Submitted by Mark O’Byrne – GoldCore
The abuse of power is staggering.
Time and time again over the last number of years the largest global banks have been found complicit in the manipulation of key rates, indices and markets. Now a large and important pension fund has taken the largest of banks to task and filed a class action lawsuit alleging conspiracy to thwart competition and extract large fees and margins from the vast and critical interest rate swap market. The banks ““have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case.” the suit states.
Interest rates swaps are used by companies and investors alike to manage interest rate risk. It is critical in smoothing returns and removing interest rate sensitivity. Providing and efficient trading market is a lucrative, but when managers of that market collude to keep margins elevated at the cost of market participants, then we all suffer.
The law suit goes on to state that banks had “ jointly threatened, boycotted, coerced, and otherwise eliminated any entity or practice that had the potential to bring exchange trading to buyside investors.” This policy had one purpose” to preserve an extraordinary profit centre,” the lawsuit said. It is alleged that the banks disguised their collusion by using code names for projects such as “Lily”, “Fusion,” and our favourite “Valkyrie,” according to the suit.
Typically what will happen now, should the suit be successful, we will see an regulatory investigation by the authorities in The US, Europe, with massive fee generation for all the professional classes concerned and associated with prosecuting and defending and interpreting the situation.
A big fine will be handed down and paid to the regulators, (note not the victims), by the perpetrators. No executives will be found guilty, no liability made nor conceded. Shareholders of the banks will barely take notice and the public, who have been paying the price for this collusion, will get back to the task of not giving a damn. Sure they would be happier watching box sets.
They say people get the governments they deserve, well they get the institutions and an regulators they deserve too. Apathy is the greatest destroyer of liberty. “Someone should do something” I hear you say, well you are someone, so get mad.