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Barclays Scandal: Tip of the Iceberg?

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    Dick Bove, Rochdale Securities bank analyst, with the latest on Barclays’ scandal.

  • Duration 4:31
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That's the British investment bank Barclays is under siege right now admits findings -- bank rigged the London Interbank offered rate or Libor as it's called they've agreed to record settlement of 450 million dollars.

So far the top three executives have stepped down and that is including CEO Bob Diamond.

He's admitted fourteen traders were involved in this -- and this what we know now.

It could just be the tip of the iceberg we turned to Dick bove a bank analyst -- rock -- securities for his insight Dick thanks for joining us tonight we appreciate your time.

Thank you -- so what I heard about Bob Diamond stepping down I thought wow.

There must be a lot more to advance that we know so far right what was -- your instinct.

We are absolutely I think they're testifying was way too low I think that the executive suite of the company should have been.

Wiped out I think that there there should be a lot of punitive actions taken against this company.

Because if you think about it Libor is the base rate for a loan securities.

Around the world supposedly.

There's some 800 trillion dollars worth of securities loans derivatives etc.

There are based upon the Libor price if they're reading that it did they really messing up the system and our.

The way any impacts everyone because people at home may be listening to this and thinking.

You know what do I care what rate banks in London are lending to each other but this is sort of the underlying basis for the whole entire system.

Yes it is and and it does affect everybody because essentially.

All of the loans made by the local banks pretty much or Libor based the Libor based and therefore -- the -- number.

His faults if it's phony and it's being rigged so a small number of our bond traders can make some money.

Then basically the whole system is being Rihanna.

It means that the earnings being produced by banks have faults that means it's the CPI is not corrected means a lot of things none of which are positive.

Yeah let's talk about how it actually happened because this came out of the CFTC settlement would Barkley it's.

They said Berkeley senior management directed the -- -- bidders.

To lower Barkley submission in order.

To be closer to the rate submitted by other banks -- that basically means that at the end of the day when they said what were you able to borrow for Berkeley's.

Lied according to this and said it was lower so so how does that work from there that what does that mean.

Well basically the way it works is that -- eighteen banks who submit there pricing.

In terms of whole wide variety of -- that they borrow on.

To the -- the British Bankers' Association.

The British Bankers' Association and takes that information.

-- gets -- of the extreme numbers and averages what is left and that is Libor.

And the three -- library is the one that most people look at.

And they base you know the price of loans on that Libor so.

If you understated the value -- Libor you not really hurting the consumer the consumer is actually.

Benefiting by it but you are hurting lenders.

And if -- You getting away with you know manipulating this number you you convincing people that the banks need more regulation.

If you gonna continue to regulate regulate banks ultimately.

You gonna get to a point where the banks cannot -- the economy.

Because they're not gonna generate loans they're not gonna take in deposits because they're being over regulated.

So this this is setting off a whole bunch of things in addition to which we don't even know what the base rate for lending his anymore because if we can't use Libor -- what are we gonna use.

Break and do you think that if somebody -- here is that criminal and how far do you think this -- are there other banks involved at this point.

Well you know how the illicit diamonds they're being with the June that he is.

Indicate no -- they've indicated that there are a bunch of other banks that it would have been doing the same thing.

Which I thought I was -- -- this statement today basically saying it's okay for me to do it because a whole bunch of other guys are doing it also.

-- even stripping -- a lot of other banks doing.

I don't know I know that Citigroup did it in Japan in 2009 and 2010.

And they went to the regulators and -- we've got to our traders who are rigging the land -- the yen -- price.

And the regulators took action on it so you know two to assume that no one else is doing -- I think would be a mistake.

To tell you that everybody's doing it I think is a mistake also simply don't know half I think that -- gonna get bigger than -- Dick abate thanks for breaking it down for us.

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