BUSINESS
07/16/2012 08:00 am ET

Libor Fraud: Anybody Can Do It! Seven And A Half Things To Know

Thing One: The Big Easy: Libor is like a honey trap for banks: The perfect lure for getting themselves into deep trouble.

Bloomberg writes today that it has long been ridiculously easy for one bank acting alone to manipulate Libor, a key short-term lending rate. The rate is determined by banks' self-reporting, and we're learning that banks have for years skewed it to make money in derivatives trades or to make them look healthier than they really are. And anybody can do it! "One former trader interviewed by Bloomberg News... said he and his colleagues tried to influence his bank’s rate- setters over a period of years because it was easy and even small movements helped their profit and loss accounts," Bloomberg's Liam Vaughan and Katie Linsell write. There's no need for a vast banking conspiracy to drive Libor higher or lower -- banks can do it on their own, for fun and profit. But mostly profit.

And you better believe they did, for years and years, a scandal that is only starting to unfold. The attorneys general in New York and Connecticut have launched criminal investigations. The New York Times reported over the weekend that the U.S. government is also building its own criminal cases. Regulators continue to be on the hot seat for looking the other way for years while this went on -- British regulators at the Financial Services Authority are due to appear before Parliament today. And, most insidious of all, the Libor scandal is turning into another massive blow to investor confidence in financial markets -- which, come to think of it, may ultimately turn out to be a good thing. Because if there's one thing we've learned over the years, it's that these bankers will screw you every time they get the chance.

Thing Two: Whale Hunt: U.S. investigators are looking into criminal charges, raised on Friday by JPMorgan Chase, that some of its traders may have tried to hide the extent of their losses on credit derivatives. This is somewhat surprising to anonymous former JPMorgan Chase employees, who tell Bloomberg the bank knew, or should have known, exactly what those traders were doing.

Thing Three: Sneaky Peeks: And the scandals just keep on coming. The New York Times' Gretchen Morgenson writes that big hedge funds are getting an early peek at Wall Street analysts' buy and sell recommendations, letting them front-run average investors, a/k/a muppets, for easy cash. "When disseminated, analyst downgrades and upgrades can make a stock sink or soar. Getting that information early can be very profitable for traders."

Thing Four: Dirty Laundry: And our four-part bank-scandal tour ends back in England, where HSBC is just about to settle charges that it didn't do enough to stop the laundering of terrorist funds and drug money through its accounts, the Wall Street Journal writes. As in all the other scandals, regulators are getting the stinkeye for lax oversight. In this case it's the Office of the Comptroller of the Currency. Current and former OCC officials are due to appear before Congress tomorrow for an enjoyable Q&A.

Thing Five: The Price Of Labor In China: While we're all busy wailing and gnashing our teeth about how U.S. Olympic uniforms are made in China (like everything else in America), what's gone little noticed is that Chinese wages are rising rapidly, the Wall Street Journal writes. That could soon drive Chinese wages higher than those of other developing countries and marks a shift in China's economy toward greater consumption.

Thing Six: Hiring Slowdown: U.S. businesses plan to hire less in the months ahead, because of Europe, according to a new survey by the National Association for Business Economics. "The poll showed 47 percent of companies polled felt their sales have dropped due to Europe's woes."

Thing Seven: Read My Lips: New Taxes: Tax increases make the Ghost of Ayn Rand cry bitter tear, but some Republican governors are considering subjecting online sales to higher taxes as a maybe politically safe way to raise revenue, the Wall Street Journal writes. "The move toward taxing online sales has broad implications. Online shopping will become more expensive for consumers. Brick-and-mortar retailers won't have the price disadvantage they now have compared with online sellers. Strapped states suddenly could be flush with $23 billion in new annual revenue, according to the National Conference of State Legislatures."

Thing Seven And A Half: Letter Spotting. In Space: Do you spend a lot of time staring at pictures of Earth taken from space? Well, your hobby can finally be put to some good (?) use: NASA and Wired are looking to put together an alphabet made of letters formed by clouds, mountains, phytoplankton blooms or whatever natural formation looks kind of like a letter.

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Calendar Du Jour:

Economic Data:

8:30 a.m. ET: Retail Sales for June

8:30 a.m. ET: Empire State Manufacturing Index for July

Corporate Earnings:

Before Market Open:

Citigroup

Gannett

Heard On The Tweets:

@chrislhayes: PSU, Stuyvesant cheating, Wells Fargo, LIBOR, Peregrin -- institutional rot everywhere you look, it seems. #tote

@maxkeiser: Libor reflects rate charged for the average amount of bank fraud committed that day. It's fraud index for a fraud economy.

@ReformedBroker: Jamie Dimon: We're clawing back so much Whale money we have blubber in our talons. $JPM

@zerohedge: At JPM, an Internal control group double-checks marks against market prices monthly, at end of each quarter. Hello MarkIt...

@MiaFarrow: I can't get enough of this: Ladies & gentlemen -Bill Gates jumping over a chair. Video youtube.com/watch?v=KxaCOH

-- Calendar and tweets rounded up by Khadeeja Safdar.

And you can follow us on Twitter, too: @markgongloff and @byKhadeeja

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