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Libor Manipulation: UBS Makes Deal; Was Geithner Tipped in 2008?

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UBS Fined in Libor Probe: An irony of the Libor probe is that it's looking nearly as choreographed and negotiated as the long-running rate manipulation that preceded it. Early this morning UBS and Swiss regulators announced the bank had agreed to a $1.5 billion settlement, and arrests of people connected with the Swiss bank are expected today, according to anonymous sources. RBS is next in line to settle, these same sources say. As for that $1.5 billion UBS fine: despite rolling over early in the international probe, the bank played a central role in the manipulation, anonymous investigators believe. A Japanese subsidiary stepped up to take a single fraud conviction, though that doesn't seem to risk bringing UBS down Arthur Andersen style.

More interesting is a massively damning Financial Times story conservatively titled "Geithner was told of Libor fears in 2008." Unlike previous reports suggesting that central bankers simply suspected banks might be suppressing Libor submissions during the crisis, this story alleges that Treasury Secretary Timothy Geithner, who was then president of the New York Fed bank, was notified by a colleague in May 2008 of her suspicion that Libor was being gamed for profit. Fed official Hayley Boesky (who's now moved on to Bank of America) told Geithner in an email that the same executives who oversaw Libor also oversaw the bank derivatives positions. The employees who submitted Libor rates "verify the posting with the boss to make sure it fits their derivatives position." The emails cited by the FT are not among those made public by the Fed, raising questions of whether the regulator sought to hide them. Other emails by New York Fed employees stated that the British Bankers Association's submission standards were fiction. This story alleges that the Fed was aware of foundational fraud in the financial markets and did not intervene. But that's not how Treasury's spinning it: "The record confirms that as president of the New York Fed, Secretary Geithner helped to identify the problems with Libor, briefed Treasury and US regulatory agencies on the issue, and pressed for reform by the British Bankers' Association of the Libor rate-setting process in London," a spokeswoman told the FT.Financial Times, Wall Street Journal

Wall Street Journal

Speaking of dubious ratings, the SEC is postponing a consideration of how to reduce conflicts of interest in the issuer-pays securities rating industry. It's inertia — and a big win for the ratings agencies.

When the head of NYSE Euronext's equities trading platform tells the Senate Banking Committee that the complexity of markets is putting everyone at risk, everyone should probably be very afraid of everything.

MF Global's bankruptcy trustee is battling with nine major former clients of the firm that didn't post collateral for their trades. Instead, they had letters of credit and argue they shouldn't face losses akin to other customers.

It turns out that being accused of drunkenly stiffing a cab driver, using racial epithets, and stabbing him in the hand can get a Morgan Stanley corporate bond executive fired. Charges have been dropped. The banker claims that Morgan Stanley still owes him millions in deferred compensation, which his former employer say are no longer owed because he violated the firm's code of conduct.

Financial Times

JPMorgan has appointed Kevin Watters as head of its mortgage business, switching out Jamie Dimon "enforcer" Frank Bisignano from the role. The move is being interpreted by the FT as a sign that the mortgage unit is no longer considered a source of strife.

Deutsche Bank can't seem to stop stepping on itself or sundry laws, declares a column marveling at the bank's inability to simply make money without getting into trouble.

The revolving door isn't just for U.S. regulators. Hector Sants, the former head of the U.K.'s Financial Services Authority, will be getting a $4.8 million package to take on a compliance role at Barclays.

Global regulators have delivered a vote of no confidence in banks' models for asset-backed securities risks. The Basel committee on banking supervision is looking at reducing reliance on ratings and eliminating the capital benefits for banks that perform modeling to show their holdings are safe.

New York Times

American Express CEO Kenneth Chenault is being considered for a possible Obama cabinet posting, so New York Times' Dealbook decides to take a look at his crisis-era track record. The verdict is highly favorable, finding that while he did preside over the lender's abrupt conversion to a bank holding company, AmEx drew much less heavily on government support than its peers. If Chenault does have an image issue, the paper suggests, it's likely going to be his $57 million in compensation over the last three years.

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