the offense.
“The plaintiffs, I believe, are confusing a claim of being perhaps deceived,” he said, “with a claim for harm to competition.”
Judge Buchwald swallowed this lunatic argument whole and dismissed most of the case. Libor, she said, was a “cooperative endeavor” that was “never intended to be competitive.”
Her decision “does not reflect the reality of this business, where all of these banks were acting as competitors throughout the process,” said the antitrust lawyer Sokol. Buchwald made this ruling despite the fact that both the U.S. and British governments had already settled with three banks for billions of dollars for improper manipulation, manipulation that these companies admitted to in their settlements.
Michael Hausfeld of Hausfeld LLP, one of the lead lawyers for the plaintiffs in this Libor suit, declined to comment specifically on the dismissal. But he did talk about the significance of the Libor case and other manipulation cases now in the pipeline.
“It’s now evident that there is a ubiquitous culture among the banks to collude and cheat their customers as many times as they can in as many forms as they can conceive,” he said. “And that’s not just surmising. This is just based upon what they’ve been caught at.”
Greenberger says the lack of serious consequences for the Libor scandal has only made other kinds of manipulation more inevitable. “There’s no therapy like sending those who are used to wearing Gucci shoes to jail,” he says. “But when the attorney general says, ‘I don’t want to indict people,’ it’s the Wild West. There’s no law.”
The problem is, a number of markets feature the same infrastructural weakness that failed in the Libor mess. In the case of interest-rate swaps and the ISDAfix benchmark, the system is very similar to Libor, although the investigation into these markets reportedly focuses on some different types of improprieties.
Though interest-rate swaps are not widely understood outside the finance world, the root concept actually isn’t that hard. If you can imagine taking out a variable-rate mortgage and then paying a bank to make your loan payments fixed, you’ve got the basic idea of an interest-rate swap.
In practice, it might be a country like Greece or a regional government like Jefferson County, Alabama, that borrows money at a variable rate of interest, then later goes to a bank to “swap” that loan to a more predictable fixed rate.
In its simplest form, the customer in a swap deal is usually paying a premium for the safety and security of fixed interest rates, while the firm selling the swap is usually betting that it knows more about future movements in interest rates than its customers.
Prices for interest-rate swaps are often based on ISDAfix, which, like Libor, is yet another of these privately calculated benchmarks. ISDAfix’s U.S. dollar rates are published every day, at 11:30 a.m. and 3:30 p.m., after a gang of the same usual-suspect megabanks (Bank of America, RBS, Deutsche, JPMorgan Chase, Barclays, etc.) submits information about bids and offers for swaps.
And here’s what we know so far: The CFTC has sent subpoenas to ICAP and to as many as 15 of those member banks, and plans to interview about a dozen ICAP employees from the company’s office in Jersey City, New Jersey.
Moreover, the International Swaps and Derivatives Association, or ISDA, which works together with ICAP (for U.S. dollar transactions) and Thomson Reuters to compute the ISDAfix benchmark, has hired the consulting firm Oliver Wyman to review the process by which ISDAfix is calculated.
Oliver Wyman is the same company that the British Bankers’ Association hired to review the Libor submission process after that scandal broke last year. The upshot of all of this is that it looks very much like ISDAfix could be Libor all over again.
“It’s obviously reminiscent of the Libor manipulation issue,” Darrell Duffie, a finance professor at Stanford University, told reporters. “People may have been naive that simply reporting these rates was enough to avoid manipulation.”
And just like in Libor, the potential losers in an interest-rate-swap manipulation scandal would be the same sad-sack collection of cities, towns, companies and other nonbank entities that have no way of knowing if they’re paying the real price for swaps or a price being manipulated by bank insiders for profit.
Moreover, ISDAfix is not only used to calculate prices for interest-rate swaps, it’s also used to set values for about $550 billion worth of bonds tied to commercial real estate, and also affects the payouts on some state-pension annuities.
So although it’s not quite as widespread as Libor, ISDAfix is sufficiently power-jammed into the world financial infrastructure that any manipulation of the rate would be catastrophic – and a huge class of victims that could include everyone from state pensioners to big cities to wealthy investors in structured notes would have no idea they were being robbed.
“How is some municipality in Cleveland or wherever going to know if it’s getting ripped off?” asks Michael Masters of Masters Capital Management, a fund manager who has long been an advocate of greater transparency in the derivatives world. “The answer is, they won’t know.”
Worse still, the CFTC investigation apparently isn’t limited to possible manipulation of swap prices by monkeying around with ISDAfix. According to reports, the commission is also looking at whether or not employees at ICAP may have intentionally delayed publication of swap prices, which in theory could give someone (bankers, cough, cough) a chance to trade ahead of the information.
Swap prices are published when ICAP employees manually enter the data on a computer screen called “19901.” Some 6,000 customers subscribe to a service that allows them to access the data appearing on the 19901 screen.
The key here is that unlike a more transparent, regulated market like the New York Stock Exchange, where the results of stock trades are computed more or less instantly and everyone in theory can immediately see the impact of trading on the prices of stocks, in the swap market the whole world is dependent upon a handful of brokers quickly and honestly entering data about trades by hand into a computer terminal.
Any delay in entering price data would provide the banks involved in the transactions with a rare opportunity to trade ahead of the information. One way to imagine it would be to picture a racetrack where a giant curtain is pulled over the track as the horses come down the stretch – and the gallery is only told two minutes later which horse actually won. Anyone on the right side of the curtain could make a lot of smart bets before the audience saw the results of the race.
At ICAP, the interest-rate swap desk, and the 19901 screen, were reportedly controlled by a small group of 20 or so brokers, some of whom were making millions of dollars. These brokers made so much money for themselves the unit was nicknamed “Treasure Island.”
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Already, there are some reports that brokers of Treasure Island did create such intentional delays. Bloomberg interviewed a former broker who claims that he watched ICAP brokers delay the reporting of swap prices.
“That allows dealers to tell the brokers to delay putting trades into the system instead of in real time,” Bloomberg wrote, noting the former broker had “witnessed such activity firsthand.”
An ICAP spokesman has no comment on the story, though the company has released a statement saying that it is “cooperating” with the CFTC’s inquiry and that it “maintains policies that prohibit” the improper behavior alleged in news reports.
The idea that prices in a $379 trillion market could be dependent on a desk of about 20 guys in New Jersey should tell you a lot about the absurdity of our financial infrastructure. The whole thing, in fact, has a darkly comic element to it. “It’s almost hilarious in the irony,” says David Frenk, director of research for Better Markets, a financial-reform advocacy group, “that they called it ISDAfix.”
After scandals involving libor and, perhaps, ISDAfix, the question that should have everyone freaked out is this: What other markets out there carry the same potential for manipulation?
The answer to that question is far from reassuring, because the potential is almost everywhere. From gold to gas to swaps to interest rates, prices all over the world are dependent upon little private cabals of cigar-chomping insiders we’re forced to trust.
“In all the over-the-counter markets, you don’t really have pricing except by a bunch of guys getting together,” Masters notes glumly.
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That includes the markets for gold (where prices are set by five banks in a Libor-ish teleconferencing process that, ironically, was created in part by N M Rothschild & Sons) and silver (whose price is set by just three banks), as well as benchmark rates in numerous other commodities – jet fuel, diesel, electric power, coal, you name it.
The problem in each of these markets is the same: We all have to rely upon the honesty of companies like Barclays (already caught and fined $453 million for rigging Libor) or JPMorgan Chase (paid a $228 million settlement for rigging municipal-bond auctions) or UBS (fined a collective $1.66 billion for both muni-bond rigging and Libor manipulation) to faithfully report the real prices of things like interest rates, swaps, currencies and commodities.
All of these benchmarks based on voluntary reporting are now being looked at by regulators around the world, and God knows what they’ll find.
The European Federation of Financial Services Users wrote in an official EU survey last summer that all of these systems are ripe targets for manipulation. “In general,” it wrote, “those markets which are based on non-attested, voluntary submission of data from agents whose benefits depend on such benchmarks are especially vulnerable of market abuse and distortion.”
Translation: When prices are set by companies that can profit by manipulating them, we’re fucked.
“You name it,” says Frenk. “Any of these benchmarks is a possibility for corruption.”
The only reason this problem has not received the attention it deserves is because the scale of it is so enormous that ordinary people simply cannot see it.
It’s not just stealing by reaching a hand into your pocket and taking out money, but stealing in which banks can hit a few keystrokes and magically make whatever’s in your pocket worth less. This is corruption at the molecular level of the economy, Space Age stealing – and it’s only just coming into view.