Yet More Rigging By Big Banks – This Time It’s Interest Rate Swaps

The abuse of power is staggering.

Time and time again over the last number of years the largest global banks have been found complicit in the manipulation of key rates, indices and markets. Now, a large and important pension fund has taken the largest of banks to task and filed a class action lawsuit alleging conspiracy to thwart competition and extract large fees and margins from the vast and critical interest rate swap market. The banks “have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case,” the suit states.

Interest rates swaps are used by companies and investors alike to manage interest rate risk. It is critical in smoothing returns and removing interest rate sensitivity. Providing an efficient trading market is lucrative, but when managers of that market collude to keep margins elevated at the cost of market participants, then we all suffer.

The lawsuit goes on to state that banks had “jointly threatened, boycotted, coerced, and otherwise eliminated any entity or practice that had the potential to bring exchange trading to buyside investors.” This policy had one purpose, “to preserve an extraordinary profit centre,” the lawsuit said. It is alleged that the banks disguised their collusion by using code names for projects such as “Lily”, “Fusion,” and our favourite, “Valkyrie,” according to the suit.

Typically, what will happen now, should the suit be successful, we will see a regulatory investigation by the authorities in the U.S. and Europe, with massive fee generation for all the professional classes concerned and associated with prosecuting, defending, and interpreting the situation.

A big fine will be handed down and paid to the regulators, (note: not the victims), by the perpetrators. No executives will be found guilty, no liability made nor conceded. Shareholders of the banks will barely take notice and the public, who have been paying the price for this collusion, will get back to the task of not giving a damn. Sure, they would be happier watching box sets.

They say people get the governments they deserve; well, they get the institutions and regulators they deserve, too. Apathy is the greatest destroyer of liberty. “Someone should do something,” I hear you say, well, you are someone, so get mad.

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DAILY PRICES

Today’s Gold Prices: USD 1070.50, EUR 1009.41 and GBP 710.30 per ounce.
Yesterday’s Gold Prices: USD 1072.20, EUR 1011.10 and GBP 711.23 per ounce.
(LBMA AM)

Gold lost $4.80 at the end of the day yesterday to close at $11.70.60. Silver gained $0.02 for the day to finish at $14.19. Platinum managed a gain, closing up $1.50 to $840.50.

IMPORTANT NEWS

Most U.S. Stocks Gain With Dollar on Strong Data as Oil Climbs – Bloomberg
Gold ends lower as U.S. data maintains rate-hike expectations – MarketWatch
Sell gold because of Draghi? That’s ridiculous – CNBC
Gold inches down, as mixed data provides few clues on rate hike timing – Investing.com
The gold that’s as light as AIR: New foam could lead to revolution in jewellery – Mail Online

IMPORTANT ANALYSIS

Will Fresh QE From ECB Boost Gold? – seekingalpha.com
‘Silk Road’ Countries’ Gold Reserves and Demand Accumulation Has Grown 450% Since 2008 – Jesse’s Café Américain
The December Jobs Number May Really Be The “Most Important Ever” – ZeroHedge
Death of paper gold & Silver: The Data Proves It – Silverseek.com
One More Lower Low? – Goldseek.com

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