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It amazes and depresses me that it takes bad behavior on a level that is easily explainable (i.e. help terrorist launder money) for people to get upset at how u

It amazes and depresses me that it takes bad behavior on a level that is easily explainable (i.e. help terrorist launder money) for people to get upset at how untouchable large international financial institutions have become. The LIBOR scandal is so much bigger and more important than this HSBC case but it seemingly gets a pass from public outrage since there's no easy TL;DR explanation of it.

jrockway 14y ago
Libor TLDR: "Organizations set their interest rates to a random number that some banks came up with. The banks changed how they came up with the number without telling anyone, and the organizations got mad because it caused them to lose money while the banks made money."
- dllthomas 14y ago
  Libor TLDR: "Fraud."
  - mtgx 14y ago
    I don't think that's enough to make people understand whether the governments should just fine them or that they need to put hundreds of people in jail.
    - dllthomas 14y ago
      Fraud is a crime. When it involves enough money (amount depending on jurisdiction) people are supposed to go to jail. It is my understanding that the amounts involved here were significantly above those required for any jurisdiction.
- FireBeyond 14y ago
  Not "changed how they came up with the number". What you actually mean is "knowingly supplied false numbers" - note that the numbers were the offer rates, and instead, these banks would give numbers that were preferential to their positions, not an accurate reflection.
rjknight 14y ago
The first few pages of the OP, which focus on HSBC, were actually nowhere near as important as the last page, on LIBOR. The LIBOR case is much, much more important than whether or not HSBC had dealings with Iran. When he's talking about this, Taibbi sounds weirdly parochial, like he's more upset about America's interests being ignored than he is about any fundamental wrongdoing (I know he's American and Rolling Stone has a predominantly US audience, but still...)
- crisnoble 14y ago
  I think he is just depressed that if the self appointed most powerful government in the world can't do anything to curb the behavior of these banks, then we have no hope in stopping them. In other words, Breuer is saying the banks have us by the balls, that the social cost of putting their executives in jail might end up being larger than the cost of letting them get away with, well, anything.
tedunangst 14y ago
Considering the LIBOR was kept artificially low, it benefited consumers. Why would there be public outrage?
- pmorici 14y ago
  That is a simplistic assumption. Here is another Rolling Stone article about how some banks were convicted of colluding to suppress interest rates in the US municipal bond market. The Libor scandal is the same thing essentially they were defrauding small towns out of millions of dollars of interest by their collusion. http://www.rollingstone.com/politics/news/the-scam-wall-street-learned-from-the-mafia-20120620 http://www.rollingstone.com/politics/news/the-scam-wall-stre...
  - tedunangst 14y ago
    Wow, one Taibbi article backs up another Taibbi article? Coincidence, I'm sure.
    - jlgreco 14y ago
      Way to not actually address anything at all. Seriously, who the fuck cares who wrote the articles?
      - tedunangst 14y ago
        I do. Once I realized all the Rolling Stone articles on HN were the same, I stopped clicking.
        jlgreco 14y ago
        I don't think I have ever seen someone so fully embrace logical fallacies. Do you have any reason to think the article is wrong, besides who the author is and where it was published? Any at all?
    - biot 14y ago
mixmax 14y ago
here's one: You're paying an interest rate on your car, your mortgage and your bank loan right? OK, that interest rate is set by the bank. The way they do that is to use LIBOR, and add a bit on top which is their profit. So your loans follow LIBOR. The banks basically rigged the game, and changed LIBOR as they saw fit, meaning that you paid more in interest than you should. Your neighbour did too. And his neighbour. If you add it all up it's billions. They fucked everyone to make a quick buck, and it's illegal as hell.
- omonra 14y ago
  LIBOR was mostly manipulated down. See: http://www.bbc.co.uk/news/business-18671255 http://www.bbc.co.uk/news/business-18671255 "At the onset of the financial crisis in September 2007 with the collapse of Northern Rock, liquidity concerns drew public scrutiny towards Libor. Barclays manipulated Libor submissions to give a healthier picture of the bank's credit quality and its ability to raise funds. A lower submission would deflect concerns it had problems borrowing cash from the markets." ... "From as early as 28 August, the New York Fed said it had received mass-distribution emails that suggested that Libor submissions were being set unrealistically low by the banks." Ie - you, the borrower - benefited from this manipulation.
  - mixmax 14y ago
    You're right, and I know. I have an education in economics :-) The reason I omitted it was the difficult problem of explaining a complex subject in very few words, and still pointing the finger at banks. If you tell joe six-pack that his mortgage sometimes got cheaper you'll either have to divulge a complex explanation of why this is bad for him (which he won't understand or care about) or have him think that the banks should do some more of that LIBOR rigging so his mortgage can be lower. It's a compromise.
    - smsm42 14y ago
      If you didn't know the facts it is excusable mistake, but if you knew the facts and still wrote something that is factually wrong - because "joe six-pack can't handle the truth" - then I can't see how you can consider you're doing anything but plain and simple deception. And when "joe six-pack" with discover it - and he will, eventually - you'd be surprised why he doesn't believe any word you say anymore. If you sacrifice the truth in order to further your goals, you're part of the problem.
temphn 14y ago
There are two responses to something like LIBOR. One response is Taibbi's, which is to ask for the US government to crack down on bankers. This fails because of the tacit assumption that the US government is any less corrupt. The second response is to embrace something like Bitcoin, which decentralizes everything. No central banking, no LIBOR scandal. But also no ability to stop "money laundering", defined as a transaction that a government doesn't want you to engage in. That's the tradeoff: the Bitcoin protocol is based on an adversarial environment and gives no special privileges to government or banking nodes. LIBOR (banks), QE4 (govt), and the bailouts (both) are all enabled by the fact that some nodes in our system are granted special powers to set rates and print money.
- wisty 14y ago
  Banks could still loan bitcoins. They'd go bust if they loaned too much, like they did in the Great Depression under the gold standard. And governments could still bail them out, with bitcoin-denominated treasury bonds. Quantitative easing wouldn't be possible though, because bitcoins don't work that way, so you might get deflation. I guess the added danger of this lack of flexibility might encourage banks (and governments) to be more cautious but it hasn't stopped them in the past.
  - jacquesm 14y ago
    Loaning out bitcoins you don't have is going to be pretty hard. Bitcoins are closer to cash than it may seem at first glance and just like cash you can't really fake having it.
    - JumpCrisscross 14y ago
      Money consists of central bank money, or currency and deposits at the central bank, and private money. Bitcoin would replace central bank money. It does not, however, replace private money. If I paint your fence and you give me an IOU, we just created money - real services were rendered and a nominal claim was accepted in return. Similarly, Bitcoins are as (if not more) theoretically fungible as Treasuries. Banks finance themselves in the wholesale markets collateralised by Treasuries. A repurchase agreement using Bitcoins is not beyond practical contemplation. Note that fractional reserve banking originated on the gold standard.
einhverfr 14y ago
I think the thing is that it takes something truly shocking to penetrate the defensive layers of "but liberal capitalism can't do this" thinking. Our financial sector is currently hopelessly corrupt and, at least in the US, the banking sector itself has a total grip on any attempt to regulate it.

jrockway 14y ago

Libor TLDR: "Organizations set their interest rates to a random number that some banks came up with. The banks changed how they came up with the number without telling anyone, and the organizations got mad because it caused them to lose money while the banks made money."

dllthomas 14y ago
Libor TLDR: "Fraud."
- mtgx 14y ago
  I don't think that's enough to make people understand whether the governments should just fine them or that they need to put hundreds of people in jail.
  - dllthomas 14y ago
    Fraud is a crime. When it involves enough money (amount depending on jurisdiction) people are supposed to go to jail. It is my understanding that the amounts involved here were significantly above those required for any jurisdiction.
FireBeyond 14y ago
Not "changed how they came up with the number". What you actually mean is "knowingly supplied false numbers" - note that the numbers were the offer rates, and instead, these banks would give numbers that were preferential to their positions, not an accurate reflection.

rjknight 14y ago

The first few pages of the OP, which focus on HSBC, were actually nowhere near as important as the last page, on LIBOR. The LIBOR case is much, much more important than whether or not HSBC had dealings with Iran. When he's talking about this, Taibbi sounds weirdly parochial, like he's more upset about America's interests being ignored than he is about any fundamental wrongdoing (I know he's American and Rolling Stone has a predominantly US audience, but still...)

crisnoble 14y ago
I think he is just depressed that if the self appointed most powerful government in the world can't do anything to curb the behavior of these banks, then we have no hope in stopping them. In other words, Breuer is saying the banks have us by the balls, that the social cost of putting their executives in jail might end up being larger than the cost of letting them get away with, well, anything.

tedunangst 14y ago

Considering the LIBOR was kept artificially low, it benefited consumers. Why would there be public outrage?

pmorici 14y ago
That is a simplistic assumption. Here is another Rolling Stone article about how some banks were convicted of colluding to suppress interest rates in the US municipal bond market. The Libor scandal is the same thing essentially they were defrauding small towns out of millions of dollars of interest by their collusion. http://www.rollingstone.com/politics/news/the-scam-wall-street-learned-from-the-mafia-20120620 http://www.rollingstone.com/politics/news/the-scam-wall-stre...
- tedunangst 14y ago
  Wow, one Taibbi article backs up another Taibbi article? Coincidence, I'm sure.
  - jlgreco 14y ago
    Way to not actually address anything at all. Seriously, who the fuck cares who wrote the articles?
    - tedunangst 14y ago
      I do. Once I realized all the Rolling Stone articles on HN were the same, I stopped clicking.
      - jlgreco 14y ago
        I don't think I have ever seen someone so fully embrace logical fallacies. Do you have any reason to think the article is wrong, besides who the author is and where it was published? Any at all?
  - biot 14y ago

mixmax 14y ago

here's one: You're paying an interest rate on your car, your mortgage and your bank loan right? OK, that interest rate is set by the bank. The way they do that is to use LIBOR, and add a bit on top which is their profit. So your loans follow LIBOR. The banks basically rigged the game, and changed LIBOR as they saw fit, meaning that you paid more in interest than you should. Your neighbour did too. And his neighbour. If you add it all up it's billions. They fucked everyone to make a quick buck, and it's illegal as hell.

omonra 14y ago
LIBOR was mostly manipulated down. See: http://www.bbc.co.uk/news/business-18671255 http://www.bbc.co.uk/news/business-18671255 "At the onset of the financial crisis in September 2007 with the collapse of Northern Rock, liquidity concerns drew public scrutiny towards Libor. Barclays manipulated Libor submissions to give a healthier picture of the bank's credit quality and its ability to raise funds. A lower submission would deflect concerns it had problems borrowing cash from the markets." ... "From as early as 28 August, the New York Fed said it had received mass-distribution emails that suggested that Libor submissions were being set unrealistically low by the banks." Ie - you, the borrower - benefited from this manipulation.
- mixmax 14y ago
  You're right, and I know. I have an education in economics :-) The reason I omitted it was the difficult problem of explaining a complex subject in very few words, and still pointing the finger at banks. If you tell joe six-pack that his mortgage sometimes got cheaper you'll either have to divulge a complex explanation of why this is bad for him (which he won't understand or care about) or have him think that the banks should do some more of that LIBOR rigging so his mortgage can be lower. It's a compromise.
  - smsm42 14y ago
    If you didn't know the facts it is excusable mistake, but if you knew the facts and still wrote something that is factually wrong - because "joe six-pack can't handle the truth" - then I can't see how you can consider you're doing anything but plain and simple deception. And when "joe six-pack" with discover it - and he will, eventually - you'd be surprised why he doesn't believe any word you say anymore. If you sacrifice the truth in order to further your goals, you're part of the problem.

temphn 14y ago

There are two responses to something like LIBOR. One response is Taibbi's, which is to ask for the US government to crack down on bankers. This fails because of the tacit assumption that the US government is any less corrupt. The second response is to embrace something like Bitcoin, which decentralizes everything. No central banking, no LIBOR scandal. But also no ability to stop "money laundering", defined as a transaction that a government doesn't want you to engage in. That's the tradeoff: the Bitcoin protocol is based on an adversarial environment and gives no special privileges to government or banking nodes. LIBOR (banks), QE4 (govt), and the bailouts (both) are all enabled by the fact that some nodes in our system are granted special powers to set rates and print money.

wisty 14y ago
Banks could still loan bitcoins. They'd go bust if they loaned too much, like they did in the Great Depression under the gold standard. And governments could still bail them out, with bitcoin-denominated treasury bonds. Quantitative easing wouldn't be possible though, because bitcoins don't work that way, so you might get deflation. I guess the added danger of this lack of flexibility might encourage banks (and governments) to be more cautious but it hasn't stopped them in the past.
- jacquesm 14y ago
  Loaning out bitcoins you don't have is going to be pretty hard. Bitcoins are closer to cash than it may seem at first glance and just like cash you can't really fake having it.
  - JumpCrisscross 14y ago
    Money consists of central bank money, or currency and deposits at the central bank, and private money. Bitcoin would replace central bank money. It does not, however, replace private money. If I paint your fence and you give me an IOU, we just created money - real services were rendered and a nominal claim was accepted in return. Similarly, Bitcoins are as (if not more) theoretically fungible as Treasuries. Banks finance themselves in the wholesale markets collateralised by Treasuries. A repurchase agreement using Bitcoins is not beyond practical contemplation. Note that fractional reserve banking originated on the gold standard.

einhverfr 14y ago

I think the thing is that it takes something truly shocking to penetrate the defensive layers of "but liberal capitalism can't do this" thinking. Our financial sector is currently hopelessly corrupt and, at least in the US, the banking sector itself has a total grip on any attempt to regulate it.