Britain’s Lloyds Bank found a new way to rig the market in order to
reduce the fees it paid the Bank of England for its £20 billion bailout
in 2008-9. It demonstrates once again that swindling, fraud and
criminality are the City of London’s modus operandi. And the victims of
this bank robbery are working people.
Lloyds, in which the
Treasury has a 24 percent stake following the bank’s collapse in 2008,
admitted that four of its staff had defrauded the Treasury by
manipulating the “repo” rate, which determined the fees payable to the
Bank of England and thus the Treasury for accessing the government’s
financial lifeboat for the bank—known as the Special Liquidity Scheme
(SLS).
Under the SLS, the banks could swap their worthless loans
for UK Treasury Gilts that could be sold for cash. In return, the banks
had to pay a fee, supposedly to bring the cost of SLS funding up to the
commercial borrowing rate, based upon the repo rate which the banks
themselves were allowed to set.
Lloyds and Bank of Scotland (BoS),
with whom it merged as part of the restructuring, were the biggest
beneficiaries of the bailout scheme, receiving £90 billion between 2009
and 2012 when the scheme closed, for which they paid £1.28 billion in
fees, or just 1.4 percent. Even this was considered too much by the
bank. They evidently thought they were entitled to a cut price bailout.
According to the Bank of England’s (BoE) regulators, the bank rigged the
rate to reduce the fees paid by £7.8 million, a trifling sum in the
scheme of things. But Lloyds’ scam in turn reduced the fees other banks
paid, always assuming that they too were not fiddling the repo rate.
The
Lloyds group is to be fined £70 million for rigging the rate, and
ordered to repay £7.8 million, which the BoE said “fully” took into
account the loss of fees paid by other banks. Tracey McDermott, the
Financial Conduct Authority director of enforcement and financial crime,
said that Lloyds had been “biting the hand that was feeding them—the
emergency funding they needed to keep running.”
Bank of England
Governor Mark Carney said, “Such manipulation is highly reprehensible,
clearly unlawful and may amount to criminal conduct on the part of the
individuals involved,” although evidently not the bank itself. It is
believed that four people were involved, but none of them were named.
Amazingly, three of the four had remained in post till last Monday, when
they were “suspended” but apparently not fired. The other is believed
to have already left the bank. The refusal to name and shame these
crooks is in sharp contrast to the naming and shaming of “failing”
teachers and healthcare workers.
Carney said the Bank would
“consider” further action against Lloyds and the individuals involved.
Lloyds may face investigation by the paper tiger known as the Serious
Fraud Office.
But Lloyds’ criminality did not faze the London
Stock Market. Its share price remained virtually unchanged until
Thursday, when Lloyds announced a 50 percent fall in half year profits
compared to the same period last year.
At the same time as
announcing this latest market manipulation, the BoE also stated that it
was fining Lloyds a paltry £35 million for its part in the London
Interbank Offered Rate (Libor) scandal, while the United States’
authorities were fining it £113 million. Again, none of the 16
individuals were named, and neither they nor any senior officials nor
the bank itself are to be charged with a criminal offence. Instead,
these unindicted thieves earn millions and millions.
Lloyds was
just one of a number of well-known international banks, including
Britain’s finest, that were found to have rigged the Libor, the
benchmark global interest rate to which hundreds of trillions of dollars
of financial contracts are tied. It did so to increase its profits and
conceal its financial problems.
The actions of the bankers
defrauded hundreds of millions of people who pay interest on mortgages,
credit cards, student loans and car loans, as well as institutional
investors such as pension funds, insurance companies and public
authorities, and countless millions of retirees who rely for income on
fixed rate investments. It was grand larceny.
https://www.wsws.org/en/articles/2014/08/05/lloy-a05.html
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