UBS and Libor: Horribly rotten, comically stupid

**~~sabaku_no_gaara~~** · December 23, 2012, 07:00 AM

I've read a wonderfull article in the Economist about the practices at Swiss bank UBS in the LIBOR scandal, apparently it goes beyond just banks and also involves trading companies.

Annyway the best parts are the exchanges between the employees:

Yet, even in the midst of this wrongdoing there was evidence of a sense of honour, however misplaced. One banker at UBS, in asking a broker to help manipulate submissions, promised ample recompense:

"I will

ing do one humongous deal with you ... Like a 50, 000 buck deal, whatever. I need you to keep it as low as possible ... if you do that ... I’ll pay you, you know, 50,000 dollars, 100,000 dollars ... whatever you want ... I’m a man of my word."

Further hints emerge of the warped morality that was held by some UBS employees and their conspirators at brokers and rival banks. In one telling conversation an unnamed broker asks an employee at another bank to submit a false bid at the request of a UBS trader. Lest the good turn go unnoticed the broker reassures the banker that he will pass on word of the manipulation to UBS.

Broker B: “Yeah, he will know mate. Definitely, definitely, definitely”;
Panel Bank 1 submitter: “You know, scratch my back yeah an all”
Broker B: “Yeah oh definitely, yeah, play the rules.”

The interchanges published by the FSA also reveal a comical stupidity among people who, if judged by their above-average pay, ought to have been expected to display above-average insight and intelligence. Sadly, they showed neither.

In one instance, two UBS employees, a manager and a trader (who also submitted interest rates) discuss an article in the Wall Street Journal raising doubt over the accuracy of bank’s LIBOR submissions. “Great article in the WSJ today about the LIBOR problem” says one. “Just reading it” his colleague replies.

Yet according to the FSA, some two hours later they were happily conspiring to submit manipulated bids:

Trader-Submitter D: “mate any axe in [GBP] libors?”
Manager D: “higher pls”
Trader-Submitter D: “93?”
Manager D: “pls”
Trader-Submitter D: “[o]k”

In another moment of comical stupidity one employee sends out a request on a public chat forum at the bank asking the 58 participants if there are any requests for a manipulated rate. Later, after being admonished to “BE CAREFUL DUDE” in a private note from a manager, he replies “i agree we shouldnt ve been talking about putting fixings for our positions on public chat (sic

Here's the article, it offers an interesting view on the manipulations and how rotten the financial system was:
http://www.economist.com/blogs/schum...omicallystupid

**Dr. Croccer** · December 23, 2012, 07:07 AM

I don't think anyone still seriously thinks that the financial sector isn't dominated by overpaid, corrupt morons.

**conon394** · December 23, 2012, 07:16 AM

Another great example of why we just need to free the market and roll back regulation ... because well err...

I kind of surprised how little coverage the LIBOR issue scandal gets in the US

The Second part of the article was interesting - The regulatory bodies can't really inflict to much cost on the Mega-Banks even 1.5 Billion is small change for UBS. But they seemingly get widespread evidence of systematic collusion out in the public. As the article says that will make class Action law suits in the US much stronger and I would wonder if it might open up a RICO charge here as well. Wall Street had been big Obama supports in his first run but they went hard for Romney payback might be in the offing...

**~~Basil II the B.S~~** · December 23, 2012, 07:29 AM

And yet fines will still be ridiculously low compared to the damage done. Banks involved in such activities should have their license revoked.

**Condottiere 40K** · December 23, 2012, 08:20 AM

One school of thought blames globalization - Swiss banks as such weren't terribly big but rather good at what they did in their modest niches. In order to compete with the big boys they started by trying to get some substantial bite of that investment market pie share, and they expanded faster than as has proven prudent and allowed their employees greater leeway than was responsible.

By some strange foresight, they built up their warchest(s) around four years ago.

**conon394** · December 23, 2012, 08:55 AM

and they expanded faster than as has proven prudent and allowed their employees greater leeway than was responsible.

But that excuse it getting rather old... I mean Barings dies because of a 'rouge trader' almost 2 decades ago and we still get the same song and dance oh it was a mistake or a rouge operation or we cannot manage such a big operation... Maybe if more of these overpaid jokers and their CEOs went to prison for a real long time they might just manage to put in place real policy changes.