RBS Traders Swapped Sushi For Libor Rigging, Emails Show: Seven And A Half Things To Know

Feb 07, 2013

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Mark Gongloff is off the newsletter this week, so today's 7.5 Things are brought to you by Jillian Berman.

Thing One: Dumb Wall Street Emails, RBS Edition: Just yesterday we asked whether Wall Street workers would ever learn that it might not be a good idea to discuss, you know, morally and legally ambiguous decisions over email. And here we find ourselves asking the same question. A trove of emails released as part of a filing by the Commodity Futures Trading Commission reveals that RBS traders were rather callous in their discussion of manipulating one of the most important interest rates in the world. One noted that “its just amazing how libor fixing can make you so much money,” according to the Financial Times. Another offered sushi in exchange for submitting a low rate.

Yesterday's headline news was RBS agreeing to pay $612 million to settle allegations the bank rigged the Libor rate. More than a dozen traders as well as at least one manager in a variety of offices participated in the alleged manipulation, according to the Wall Street Journal. The CFTC said that traders “succeeded at times” at rigging the rate.

Though critics and officials are likely pleased RBS will have to pay up -- at least somewhat -- for the alleged wrongdoing, the settlement has some British lawmakers upset. That’s because the British government has an 82 percent stake in RBS, meaning that it’s possible taxpayers will be liable for some of the fine, according to The New York Times. RBS has agreed to clawback bonuses to pay for part of the fine, but the government will still be on the hook for some of it.

Thing Two: Dumb Wall Street Emails, JPMorgan Edition: Speaking of embarrassing emails, a set of internal emails reveals that JPMorgan Chase adjusted critical reviews of flawed home loans instead of disclosing their problems, The New York Times Reports. The mortgages, which looked healthier than they actually were, were then bundled into complex securities that appeared more attractive to investors than they should have been. The emails are part of lawsuit filed by one of those burned investors, Belgian-French bank Drexia. The suit claims that JPMorgan tricked the bank into buying $1.6 billion shoddy mortgage-backed securities. The outcome of the case could shed light on a similar lawsuit filed by the Federal Housing Finance Agency against 17 banks, which claims they sold troubled mortgage-backed securities to the government mortgage giants.

Thing Three: S&P Prepares For Battle: As if downgrading America’s credit rating in 2011 wasn’t enough, S&P is now throwing everything it has at waging battle against the U.S. government. Reuters writes that the ratings agency is hiring top white-collar crime lawyer John Keker as part of its defense team in a suit filed by the Justice Department alleging the company knowingly gave shoddy mortgage bonds high ratings in order to boost profits. Keker has represented the likes of Lance Armstrong and former Enron executive Andrew Fastow. He was recommended to S&P by famed first amendment lawyer Floyd Abrams, who is also representing S&P.

Despite hiring Abrams, S&P is not using a first amendment defense in the case, a common route for credit ratings agencies defending their ratings. Instead, the company is arguing that it’s being held accountable for not predicting that the housing market would go sour. S&P’s defense is somewhat of a “red herring,” one lawyer told Bloomberg, because it doesn’t address what the government is alleging -- that S&P knowingly didn’t adjust its models to or take other steps to accurately portray the risks of the bonds.

S&P is facing the possibility of paying $5 billion if it loses the case against the Feds. But the bill could go much higher; attorneys general in several states have filed lawsuits of their own seeking damages, according to the Wall Street Journal.

Thing Four: No More Saturday Mail: It’s the end of an era in which you receive bills and junk mail on Saturdays. The U.S. Postal Service announced yesterday that it would stop Saturday mail delivery starting in August in an aim to cut costs by $2 billion per year. The agency is struggling to stay solvent, suffering $15.9 billion in losses last year. Just hours after the announcement unions and Democratic lawmakers began to wage a battle with the Postal Service, arguing that the move was illegal. Some even called for the Postmaster General’s resignation.

Thing Five: 787 Nightmare Closer To Ending: Boeing’s 787 Dreamliner is slowly becoming less of a nightmare. The Federal Aviation Administration will allow a crew-only flight on a 787, the first since the plane was grounded last month after its batteries caught fire in two separate incidents, according to The New York Times. Boeing is proposing a set design changes to the batteries in order to get the Dreamliners back in the air, while the company looks for a longer-term solution, according to the Wall Street Journal. The fixes would need to be approved by American and Japanese regulators, who have said any solution must increase the warning time when the batteries catch fire and dilute the dangers of the system malfunctioning.

Thing Six: Budget Wars! The budget battle is on. Democrats say their near creating legislation that would aim to stave off $1 trillion in automatic cuts to military and domestic budgets, according to The New York Times. The problem: Republican leaders probably won’t be too happy about the bill because it would raise taxes. Still, the Democrats say they believe that once the federal layoffs start in earnest in March, Republicans will come around. The looming cuts have already affected the Pentagon, which has already announced it delayed deploying a second aircraft carrier to the Persian Gulf as a result.

Thing Seven: Layoffs Are Everywhere: About 80 percent of Americans say they know someone in their group of family or friends that has been laid off, according to a new study from Rutgers University cited by The New York Times. The survey reveals the “all-consuming” nature of the recession, one of the researchers told the NYT. Nearly 25 percent of Americans say they were laid off at some point during or after the recession and nearly one-fourth of those laid off in the past few years said they still hadn’t found a job.

Thing Seven And One Half: Well, That's A Big Number: Calling all nerds. Missouri researchers have discovered the largest prime number yet. It clocks in at about 17 million digits. (You'll remember from your high school math class that a prime number is one that is divisible only by itself and by 1 without leaving a remainder.)

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Also on HuffPost:

9 Incriminating Things Wall Street Workers Have Said Via Email