Forum Post: Kucinich Explains the LIBOR Scandal

Kucinich Explains the LIBOR Scandal

Thursday, 12 July 2012 10:19 By Congressman Dennis Kucinich, Dennis Kucinich | Statement

http://truth-out.org/news/item/10288-kucinich-explains-libor

Washington, DC - Congressman Dennis Kucinich (D-OH) today released a video on YouTube explaining the “LIBOR scandal” and why it is important to everyone who participates in the economy. Kucinich explained in easily understandable language what the London Interbank Offered Rate (LIBOR) is, how it affects world markets, and why the Barclay’s scandal is important.

“Late last month, Barclay’s Bank, a multinational bank and financial institution based in the United Kingdom, admitted to regulators that it tried to manipulate something called “Libor” before and during the financial crisis in 2008. “Libor” is an acronym for London Interbank Offered Rate. It is a rate used as a benchmark for the cost of lending throughout the financial system, and it is also used as a reference rate for a wide range of financial products like car loans, adjustable-rate mortgages, student loans and credit cards.

“The Libor is not based on an objective measure of the interest for bank-to-bank loans. It is the average of a daily poll of the Association’s member banks, who give an estimate of the interest rate they think they would pay if they sought to borrow from another bank.

“It is supposed to be the way the financial system assesses the overall health of the financial system, because if the banks being polled feel confident about the state of things, they report a low number, because they assume that if they had to borrow from another bank, their cost of borrowing would be low. If member banks feel a low degree of confidence in the financial system, they report a higher interest rate. And from that the Libor is calculated, affecting the interest rate on financial products around the globe.

“What has emerged from the Barclay’s Bank inquiry is evidence that banks may have in fact been deliberately manipulating Libor rates for years. The evidence so far is that one arm of a bank responding to the Libor poll would change their number based on what another arm of the same bank wanted—and that other arm could consist of the bank’s traders who make their money on whether the rate goes up or down. This means that millions of consumers, investors and businesses have been paying the wrong interest rate. Or rather, they haven’t been paying an interest rate that is set according to some legitimate benchmark. Instead they are paying a rate based on a gentlemen’s agreement at financial institutions, a method that practically incentivizes those banks to game the system to maximize their profits.

“And remember, the British Bankers Association, the group that is responsible for setting the rate, is not a government agency. It is just a trade group of big banks-- Bank of America, JPMorgan Chase and Deutsche Bank and others--whose decisions on such a crucial number are not based on honest accounting or rules or regulatory oversight, but on a gentlemen’s agreement of honesty.

“We don’t know just how deep this scandal goes. But the fact is that if a fundamental component of our financial system has been or is being manipulated, we have the right to know about it. Banks are not above the law and they should not be allowed to operate in secrecy, especially when they have a history of taxpayer bailout and when we are forced to rely on them to provide capital for economic growth.”

This piece was reprinted by Truthout with permission or license.

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A Prophet Crying in the Wilderness: Montana's Governor Vows to Continue His Fight Against Citizens United

Thursday, 12 July 2012 14:43 By Richard Schiffman, Truthout | News Analysis

http://truth-out.org/news/item/10237-a-prophet-crying-in-the-wilderness-montanas-governor-vows-to-continue-his-fight-against-citizens-united

I'm just a rancher who ended up governor of Montana," Brian Schweitzer is fond of saying. In a world where even Mitt Romney paints himself as a populist with humble roots, one might reasonably be skeptical of Schweitzer's self-portrait. The governor of the Big Sky State, however, appears to be the real deal - a plainspoken 51-year-old farmer and irrigation engineer, who had never held public office before he ran for the highest post in Montana eight years ago.

At 6-foot-2 and 205 pounds, Schweitzer may rival New Jersey's Chris Christie as the nation's most physically imposing head of a state. He is also arguably the most accessible, keeping his door in the Capitol building in Helena open to ordinary Montanans, who reportedly show up without appointments to chat with the governor. When he was elected in 2004, the liberal Democrat with libertarian leanings was hailed as a harbinger of blue hopes in this overwhelmingly red part of the country. There was speculation that Schweitzer might someday be a potential presidential contender. But the Montana governor has proven to be anything but a team player. To the chagrin of his own party's faithful, he told The New York Times[mtlowdown.blogspot.com/2012/04/schweitzer-in-2006-i-might-support.html] in 2006 that if Mitt Romney got the nomination, he might consider supporting him (some suggested that Schweitzer was angling to be Romney's running mate).

Since then, Schweitzer has distanced himself from Romney, who he says has "taken a right turn" on immigration policy and military expansionism. The outspoken governor also recently got into hot water when he suggested that Romney's family roots in "a polygamy commune in Mexico" might hurt him in the upcoming presidential contest.

However politically unadroit such comments might be, they reinforce Schweitzer's image as being a straight shooter and a maverick, an image that was further burnished by a recent New York Times op-ed in which the governor called for a federal constitutional amendment that would allow states to ban corporate money from political campaigns.

The opinion piece recounts Montana's surprising populist history, where citizens demanded that corporate money be excluded from election campaigns - and got it way back in 1916. It happened after Montana's wealthiest citizen, the copper magnate William A. Clark, paid each of the state's legislators ten thousand dollars in cash ($250, 000 in today's money) for a seat in the US Senate. Public outrage against this brazen act of corruption boiled over, leading to the passage of a ballot initiative that effectively took money out of politics in Montana. Even private donations to politicians were eventually limited to a maximum of a few hundred dollars.

All meetings of state officials, in Schweitzer's telling, are required to be open to the public and all documents - including the governor's emails and hand-scrawled notes - are available for citizen inspection. Legislators in Montana are basically ranchers, teachers, carpenters, and others who put their professions on hold for a 90-day session, every other year, to serve for $80 a day. "There's very little money in Montana politics," Schweitzer writes matter-of-factly.

But all of this is about to change, under threat by the Supreme Court, after its Citizens United ruling two years ago opened the floodgates of corporate contributions to political PACS. In February, the court informed Montana that it could no longer enforce its own law. The state would have to allow dirty money to corrupt its political process. Schweitzer sees this as the death knell for Montana's "rare, pure form of democracy," which will now be forced to kowtow to the highest corporate bidders like the rest of the nation. "I know this" Schweitzer says "because I've started receiving bills on my desk that have been ghostwritten by a host of industries looking to weaken state laws, including gold mining companies that want to overturn a state ban on the use of cyanide to mine gold and developers who want to build condos right on the edge of our legendary trout streams. "In the absence of strict rules governing campaign money, these big players will eventually get what they seek. I vetoed these bills, but future governors might sign them if they have been bribed by the same type of money that is now corrupting our State Legislature." Montanans are fighting back. Their attorney general, Steve Bullock, says that states should have the right to be the masters of their own elections. He challenged the Supreme Court ruling in a brief - joined by attorneys general from 22 states and Washington, DC. Last Monday, the Supreme Court refused Montana's petition. Justice Anthony Kennedy, writing on behalf of the court's majority, said that, "independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption," and therefore "[n]o sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations."

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Secret Donors vs. First Amendment: The Tricky Task of Reforming Election Abuse by Nonprofits (Part Two)

http://truth-out.org/news/item/10289-secret-donors-vs-freedom-of-speech-the-tricky-task-of-reforming-election-abuse-by-nonprofits-part-two

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Unions Are in Peril

http://truth-out.org/news/item/10290-bill-fletcher-jr-and-stephen-lerner-unions-are-in-peril

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Congress Considers Prosecutions of Reporters Over Leaked Information

http://truth-out.org/news/item/10287-congress-considers-prosecutions-of-reporters-over-leaked-information