Is it just me, or do titans of the financial industry simply pass the baton of fraud and failure around like a hot potato? From the MF Global theft to Goldman Sachs (NYSE:GS) dancing on muppets, there seems to be no shortage of reasons to hate big financial firms. In recent days, investors have been able to shift their focus to a completely new scandal that has rocked confidence in the financial system.
Last week, Barclays (NYSE:BCS), which is Britain’s second largest bank by assets, announced it would pay a record $453.6 million to sweep under the rug a multi-year investigation by U.S. and U.K. regulators on allegations that the bank manipulated the London Interbank Offered Rate. The Libor is the average interest rate that major banks in London charge when lending to other banks. It affects everything from interest rate swaps to mortgage and credit card rates. Other institutions such as Deutsche Bank (NYSE:DB), Citigroup Inc. (NYSE:C), HSBC Holdings (NYSE:HBC) and Royal Bank of Scotland (NYSE:RBS) are also being investigated for manipulating interest rates that impact hundreds of trillions of dollars worth of financial instruments around the world.
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Earlier this year, Jamie Dimon, chief executive officer of JPMorgan Chase (NYSE:JPM), broke news that his bank will suffer a trading loss of at least $2 billion due to the infamous Whale Trader in London. Now, another Diamond lies in the London rough. Barclays CEO Robert Diamond resigned on Tuesday amid heavy pressure over the bank’s recent Libor-gate. “The external pressure placed on Barclays has reached a level that risks damaging the franchise – I cannot let that happen,” explained Diamond. He did not mention the damage done to the financial system.
In addition to Diamond quitting, chief operating officer Jerry Del Missier also resigned, but the rabbit hole doesn’t end there. A 2008 note released by Barclays shows that Paul Tucker, the markets director at the Bank of England at the time, hinted that Barclays could lower its Libor rates, signaling that the manipulation scheme goes well beyond the corporate world.
Other financial fraud cases hitting newswires today include a lawsuit against Morgan Stanley (NYSE:MS) for pushing Standard & Poor’s and Moody’s Investors Service Inc. to give subprime mortgage instruments higher credit ratings than they deserved. Also, JPMorgan Chase is being investigated by the Federal Energy Regulatory Commission over power-market manipulation. I wonder who will receive the hot potato next?
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