Libor non-scandal of the day, Citigroup edition

By Felix Salmon
July 30, 2012
Omer Rosen, it would seem, for one.

" data-share-img="" data-share="twitter,facebook,linkedin,reddit,google" data-share-count="true">

What kind of person confesses to a crime he didn’t commit? Omer Rosen, it would seem, for one. His piece in the Boston Review today is headlined “I, Too, Have Messed with LIBOR”, and after a lot of throat-clearing he finally utters the fateful words:

I was not setting the official LIBOR—no one would borrow money or otherwise make or receive payments based on my LIBORs. However, for the purposes of this particular deal, I was ‘setting’ LIBOR.

The scare quotes are doing a huge amount of work, there, because in fact Rosen not only wasn’t setting Libor; he really wasn’t even “setting” Libor, either. Here’s the tl;dr version of Rosen’s 1,700-word piece: Rosen was working at Citigroup, on a deal which would save a client millions of dollars in taxes. But banks know better than to put things in writing saying “you should do this deal because you’ll save a shedload of money in taxes”. So instead they concoct an ersatz financial justification for the deal which allows everybody to sit around a table gravely nodding their heads and saying “yes of course it makes perfect financial sense, in and of itself, for us to borrow at a high fixed rate instead of a low floating rate, and wow, look at that, there are tax benefits too, that’s just icing on the cake”.

In this case, the ersatz financial justification was about as simple as it could get: Rosen basically just said “hey, if you borrowed at a floating rate, then if interest rates went up, you’d end up paying more money than if you borrowed at a fixed rate”. And that, apparently, was all the wispy gauze of a financial justification needed for the deal to go through.

There was no setting-of-Libor going on here: there was just a possible future path for interest rates generally, combined with a willful ignorance of, say, the existence of interest-rate swaps. According to Rosen, he was told by his managing director that “tax transactions are illegal” — if that’s true, then the real scandal here has nothing to do with Libor, and everything to do with the fact that Citigroup put together an illegal transaction. But frankly I doubt that the transaction was illegal; I think the people structuring it just didn’t want to raise unnecessary red flags with the IRS.

But that’s the problem with things like the Libor scandal, I guess. Once a top-tier bank like Barclays cops to lying about Libor, everybody else wants to inflate their importance by joining their ranks. Even if what they did really had nothing to do with Libor manipulation at all.


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see


Posted by Foppe | Report as abusive

wow, Felix – thanks for pointing this out. That Rosen article epitomizes everything that’s wrong with the media these days: Rosen had positively NOTHING to do with setting any sort of LIBOR – but Joe Six Pack won’t understand that, and the hysteria grows…

He’ll tell his “story” to try to get a book deal… maybe a movie deal. The truth isn’t very sexy: this guy made a pitchbook with bullish future rate assumptions!! OH THE HORROR!

Posted by KidDynamite | Report as abusive

I’m surprised that Felix Salmon, of all people, would so woefully misread this piece. The headline is clearly ironic and the details of the transaction are very clear. This is a junior derivatives guy making up LIBOR numbers to concoct a shady tax deal without calling it a tax deal, so that the IRS’s suspicions aren’t raised. This is the sort of unethical commonplace in Wall Street that underlies the greater scandals, including the LIBOR scandal.

Posted by PontrarianP | Report as abusive

I’d like to go on record that I, also, was not setting official LIBOR. Ever. Granted, I have absolutely nothing to do with banking – but it seems like all of the “cool” kids are doing it so….

Posted by Mike_Dillon | Report as abusive

The scare quotes are doing a huge amount of work, there. Felix, the term SCARE QUOTES is a faux term, has no meaning, is an illcoined malcoined term and whem you use it here, you have no idea what it means or who coined it or when. so why use it? just say “in quotation marks” goodle “scare quotes + dan bloom” to learn truth here.
dan bloom, Tufts 1971

Posted by thewrap | Report as abusive

I tried goodling and that didn’t work, so I then tried gooGling “scare quotes + dan bloom”. Yeah, what am I supposed to learn?

The top few links direct to some web sites designed in the paranoid style, with all the features you’d expect: random fonts in random sizes and random colors; no unifying argument or explanation of what is being read; a massive chip on someone’s shoulder. All amusing enough, but none of this actually answers the fscking question of why Felix is such an evil human being for using a term in common use.

Don’t believe me: look at this delightful page thrown up by google and tell me WTF is going on here:  /07/27/what_happens_when_scare_quotes_b ecomes_a_hot_tweet_potato

Posted by handleym99 | Report as abusive