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The LIBOR Scandal The Fix Is In—the Bank of England Did It!

August 6, 2012 Comments off

The LIBOR Scandal The Fix Is In—the Bank of England Did It!
Source: Levy Economics Institute at Bard College

As the results of the various official investigations spread, it becomes more and more apparent that a large majority of financial institutions engaged in fraudulent manipulation of the benchmark London Interbank Offered Rate (LIBOR) to their own advantage, and that bank management and regulators were unable to effectively monitor the activity of institutions because they were too big to manage and too big to regulate. However, instead of drawing the obvious conclusion—that structural changes are needed to reduce banks to a size that can be effectively regulated, as proposed on numerous occasions by the Levy Economics Institute—discussion in the media and political circles has turned to whether the problem was the result of the failure of central bank officials and government regulators to respond to repeated suggestions of manipulation, and to stop the fraudulent behavior.

Just as the “hedging” losses at JPMorgan Chase have been characterized as the result of misbehavior on the part of some misguided individual traders, leaving top bank management without culpability, politicians and the media are now questioning whether government officials condoned, or even encouraged, manipulation of the LIBOR rate, virtually ignoring the banks’ blatant abuse of principles of good banking practice. Just as in the case of JPMorgan, the only response has been to remove the responsible individuals, rather than questioning the structure and size of the financial institutions that made managing and policing this activity so difficult. Again, the rotten apples have been removed without anyone noticing that it is the barrel that is the cause of the problem. But in the current scandal, the ad hominem culpability has been extended to central bank officials in the UK and the United States.

Categories: banks and banking, business and economics, financial crime and fraud, Levy Economics Institute at Bard College, United Kingdom

The Greek Crisis: Possible Costs and Likely Outcomes of a Grexit

June 22, 2012 Comments off

The Greek Crisis: Possible Costs and Likely Outcomes of a Grexit
Source: Levy Economics Institute at Bard College

The European Union’s (EU) handling of the Greek crisis has been an unmitigated disaster. In fact, EU political leadership has been a failure of historic proportions, as its myopic, neoliberal bent and fear-driven policies have brought the eurozone to the brink of collapse. After more than two years of a “kicking the can down the road” policy response, it’s a do-or-die situation for Euroland. Greece has reached the point where an exit looks rather imminent (it’s really a matter of time, regardless of the June 17 election outcome), Portugal is bleeding heavily, Spain is about to go under, and Italy is in a state of despair. This Policy Note examines why the bailout policies failed to rescue Greece and boost the eurozone, and what effects a “Grexit” might possibly have—on Greece and the rest of Euroland.

Categories: business and economics, Europe, Greece, Levy Economics Institute at Bard College

Greece’s Pyrrhic Victories Over the Bond Swap and New Bailout

March 16, 2012 Comments off

Greece’s Pyrrhic Victories Over the Bond Swap and New Bailout
Source: Levy Economics Institute at Bard College

Nearly two years after becoming the first eurozone member-state to be bailed out by the European Union (EU) and International Monetary Fund (IMF), Greece is officially bankrupt. True, there was never any doubt about the outcome, but Greece’s restructuring of nearly 200 billion euros in private debt and the agreement for a new bailout package signify something much bigger—namely, the formal conversion of a sovereign nation into an EU/IMF zombie debtor, and a doomsday scenario that includes its forced exit from the eurozone.

+ Full Paper (PDF)

Categories: business and economics, Europe, Greece, international relations, Levy Economics Institute at Bard College

The New European Economic Dogma: Improving Competitiveness by Reducing Living Standards and Increasing Poverty

February 22, 2012 Comments off
Source:  Levy Economics Institute at Bard College
Greece’s new EU/IMF bailout package is all about private sector wage cuts and an overhaul of labor rights. In short, it will do absolutely nothing to address the nation’s economic crisis because it is not designed to rescue Greece’s embattled economy. In fact, it will have the unwanted effect of keeping the nation locked in a vicious cycle of debt—and leading, finally, to its exit from the eurozone. 

+ Full Paper (PDF)

Categories: business and economics, Europe, Greece, international relations, Levy Economics Institute at Bard College

Delaying the Next Global Meltdown

February 9, 2012 Comments off

Delaying the Next Global Meltdown
Source: Levy Economics Institute at Bard College

It’s a mistake to interpret the unfolding disaster in Europe as primarily a “sovereign debt crisis.” The underlying problem is not periphery profligacy, but rather the very setup of the European Monetary Union (EMU)—a setup that even now prevents a satisfactory resolution to this crisis. The central weakness of the EMU is that it separates nations from their currencies without providing them with adequate overarching fiscal or monetary policy structures—it’s like a United States without a Treasury or a fully functioning Federal Reserve. Without addressing this basic structural weakness, Euroland will continue to stumble toward the cliff—and threaten to pull a tottering US financial system over the edge with it.

+ Full Document (PDF)

Categories: business and economics, international, Levy Economics Institute at Bard College
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