Libor

Yes.

Five years in a United Kingdom prison for allegedly manipulating yen LIBOR rates.

But here is the massive plot twist.

The thing that changes history.

And when you look at Exhibit 32 in this new document dump, which is Hayes' sworn affidavit, the timeline of the government's investigation tells a very specific story.

A very suspicious story, honestly.

Yeah, because according to the documents, the U.S. government's investigation originally focused exclusively on U.S. dollar LIBOR.

Right.

Woo-hoo! Except not really.

Until 2022, because that's when we switched away from LIBOR to SOFR.

What that word salad basically means is that City of London has always ran American monetary policy, meaning even after like World War II, when British pound was no longer the world reserve currency, we were now it was King dollar.

They still controlled our price of dollars.

And that was through LIBOR.

It was just an indexing rate.

Your credit card, your mortgage, your auto loans, any revolving credit, that was all tied to LIBOR.

LIBOR, if you Google it, Google LIBOR scandal, it was bullshit.

That's a short-term rate in line with what loans and short-term borrowing pay.

It used to be LIBOR, which came from a survey of banks.

LIBOR has been replaced by rates built from real transactions.

The US one is SOFR, the secured overnight financing rate, an overnight borrowing rate backed by treasuries.

The Euro one is the Euro short-term rate, called Ester, and the British one is SONIA, the sterling overnight index average.

A government has many bond issues, so one standardized contract can't name a single bond.

Several bonds are deliverable and the fixed income lessons show how the price is adjusted.

Another deeper note on LIBOR.

Some local authorities still issue them, and banks issue them for regulatory capital, often callable or convertible to equity, if the bank is in trouble.

Finally, reference rates used to be set by polling banks, as with Libor, and a poll can be nudged.

Today's rates average observed transaction rates, which are harder to manipulate.

Remember that MRR is market observed and resets each period.

And one of those, uh, actually one of the, one of the two women that were on the call, uh, she was a former

fed governor and she was on the LIBOR committee.

This woman is probably in her seventies and you know, this woman should know more about global capital markets than anyone in the world.

And I asked her one day and

Yes, it is.

And I was like, okay.

And all those offshore dollars, they're indexed to LIBOR, right? And she goes, yeah, of course, of course they are.

What else would they be? What else would they be indexed on? And I was like, okay, so the fed doesn't control the U S the, And she's like, no, no, of course not.

And finally, on market abuse news, the United Kingdom Financial Conduct Authority has announced the revocation of prohibition orders banning Colin Birmingham, Philippe Moryussef, Jonathan Matthew and Christian Bittar from working in the financial services industry.

The decision follows the Court of Appeal's recent quashing of their criminal convictions relating to LIBOR and EUROBOR benchmark manipulation, which served as the legal foundation for the regulator's original prohibition decision.

Alongside lifting the bans, the FCA confirmed it has removed all associated final notices from its official channels and will take no further enforcement action against the four individuals in relation to the benchmark matters, building on similar revocations enacted last year for Tom Hayes and Carlo Palumbo.

Now let's take a look at other financial crime news.