From Common Dreams: http://www.commondreams.org/view/2012/06/28-3
New York Times columnists Protess and Scott report
that Barclays Bank is paying some US$450 million to regulators in the
US and UK to “resolve accusations” surrounding its manipulation of a key
interest rate, the London Inter-Bank Offer Rate (Libor), during the
first years of the ongoing global financial crisis. According to the
article, the Libor rate is used as a benchmark rate to price some US$350
trillion in financial products worldwide each year, from credit cards
to derivatives and student loans.
The Financial Times reports
that the investigation now spans 12 regulators—from the US to Europe
and Japan—and 20 banks, including the multinational giants JP Morgan,
Citigroup, Bank of America, UBS and Deutsche Bank. The general idea is
that the big banks—so far only Barclays has admitted
wrongdoing—misreported the rates at which they borrowed from other
banks, influencing the LIBOR rate so as to profit the banks. Barclays
has also admitted to allowing consultations between various bank
departments, and between itself and other banks, before reporting its
rates to Libor, an illicit practice.
In most accounts, blame for
such unsavory practices are spread around from bank managers and
employees seeking higher profits and lower losses, to regulators who
were asleep at the wheel, to the secretive and opaque process by which
the Libor rate is set. Yet, behind the regulators and the greedy
bankers, lies the ‘m’ word that no one dares utter in the business
presses—monopoly. The global financial system is increasingly run by a
few big firms operating in a highly uncompetitive market place and
wielding enormous power, often behind a veil of secrecy, (intentional)
regulatory blindness, and technical complexity.
As any
introductory economic textbook shows, imperfectly competitive
marketplaces (e.g. monopoly, monopsony, oligopoly and oligopsony) are
defined by the ability of a few firms, or only one firm, to manipulate
prices and other exchange terms. As markets concentrate, and free
competition is replaced by collusion and superprofits, firms gain the
market power to influence market rules and prices in their own
interest. Indeed, any college freshman in an traditional economics
department could foresee that growing concentration in global credit markets
would result in price distortions, to the detriment of consumers and
other less powerful actors. And, some might also be able to cite a few
examples of the manner in which market power confers political power,
another dangerous dimension of monopolistic market structures frequently
noted in the Marxist tradition, among others (think, say, of Goldman Sach’s ability to staff the US Treasury and Federal Reserve).
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