Counterparties: The devil’s in the emails
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Thereâs a certain inevitability to RBSâs $612 million Libor-rigging settlement and the Justice Departmentâs civil charges against S&P for faulty ratings. Like at Barclays, Goldman Sachs, Standard Chartered, and UBS, RBS and S&Pâs scandals come complete with how-could-they-put-that-in-writing electronic communications.
RBSâs contributions to this now-venerable tradition come courtesy of the CFTC and FSA, and are wrapped up nicely by Dealbook and FT Alphaville. One trader asked that the rate set be at a certain level by writing to the submitter that âif u did that i would come over there and make love to youâ. Another said Â âits just amazing how libor fixing can make you that much moneyâ. Believing that the US dollar Libor was being watched by the Fed, a Yen trader said âdun think anyone cares the JPY Liborâ. Scattered throughout is the requisite amount of trading floor profanity, along with a decent number of emoticons.
S&Pâs written record was more metaphorical and sarcastic. One exec wrote that âthis market is a wildly spinning top which is going to end badlyâ. An analyst said he had âno complaintsâ about his job, âaside from the fact that the MBS world is crashing, investors and the media hate us and weâre all running around to save faceâ. And then thereâs the extended re-write of the Talking Headsâ âBurning Down the Houseâ. That was immediately followed by another email warning “for obvious professional reasons, do not forward this song”.
Given that the probability of finding something stupid or profane in millions of pages of records approaches certainty, what regulator or prosecutor could resist using such material? In RBSâs case, it appears that the bankâs own traders sealed the outcome of the CFTCâs investigation.
S&P, which says that it did not âdeliberately keep ratings high when we knew they should be lowerâ, may be different. While the documents are embarrassing, Matt Levine says that âpicking some individual things that they could have done differently doesnât seem even related to proving fraudâ. And John Cassidy acknowledges that each side is taking a risk by going to trial. But given S&Pâs decisions to delay implementing new models, and to pick and choose which ones it used, he applauds the risk the DOJ is taking. — Ben Walsh
On to todayâs links: