Unstructured Finance

UF Weekend Reads

July 7, 2012

It’s Libor all the time, just not for me.

Earlier I blogged about how the Libor scandal just isn’t getting me as worked up as it is for other journalists (see Joe Nocera’s column today in the NYT). It’s not that I don’t think allegations of market manipulation aren’t important. And this is nothing to take away from the groundbreaking reporting by my Reuters colleague Carrick Mollenkamp did on the matter back in 2008 while he was at the WSJ.

It’s just that in the scheme of things, the allegation that bankers may have conspired to keep Libor artificially low to make their institutions seem more solvent during the height of the financial crisis doesn’t chill me to the bone. Did anyone really believe those institutions were solvent during the crisis? Does anyone really believe banks with hundreds of billions of second-liens on their books and other poorly reserved loans are really solvent today?

We simply say the banks (except for maybe some in the euro zone) are solvent and whistle past the graveyard.

And here’s the thing: we all know how this Libor thing will play out. A bunch of other banks will pay big fines, some other top executives will resign, politicians will hold hearings at which they will rant and rage, a few no-name bankers will go to jail and there will be talk about creating another loan benchmark that probably won’t be any less prone to potential abuse than Libor.

Oh, and the folks on Twitter will rage and pontificate too. But in the process I worry about all that we in the media miss while we get all worked up and go from one big scandal to and another. In the process we ignore the everyday financial crimes that rip-off ordinary people–whether it be lenders assessing unnecessary fees or hucksters pitching higher yielding funds and investment schemes.

Just a week ago, the SEC shut down an apparent Ponzi-like scheme that allegedly bilked $42 million from 400 investors. The pitch was a series of funds investing in mortgage investments that promised 7.5% or more annual returns.  On July 2, the SEC froze the assets of a “Georgia-based investment adviser who has apparently gone into hiding after orchestrating a $40 million investment fraud.”

And if you go through SEC litigation releases for this year there are many more of these busted fraudulent schemes that cost ordinary investors tens of millions. Now maybe this seems like chump change after Madoff and Stanford, but to the investors who lost it could be their life savings.

Outrage? This kind of stuff outrages me.

OK enough outrage. It’s the weekend and another hot one at that and time to chillax. So without further ado, here is Sam Forgione’s weekend reads:

 

From NY Review of Books:

Paul Krugman and Robin Wells form a powerhouse duo to review three books on politics and the economy.

The LIBOR scandal shows how ethics break down in a moment of crisis, the Economist writes.
Family limited partnerships walk a fine line between family interest and financial profit, writes Paul Sullivan.
Money and power can make people selfish to the point of savagery, Lisa Miller writes.
Big banks are looking to cultivate small businesses, but their sincerity is still in question, Ryan Faughnder writes.

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