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August 11, 2012
News Networks Ignore a Major Banking Scandal
    by Robert Kropp

The Interfaith Center on Corporate Responsibility writes to ABC and NBC, asserting that the networks have failed to cover the LIBOR rate-fixing scandal and its severe impacts on the poor and most vulnerable.

It may be that a narrative on the interest rates that 18 of the world's largest banks—including, from the US, Bank of America, Citibank, and JP Morgan Chase—charge each other is considered too abstract to hold the public's interest. Or it may well be that the public perception of banking ethics has, since the fiscal crisis of 2008, plunged to such depths that the London InterBank Offered Rate (LIBOR) rate-fixing scandal is seen as yet another example of business as usual.

But as a handy graphic points out, LIBOR functions as the global benchmark for $800 trillion in financial instruments, and the scandal—for which the UK-based Barclay's Bank has already agreed to pay $453 million in fines for manipulating the rate—has implications that extend beyond advantageous trading positions or a false presentation of banking fiscal health.

In the US, the City of Baltimore filed a class-action lawsuit against the LIBOR banks, charging that "Defendants' manipulation of LIBOR allowed them to pay unduly low interest rates to investors, including Baltimore Plaintiffs, on LIBOR-based financial instruments during the Class Period."

"Baltimore purchased hundreds of millions of dollars in interest rate swaps directly from at least one Defendant in which the rate of return was tied to LIBOR and was injured as a result of Defendants' anticompetitive conduct," the complaint continued.

And in Oakland, the Oakland Coalition to Stop Goldman Sachs and other community groups have launched a campaign to prevent the bank from entering into contracts with the city in the future, unless it agrees to amend an interest rate swap that is costing the cash-strapped city $5 million a year.

Rev. Seamus Finn of the Interfaith Center on Corporate Responsibility (ICCR) told that with many more city and state governments throughout the US in the midst of budget crises, and with insufficient funds in the federal budget to help allay those crises, the impact of the rate-fixing scandal is profound.

Yet viewers of evening news programs on national networks may well be unaware of it. This week, ICCR sent letters to the news producers at ABC and NBC, protesting what the organization calls "the complete absence of media coverage…on one of the biggest banking scandals of our time: The manipulation of the LIBOR, a critical bank setting interest rate that affects payments for more than 800 trillion dollars of financial instruments."

As the letters point out, a report from Media Matters surveyed network news coverage of the scandal in the days after it broke. "Between June 27 and July 12," the media watchdog group reported, "CNN devoted almost five minutes to the scandal." MSNBC devoted two news briefs, totaling about half a minute, to it.

CBS Evening News was the first network to run a full-length segment on the scandal, Media Matters found, and followed with a second segment devoted to Baltimore's lawsuit.

As for ABC World News and NBC Nightly News? Not a single mention from either during the entire two-week period.

Overall, Media Matters concluded, "American television news outlets…are practically ignoring the scandal."

Midway through the two-week period covered by the Media Matters report, Matt Taibbi wrote at Rolling Stone, "This story is so outrageous that it shocks even the most cynical Wall Street observers."

"The implications…should be particularly chilling to Americans, who in recent years have been party to a number of revelations about strange and seemingly inappropriate contacts between senior regulatory officials and big bankers during the heat of the crisis," Taibbi wrote.

In its letters, ICCR stated, "The manipulation of these rates affects people across the income spectrum. As faith-based organizations we must stress that this corruption has severe repercussions for the poor and most vulnerable."

The letters requested that the news programs "immediately start to cover these banking scandals and their impact on average Americans and poor people around the world."

As Finn pointed out to, ICCR members have a long history of engagement with financial institutions on practices that have implications for social justice. In 2010, ICCR members filed shareowner resolutions at four major financial institutions, requesting that the banks' collateral for derivatives trading not be rehypothecated.

Rehypothecation refers to the practice by financial institutions of taking in collateral as guarantees on derivatives trades, and then using it as collateral for their own transactions.

And last year, ICCR members engaged with banks on repurchase agreements, requesting greater transparency for a market in which the interdependence of banks raises similar risks to those in the derivatives market.


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