The running list of manipulations by mega banks touches every corner of finance.
Virtually every commodity has been hit by massive positions that influence prices for illicit gains.
LIBOR and delaying interest rate information amounted to $880 trillion in manipulation alone, and affected every mortgage and loan worldwide.
Big banks walked away with fines that don’t even match the profits reaped from the mortgage fiasco at the heart of the Great Recession.
Algorithmic traders collude with exchanges to gain privileged market access that lets them skim from transactions and game the bid and ask price discovery process.
Bring up any of these topics, and you’ll hear the same cynical responses. Mention silver and gold manipulation, and it will be dismissed as fringe conspiracy theory.
In an age where everything is being manipulated, it defies belief that somehow silver prices aren’t being abused for illicit gains. It requires willful ignorance.
There is plenty of evidence staring everyone right in the face, and now we know a whole lot more is on the way.
What changed? One of the banks at the center of it is going rogue.
Capitulation and Cooperation
Just this last week, something unimaginable happened.
Deutsche Bank AG has been facing lawsuits over silver and gold manipulation brought by U.S. investors.
The lawsuit accuses Deutsche Bank, UBS, Bank of Nova Scotia, Barclays Plc, HSBC Holdings Plc, and Societe Generale of conspiring to manipulate prices of gold and gold-based futures, options, and derivatives through the twice-daily London Gold Fixing meetings.
The same allegations were made of Deutsche Bank, UBS, HSBC, and ScotiaBank with regard to rigging the daily Silver Fix.
Letters filed with the Manhattan federal court now reveal that both lawsuits have been settled.
So far, this is pretty much par for the course for these kinds of issues. An undisclosed monetary settlement is in the works, and the standard lack of admission of guilt is in there too.
However, an interesting condition was included. One that isn’t going to go over well with Deutsche Bank’s partners in this illicit venture.
Deutsche bank is now working with the plaintiffs.
In the letter to the court, the counsel for the plaintiffs had this to say:
“In addition to valuable monetary consideration, Deutsche Bank has also agreed to provide cooperation to plaintiffs, including the production of instant messages, and other electronic communications, as part of the settlement. In Plaintiff’s estimation, the cooperation to be provided by Deutsche Bank will substantially assist Plaintiffs in the prosecution of their claims against the non-settling defendants.”
Not only do we have a tacit admission that manipulation in both markets was rampant amongst all the banks involved in the silver and gold price fixing meetings — after all, no one agrees to pay damages unless damages were done and provable — but we also know that there were traders messaging and emailing each other.
Sound familiar? It certainly should, considering the equally depressing and cringe-worthy messages being passed around by LIBOR bankers.
In fact, we’re just five days short of the one-year anniversary of Deutsche Bank’s being told to fire seven staff members and to pay a $2.5 billion fine.
The announcement coincided with a release of what investigators found, including my personal favorite from a brash New York staffer:
Subject: $ lsbors unch
Oh bulls**t…..strap on a pair and jack up the 3M. Hahahahaha
And a London banker playing up the national stereotype a bit too much, in all caps as well:
COULD WE PLS HAVE A LOW 6MTH FIX TODAY OLD BEAN?
Or the one showing the displeasure of peers when it wasn’t manipulated:
Tokyo Regional Manager: “why did you go in low 3m fixing? we had 17 trillion [yen] so it coming lower cost us a lot”
Senior Yen LIBOR submitter: “sorry I messed up that one, i thought i had left 91”
Tokyo Regional Manager: “You owe me a drink!”
Ultimately, the LIBOR settlements hit every bank accused of wrongdoing because of the discovery of these electronic messages.
It looks like that is going to happen all over again, moving silver and gold manipulation from “fringe conspiracies” to fully confirmed truth.
Too bad getting the last laugh could only come after the losses to others over 15 years of this going on.
What Will Come of This?
While this is great, I’m not really sure what will come of this in the end.
I’d like to think that the banks that are being betrayed by Deutsche Bank going turncoat on them will face the full brunt of the law.
However, their legal departments have the kind of funding the plaintiffs can only dream of, and the case can drag on for years as it is slowly picked apart and buried in motions, postponements, and appeals.
I’d like to think that the similar Canadian silver and gold manipulation lawsuits just filed will be bolstered by the cooperation as well, but the settlement only goes for the U.S. plaintiffs and the banks will fight tooth-and-nail to keep the two cases in two different national judicial systems.
Then there are the much greater issues involving silver and gold manipulation that aren’t being addressed.
Central banks will keep lending gold at virtually no cost to banks, which immediately turn around and sell it into the market, pushing down spot prices at a whim.
Then there is rehypothecation, where gold is used as collateral for as many leveraged loans as can be strung together in a change, creating the mirage of risk management and phantom capital.
However, we’re just at the beginning of this mess, and the new scrutiny may result in some contagion between these. Assuming the court signs off on the settlement, the U.S. plaintiffs will have a treasure trove of data to dig through and (hopefully) share with the public.
And, perhaps now that one “fringe idea” is undeniably true, the credibility of others these banks have worked so hard to discredit and silence will be restored, bringing new attention from the lax regulators who cannot ignore such blatant evidence anymore.
A man can hope, and there is no doubt that a lot of people who are frustrated by years of stonewalling and denials now have a bit more hope, myself included.
I’ll be happy with that, for now. It is a good start, but there is a whole lot more to be done.
