The Story of the Federal Reserve the Day After Lehman Brothers Collapsed

[Ichingcarpenter]

NEW YORK (TheStreet) -- Hours after Lehman Brothers tumbled into history as the largest bank failure in U.S. history, Federal Reserve Chairman Ben Bernanke's concerns focused elsewhere.

Opening remarks on Sept. 16, 2008, according to transcripts released by the central bank on Friday, revealed that Bernanke and members of the Fed's policy-making wing -- the Federal Open Market Committee -- were uncertain how the Lehman bankruptcy would affect the broader economic system.

As part of regular procedure: the committee received a briefing on the latest economic and financial updates, which included the Lehman fall, and Bernanke then asked the presidents of the regional Federal Reserve banks to offer their latest assessments.

This is the story of what unfolded.


http://www.thestreet.com/story/12438988/1/the-story-of-the-federal-reserve-the-day-after-lehman-brothers-collapsed.html

[Ichingcarpenter]

1. This story is unfolding as reporters view the documents

What is consistent in the transcripts is that the Fed appeared to be struggling to grasp the magnitude of the crisis that was unfolding. On 21 January 2008 – well before Bear Stearns and Lehman fell into trouble – Fed chairman Ben Bernanke admitted it had already misread the burgeoning financial crisis. “We were seriously behind the curve in terms of economic growth and the financial situation,” Bernanke told his fellow economists. Two months later, Bear Stearns was near to collapse and was forced to sell itself to JP Morgan in a government-brokered deal.

http://www.theguardian.com/business/2014/feb/21/fed-transcript-2008-financial-crisis-yellen-bernanke

[Ichingcarpenter]

2. Fed knew about Libor rigging in 2008

The US Federal Reserve knew about Libor rigging three years before the financial scandal exploded but did not take any firm action, documents have revealed.

According to newly published transcripts of the central bank’s meetings in the run-up to and immediate aftermath of the collapse of Lehman Brothers, a senior Fed official first flagged the issue at a policy meeting in April 2008.

William Dudley expressed fears that banks were being dishonest in the way they were calculating the London interbank offered rate – a global benchmark interest rate used as the basis for trillions of pounds of loans and financial contracts.

“There is considerable evidence that the official Libor fixing understates the rates paid by many banks for funding,” he said.

http://www.telegraph.co.uk/finance/libor-scandal/10654977/Fed-knew-about-Libor-rigging-in-2008.html

[Ichingcarpenter]

3. Libor: The Crime of the Century

LIBOR Scandal: The Crime of the Century?

The 21st has been a banner century for financial and accounting scandals. Enron, the dotcom bust, the subprime-mortgage crisis and the bank bailouts have all contributed to the very low esteem in which the American public holds Corporate America in general, and high finance in particular. So it is no small feat that the latest interest-rate-fixing LIBOR scandal is being heralded as the most egregious in a generation or, as Robert Scheer put it in the Nation, “the crime of the century.”




Read more: Is the LIBOR Scandal the Crime of the Century? | TIME.com http://business.time.com/2012/07/09/libor-scandal-the-crime-of-the-century/#ixzz2uBOOpvqN


Libor: The Crime of the Century



Forget Bernie Madoff and Enron’s Ken Lay—they were mere amateurs in financial crime. The current Libor interest rate scandal, involving hundreds of trillions in international derivatives trade, shows how the really big boys play. And these guys will most likely not do the time because their kind rewrites the law before committing the crime.

Modern international bankers form a class of thieves the likes of which the world has never before seen. Or, indeed, imagined. The scandal over Libor—short for London interbank offered rate—has resulted in a huge fine for Barclays Bank and threatens to ensnare some of the world’s top financers. It reveals that behind the world’s financial edifice lies a reeking cesspool of unprecedented corruption. The modern-day robber barons pillage with a destructive abandon totally unfettered by law or conscience and on a scale that is almost impossible to comprehend.

How to explain a $450 million settlement for one bank whose defense, in a plea bargain worked out with regulators in London and Washington, is that every institution in their elite financial circle was doing it? Not just Barclays but JPMorgan Chase, Citigroup and others are now being investigated on suspicion of manipulating the Libor rate, so critical to a $700 trillion derivatives market.

http://www.thenation.com/article/168751/libor-crime-century