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Cohan writes: "There is no point in mincing words: UBS AG, the Swiss global bank, has been disgracing the banking profession for years and needs to be shut down."

Switzerland's largest bank became the second bank to settle over the rate-rigging scandal. (photo: Steffen Schmidt/AP)
Switzerland's largest bank became the second bank to settle over the rate-rigging scandal. (photo: Steffen Schmidt/AP)

UBS Libor Manipulation Merits a Death Penalty

By William D. Cohan, The National Memo

28 December 12


here is no point in mincing words: UBS AG, the Swiss global bank, has been disgracing the banking profession for years and needs to be shut down.

The regulators that allow it to do business in the U.S. - the Federal Reserve, the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Office of Comptroller of the Currency - should see that the line in the sand was crossed last week. On Dec. 19, the bank paid $1.5 billion to global regulators - including $700 million paid to the CFTC, the largest fine in the agency's history - to settle claims that for six years, the company's traders and managers, specifically at its Japanese securities subsidiary, manipulated the London interbank offered rate and other borrowing standards.

Libor is a benchmark index rate, off which trillions of dollars of loans are priced on a daily basis. According to the Wall Street Journal, two of the many victims of the Libor fraud - a scandal that so far has nabbed Barclays plc and UBS but will probably include other large global banks - were the quasi-federal housing agencies Fannie Mae and Freddie Mac, which together claim to have lost more than $3 billion as a result of the manipulation.

The same day of UBS's global settlement, which included the Japanese subsidiary pleading guilty to fraud, two former UBS traders, Tom Hayes and Roger Darin, were sued by the Justice Department and charged with "conspiring to manipulate" Libor.

"The alleged conspirators we've charged - along with others at UBS - manipulated the benchmark interest rate upon which many transactions and consumer financial products are based," Attorney General Eric Holder said in a statement. "They defrauded the company's counterparties of millions of dollars. And they did so primarily to reap increased profits, and secure bigger bonuses, for themselves."

To see the level to which UBS employees descended, one need look no further than their written communications, as per U.S. prosecutors' document dump. "Mate yur getting bloody good at this libor game," one broker told a UBS derivatives trader. "Think of me when yur on yur yacht in monaco wont yu."

But, then again, UBS and bad behavior have become nearly synonymous. During the financial crisis, UBS took writedowns totaling some $50 billion, prompting the company to produce a 76-page, single-spaced, Orwellian transparency report. "In the aftermath of the financial market crisis it was revealed," the report said, "that UBS had taken a serious turn in the wrong direction under the leadership of the senior management then in charge of the bank. The result was an enormous loss of trust."

In February 2009, UBS entered into a deferred-prosecution agreement with the Justice Department and admitted to helping American taxpayers defraud the Internal Revenue Service. UBS agreed to provide the names of some clients whom it had helped to avoid U.S. taxes and to pay a fine of $780 million.

Then, last month, came the conviction of former UBS "rogue" trader, Kweku Adoboli, on charges that he hid trading losses totaling more than $2.3 billion. The U.K.'s Financial Services Authority fined UBS some $47 million and charged that its oversight of London traders was too trusting. The bank seems more than a little out of control.

The latest example of the bank's shameful behavior can be found in the false bravado of the traders who for years manipulated Libor and thought they could get away with it. The gruesome details can be found in the Dec. 19 report from Britain's Financial Services Authority.

It found that unidentified UBS traders entered into "wash trades" - described as "risk-free trades that canceled each other out" and had no commercial rationale - in order to "facilitate corrupt brokerage payments" to three individual brokers at two other firms.

In a Sept. 18, 2008, telephone conversation, Hayes promised that if one broker kept the six-month Japanese yen Libor unchanged for the day, he would in exchange "pay you, you know, 50,000 dollars, 100,000 dollars … whatever you want … I'm a man of my word." Lovely.

We also find out that a year earlier, Hayes had a chat on his Bloomberg terminal with Darin in which he pushed to find out what rate for Japanese yen Libor UBS would submit to the governing body that set the rates. "Too early to say yet," Darin replied, before estimating that 0.69 percent "would be our unbiased contribution."

Hayes repeated his request for a "low" submission on the three-month Japanese yen Libor. Darin messaged back: "as i said before - i dun mind helping on your fixings, but i'm not setting libor 7 [basis points] away from the truth i'll get ubs banned if i do that, no interest in that." Darin eventually submitted a Libor rate two basis points less than the "unbiased" figure of 0.69 percent.

In levying the record $700 million fine, David Meister, the CFTC's director of enforcement, said that "when a major bank brazenly games some of the world's most important financial benchmarks, the CFTC will respond with the full force of its authority." That's good as far as it goes, and the CFTC is to be commended for rooting out the global Libor manipulation scandal.

But an even more emphatic message needs to be sent to UBS by its prudential regulator in the U.S.: You are finished in this country. We are padlocking your Stamford, Connecticut, and Manhattan offices. You need to pack up and leave. Now. your social media marketing partner


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+9 # Leadyourself 2012-12-28 23:26
If TheNewYorkTimes was still

the standard for American truth that they

were before they allowed George Dubya

Clownboy and The Supremely Disgusting

Court to steal the Presidency of The United

States--losing their Mojo FOREVER, this

would have been their Front Page headline


Fortunately, RSN is the replacement

for the now OldYorkTimes.

And don't think they don't know it.

Great explanation.
+5 # Tigre1 2012-12-29 00:26
The 'loss of trust' actually is what We the People feel. It's a natural result here or we who see that no one of the true criminals of the era are punished. Indeed they should be executed: by depriving citizens, all of us, they have proved themselves great danger to the entire country: the population. Where's Robin Hood and the Lone Ranger when you need them?

Think of the ransom...
+4 # RLF 2012-12-29 15:04
Obama and Holder are prosecuting REAL criminals...lik e Bradley Manning!

What a country!
+7 # tishado 2012-12-29 00:55
We need to have the banks overseen by regulators who are skeptical of and hostile towards banks in the saem way we need firefighters who are skeptical of and hostile towards arsonists. Banks have legitimate uses but they need to be held in check, instead of catered to.
+9 # KrazyFromPolitics 2012-12-29 02:32
It's past time for all of the banks such as B of A, Wells Fargo, Chase, et al to be broken up or dissolved for all of their underhanded and devious practices. The management of these banks deserves significant jail time, and a lifetime ban from working in any work that requires fiduciary responsibility.
+4 # JSRaleigh 2012-12-29 05:53
Ain't gonna' happen. They might indict the low level traders who were the foot soldiers in the scheme. They might even prosecute them.

But it won't go any higher up the chain and by tomorrow it will be back to business as usual.
+11 # Vegan_Girl 2012-12-29 06:35
"But an even more emphatic message needs to be sent to UBS by its prudential regulator in the U.S.: You are finished in this country. "

I wouldn't hold my breath on that one. While Murdoch is facing all kind of trouble all over the world because of his abusive and criminal enterprises, the US regulators are changing the rules so he could consolidate even more power.

I think that in the US, the entire system is now subverted by corporate interests.

We have incredibly harsh rules and sentences for the working class while rich criminals walk free with impunity. Too big to fail, to rich to punish.

And as long as there are no criminal prosecutions, as long as these "staggering fines" are rounding errors compared to the profits of these crimes, they will go on, destroying our communities and our economy.
+5 # gdp1 2012-12-29 07:11
...If this pattern of unlawful and destructive behaviour by these racketeers is allowed to continue, then why not legalize petty theft also? (I'm eyeing a pretty nice watch on the wrist of the person sitting next to me...he looks like a banker)....
+2 # CandH 2012-12-29 12:05
That is the logical "end" to this now overt "kleptocracy." Look at history because it's loaded with examples of what inevitably happens to societies in this state. We're in trouble, big, but bread and circuses are being thrown at us, at an alarming rate now, to postpone what's expected by the 1%. Why? Look at history again. The world's 1% make extraordinary wealth during times of extreme chaos and war (WWII made millionaires into billionaires, even then.) We're, the world, is in trouble, big.
+3 # Kwamined 2012-12-29 09:09
Thomas Jefferson:
"The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants."
Why not now, beginning with, say, Geithner? Then all is ilk?
+4 # wrknight 2012-12-29 10:05
It's the American people who allow corporate criminal behavior by electing public officials who write the laws favoring the corporations. If Americans would wake up, examine the voting patterns of their elected officials, and vote for reformists, we could eventually restore our democracy.

The real problem is that too many people don't want to take the time and effort to be truly informed voters. It's easier to drink the Kool-Aid supplied by corporate America via the media.
+5 # RLF 2012-12-29 15:06
Every single business in america and every person that has a mortgage should sue UBS in a monstrous class action lawsuit...
+1 # Howard T. Lewis III 2012-12-30 23:32
You don't really think UBS did this without approval and profit skimming from higher up, do you? Bush41 and queen lizard shared an account at the Coutts Branch of the Bank of Scotland where drug profits and procedes from doing shakedowns on middle east shieks ended up. Looks like that is where LIBOR REALLY goes.
0 # AMLLLLL 2013-01-01 11:14
The death penalty would be effective with these folks if it ever got that far. But everyone I've ever asked over the years, when given the hypothetical choice of punishments (to them) between the death penalty and pre-frontal lobotomy, chose death. What say you?

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