On April 22, the Department of Justice announced that Deutsche Bank had agreed to pay $2.5 billion for their role in the Libor fraud scandal. The manipulation of Libor rates is the largest criminal fraud in the history of finance, and had affected interest rates for billions of loans and credit transactions over the past 10 year period.
And as is par for the course in today’s oligarchical system, no indictments or jail time will be submitted against personnel within Deutsche Bank, or the myriad of other institutions culpable in the fraud.
Benjamin M. Lawsky, Superintendent of Financial Services, announced today that Deutsche Bank will pay $2.5 billion, terminate and ban individual employees who engaged in misconduct, and install an independent monitor for New York Banking Law violations in connection with the manipulation of the benchmark interest rates, including the London Interbank Offered Bank (“LIBOR”), the Euro Interbank Offered Rate (“EURIBOR”) and Euroyen Tokyo Interbank Offered Rate (“TIBOR”) (collectively, “IBOR”).
The overall $2.5 billion penalty Deutsche Bank will pay includes $600 million to the New York State Department of Financial Services (NYDFS), $800 million to the Commodities Futures Trading Commission (CFTC), $775 million to the U.S. Department of Justice (DOJ), and 227 million GBP (approximately $340 million) to the United Kingdom’s Financial Conduct Authority (FCA).
Superintendent Lawsky said: “Deutsche Bank employees engaged in a widespread effort to manipulate benchmark interest rates for financial gain. While a number of the employees involved in misconduct have already left the bank, those that remain are being terminated or banned from the New York banking system. We must remember that markets do not just manipulate themselves: It takes deliberate wrongdoing by individuals.” - DFS.NY.Gov
As noted above in the New York Department of Financial Services’s (DFS) press release, manipulation occurred through the actions of people, not by machines or bad processes, which makes the crime a willful act, and would be subject to criminal charges and indictments if America lived in an era where we actually jailed financial criminals.
Libor rates represent the interest that banks use when transferring money back and forth among themselves, which is then used to fund business loans, credit cards, mortgages, and even student loans to the public. Thus a rise in the libor rate would mean extra money a borrower has to pay over the life of a loan or credit transaction, with that additional interest funneling up to the banks in the amount of hundreds of billions, if not trillions of dollars in ill-gotten gains.
Deutsche Bank is just one of many institutions involved in the rigging of the Libor Rate, although they along with J.P. Morgan Chase are two the biggest. And with a simple fine of $2.5 billion being assessed to the German bank yesterday, it gives no incentive for them not to continue to de-fraud the system since the rewards far outweigh the risk should they get ever get caught.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com, and hosts the popular web blog, The Daily Economist. Ken can also be heard Friday evenings giving an weekly economic report on the Angel Clark radio show.