Remember "The Bucket List Bandit"? I did a little search on Standard.net and came up with more than 100 stories on the alleged bank robber.
He was charged with 11 robberies. His largest haul on any single robbery was $7,000. At most, he was responsible for the theft of about $70,000. These numbers are something that we humans are good at grasping. While $70,000 is a good annual salary, $7,000 is the price for a conservative used car. If someone were to steal a years worth of work or a car from you, it would hurt. Plus every one of us has dealt with a friendly teller and the robbery intrudes on our sense of safety and well-being.
The public outrage and interest in the theft is understandable.
I did another search on Standard.net and got only four results. The search was for LIBOR. No it is not an alien on a Star Trek movie. LIBOR is an acronym for the London Interbank Offered Rate.
Once upon a time, I had an adjustable rate mortgage tied to the LIBOR. What this meant is once a year my lender would look at the LIBOR and adjust my loan payment -- usually up. A rising mortgage payment is also something that most of us easily understand.
For the purposes of today's column however, I am going to need to talk about something that most people struggle with and usually don't do after they graduate from school -- math with large numbers.
I'll start with an easy problem.
John's mortgage is $100,000. The interest rate is 5 percent. Over a 30-year mortgage, John pays just more than $93,000 in interest. If the interest rate was 8 percent, John would pay an extra $70,000 or so in interest -- or more than was stolen by the Bucket List Bandit.
Now imagine if 15 or so banks could control the value on the interest rate simply by the numbers they give each other. Actually you don't have to imagine it, because that is what happens. This is LIBOR and the LIBOR rate controls the interest on about $350 trillion -- not billion -- trillion dollars in loans, mortgages and credit card debt.
When you start messing with interest rates and numbers with 12 zeros on the end, the problem you have solved is how to take billions of dollars without anyone really noticing.
I suppose that gives a whole new meaning to the term, "Bank Robber."
Yet, banks have been caught red-handed stealing from individuals, pensions, cities, states and countries. So far about $2.5 billion in criminal fines have been paid by the banks and the civil lawsuits are only just beginning to seek damages between $176 billion and $7.8 billion for LIBOR manipulations.
Baltimore and others sued numerous banks over the LIBOR thefts and the case was dismissed by the judge at the end of March.
The judge in the ruling stated, "We recognize that it might be unexpected that we are dismissing a substantial portion of plaintiffs claims, given that several of the defendants here have already paid penalties to government regulatory agencies reaching into the billions of dollars."
It was unexpected, but the appeal of that judge's decision is expected.
On March 14, the Federal Home Mortgage Loan Corporation (Freddie Mac) sued a whole bunch of banks for LIBOR manipulation. A copy of the 65-page complaint can be found at http://www.scribd.com/doc/131476282/Freddie-Mac-v-Bank-of-America-LIBOR-....
And if the LIBOR mess isn't enough, the U.S. Commodity Futures Trading Commission announced in mid-April that it is currently investigating another interest rate benchmark, the ISDAfix, which controls interest rates on a market valued more than $379 trillion.
For us mere mortals, the theft of billions is simply much harder to comprehend than a teller handing over a few hundreds. It is also easier to apprehend the bank robber when his face shows up on the surveillance camera. Nameless and faceless institutions don't create the same emotion.
I do invite you to join me in adding an item to our respective bucket lists: Stop rampant financial fraud.
With something like that in our bucket list, we'll all need to live a long time.
E. Kent Winward is an Ogden attorney. He can be reached at email@example.com or 801-392-8200.