TOP
STORIES:
Every
Money Professional Knew Libor Was A Scam – (www.businessinsider.com) They've known it for 30
years. The only thing interesting about
this story is that it’s 30++ years old.People have been sandbagging Libor
quotes since the concept of Libor was originated. I don’t believe that
there is a money pro on either the buy or sell side over the past thirty years
who didn’t understand that the Libor Fixing was “fixed”. If they claim to be
“shocked” today, they are either lying or stupid. The same goes for every
central banker and treasury official that knows the way to the bathroom. As
far as any consumers who took out a Libor based loan are concerned; they have
no claim at all. If Libor hadn’t been “fixed” all these years they would have
paid substantially more on those loans. Libor has always been jimmied down, not
up. The world has been looking for an excuse to hang some bankers (and a few
regulators). Liborgate looks like it could be the opportunity for the
bloodletting. I’m convinced that this is the wrong issue to bring out the
nooses.
Social Security Hole Overwhelms Taxes, Cuts - (www.bloomberg.com) Now that health care is off the front burner, it’s time to fix Social Security. Social Security’s trustees say the system needs only “modest changes.” In fact, the system is desperately broke. The proof is buried deep in the trustees’ own 2012 report in a complex table, numbered IV.B6. The system’s actuaries prepare the report’s tables. But what the trustees make of them is up to the trustees. Clearly this year, as in others, the trustees ignored table IV.B6. How else could they have come up with their blase statement that Congress should address Social Security’s finances “in a timely way”? Table IV.B6 is a long-run balance sheet for Social Security. It shows that the system’s $88.9 trillion in liabilities exceed its $68.4 trillion in assets by $20.5 trillion. The liabilities are the present value of the system’s projected benefit payments, whereas the assets are the system’s $2.7 trillion trust fund plus $65.7 trillion in projected taxes, also valued in the present. The $20.5 trillion fiscal gap separating Social Security’s liabilities and assets -- its unfunded liability -- is enormous; it is 1.4 times U.S. gross domestic product and 34 times annual Social Security taxes.
The Worst Banking Scandal Yet? - (www.bloomberg.com) The scandal over the
manipulation of Libor has the potential to become one of the most costly and
consequential in the history of banking. If the financial institutions involved
want to prevent it from overwhelming their businesses and damaging the broader
economy, they’ll have to act fast. Investigators in the U.S., Canada, Europe and Asia are
piecing together a breathtaking portrait of avarice and deceit. To hide their
institutions’ problems during the financial crisis, or often to boost their
traders’ profits, bankers knowingly submitted false data for the calculation of the London Interbank Offered Rate, a
benchmark interest rate that influences the
value of hundreds of trillions of dollars in financial contracts around the
world, including floating-rate mortgages, corporate loans and interest-rate swaps. The roughly $450
million in fines paid by Barclays Plc, the first bank to fess up, is only the
beginning. Regulators can and should hit more banks with large fines to prevent
a repeat. More important, criminal charges for the first time could threaten a
significant number of bankers and traders with jail terms for their actions
during the financial crisis -- a much needed comeuppance that could help reset
the industry’s moral compass.
Insight: The curious case of Iowa broker's Romanian property
empire - (www.reuters.com) Russell Wasendorf Sr., the
founder of failed Iowa brokerage PFGBest, had risky investments a long way from
the Midwest markets where he built his name. More than a decade before he
allegedly began hiding more than $200 million of misappropriated client money
in a scheme that unraveled this week, Wasendorf joined three other Chicago
traders as founding investors in one of Romania's largest real estate
development groups, Avrig 35 Group, which was valued at more than $1 billion at
its height in 2007. But since 2007 the paper value of his holdings has crashed
from around $150 million to less than $45 million, as Avrig has written down
investments. As Avrig's complex web of dozens of firms struggles to trade its
way out of difficulties, Alexander Hergan, Wasendorf's Romanian-born business
partner and a former options trader and founding member of the Chicago Board of
Options Exchange (CBOE), hopes the drama in Iowa doesn't upset the firm's
recovery.
Spain Threatens Deficit-Troubled Regions, Offers Help - (www.bloomberg.com) Spain’s
government threatened to take control of budgets in regions that fail to meet
austerity targets, while offering financing to help them avoid default as the
nation battles to restore investor confidence. Regions projected to miss
deficit goals this year were given a week to take action or risk intervention,
Budget Minister Cristobal Montoro said in Madrid late yesterday after meeting
regional finance chiefs. Local officials, including some from the ruling People’s
Party, resisted his demands. “This proposal has more show than go,”
said Michael Derks, chief strategist at FxPro Group Ltd. in London.
“Spain isn’t in any position to take on more obligations and this isn’t going
to repair the credibility of regional governments that have been shut out of
markets for a considerable time.”
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