Saturday, July 28, 2012

More On Why Sued-For LIBOR Losses May Be Substantial And More On Figuring Why Mayor Bloomberg Is Minimizing The Public's Loss

Noticing New York has been covering how various branches of New York state and local government may be suing over losses the tax-paying public has suffered due to the manipulation of the LIBOR rate, how, ironically, those lawsuits may embarrassingly coincide with the opening of the Ratner/Prokhorov basketball arena promotionally named “Barclays” to advertise one of the banks in the thick of the LIBOR scandal most likely to be sued, and how New York Mayor Bloomberg, though he admits he expects the city may be joining these lawsuits, has gone out on a limb to assert that the losses suffered by New Yorkers will be “de minimis,” even though fellow government officials are NOT backing Bloomberg up to assure us that losses will be minimal.– Whew, what a long sentence!– (For starters, see: Thursday, July 26, 2012, “Barclays” Center Opening Pending; Fellow Government Officials Don’t Back Bloomberg Re Minimizing NY Lawsuits Against Barclays Bank.)

Here is more about how the kind of LIBOR manipulation losses that people are likely to be suing for may be very substantial, not minimal at all. It’s an NPR “All Things Considered” “Planet Money” story about how just one Chicago derivatives trader, Dan Sullivan, says he suffered a million dollar loss in just one 24-hour period. (See: Losing With LIBOR: One Trader's Story, July 27, 2012, by David Kestenbaum.)

The million dollar loss described by the NPR piece wasn’t because Sullivan had lavishly put a huge amount of money at risk; it was because he was entitled to a “lottery ticket”-style payoff on his investment because he had correctly forecast and bet on some fairly long market rate odds. But his payday was taken away from him by the banks’ LIBOR rate falsification. Now does someone want to argue that Sullivan’s loss would have been cancelled or netted out as some sort of a “wash” by all the other financial transactions Sullivan was engaged in in his life? (See NNY’s prior article for this.) That’s not likely for this particular individual.

One point to be made about this concept that LIBOR losses may frequently be netted out against LIBOR manipulation related “gains,” sometimes for an approximate “wash” is that there may be those who lost, those who possibly experienced what is arguably a wash, and those who gained, but the only people who might be hopefully wishing to sit on the legal sideline are those in the “wash” category. Those who “lost” will want to sue. Those who “won” may wind up being sued against their will and those with an arguable “wash” may still find themselves in litigation: The compartmentalization that comes from lawsuits and legal relationships may not make it easy to view things as one big self-cancelling “wash” for those who might otherwise want it to be.

The NPR ATC story ends by saying that there are “a lot of others like” Mr. Sullivan “out there”:
Many of them are suing, and they say they lost more than he did. There are huge pension funds and hedge funds and city governments that bought these derivatives. A war is brewing in the courts.
Meanwhile, on July 19th, Bloomberg News (as conceptually distinct from Bloomberg the Mayor speaking on the same subject on that same day) reported about a potential LIBOR scandal “feeding frenzy of sharks” with everyone “everyone’s preparing for war” in the litigation area. (See: Feeding Frenzy Seen If Wall Street Sues Itself Over Libor, by Donal Griffin.)

Here is more about why New York Mayor Michael Bloomberg may be minimizing losses to New York and New Yorkers say (among other ways) through losses to the New York City and New York State pension funds.

Noticing New York has offered three possible theories why Bloomberg might be minimizing:
1. Bloomberg doesn’t want the LIBOR scandal to cast a pall over the opening of the Ratner/Prokhorov basketball arena promotionally named “Barclays” to advertise the centrally implicated bank whose name is becoming nearly synonymous with the scandal- Under Bloomberg New York City has directed close on to a billion dollars of NYC subsidy into the arena for a net loss in the hundreds of millions of dollars.

2. Bloomberg is a self-proclaimed friend of Robert E. Diamond, Jr., the former chief of Barclays who recently resigned over the LIBOR scandal.

3. Mayor Bloomberg is a friend of Wall Street, eager to ignore its excesses and let it continue in its unregulated abuses.
A news story rolling off the presses now pushes theory #3 more into the lead: Bloomberg just decided to endorse Tea Party candidate Scott P. Brown in the hotly contested Massachusetts Senate race. Brown is running against Elizabeth Warren, “one of the financial industry’s biggest critics.” Warren, with a deep understanding of Wall Street abuse, was a key player in instituting and seeking to make new regulation of the banks effective. (See: Bloomberg Endorses Republican in Heated Massachusetts Senate Race, by David W. Chen, July 26, 2012.)

Bloomberg spokesmen say that the Bloomberg endorsement and fund-raising for Brown isn’t about protecting Wall Street. Ostensibly it’s about Scott Brown and “gun control”: Bloomberg spokesmen are pointing out that Brown once voted against the gun lobby respecting not allowing permits issued by other states to override local prohibitions on carrying concealed guns.

Noticing New York often questions Bloomberg’s sincerity; for example when with changing times he buffed-up his environmental credentials. But, without questioning Bloomberg’s sincerity on the overall gun control issue: Bloomberg’s endorsement of Brown isn’t really about targeting Elizabeth Warren for her effective record of criticizing Wall Street and its excesses? Wouldn't Warren, a progressive Massachusetts Democrat, be better than Scott Brown on gun control issues when, as the New York Times reports, “Mr. Brown has generally received high ratings from gun rights organizations and has not pushed for renewing a federal assault-weapons ban or for tightening restrictions on gun shows”?

Come on now! No, it’s pretty clear, Brown’s gun control record is just a contrived cover for Bloomberg’s work to keep the banks unregulated and unaccountable. That probably puts the above point #3 in the lead for the reason that Bloomberg is also so eager to minimize the public’s LIBOR losses.

But maybe it doesn’t make any difference which exactly of those above three reasons explains why Bloomberg is minimizing the possibility of the public’s loses at the hands of Barclays and the other banks, because whether it's "Barclays" (Ratner/Prokhorov) arena boondoggling, Barclays bank president befriending or Barclays Bank LIBOR manipulations, all three of those explanations are probably essentially the same: Bloomberg supports a corporatist privilege for the 1% to manipulate, lie and scheme to scam the 99%.

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