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It's not really news; it's always been clear that: 1. The Bank of England knew about the Libor rigging as it happened 2. And was, at a minimum, very happy wit

by Lazare 10y ago

It's not really news; it's always been clear that: 1. The Bank of England knew about the Libor rigging as it happened 2. And was, at a minimum, very happy with the results (given that it reduced the risk of bank runs imperiling the entire system) 3. And that nobody involved really thought this was a serious issue, much less a crime. Putting the above together, it would be surprising if there wasn't some pressure from the Bank of England to push Libor down; why wouldn't they be doing that? In the circumstances, it would have practically been remiss of them to do otherwise. Of course, it looks absolutely horrific now that we've decided that manipulating Libor is a serious issue that people should go to prison for!

Lazare 10y ago
As an update, keep in mind that Barclay's was being pretty open about it. They were talking about it to the NY Fed, US Fed, ECB, World Bank, etc. http://dealbreaker.com/2012/07/same-old-boring-story/ http://dealbreaker.com/2012/07/same-old-boring-story/ Like, literally, a Barclay's guy is on record telling a regulator that they were lying about Libor because telling the truth hurt their share price, so they stopped! And then everyone laughed, and that was the end of it, because it was just Libor, and it's not like there was an assumption that it was somehow accurate or objective. Times change.
- branchless 10y ago
  Times change! Same Barclays that bailed itself out by lending to Qatar so they could buy back Barclays shares, which UK regulators signed off so one UK bank could appear solvent. Sant, who signed it off, got a job at Barclays shortly after. Who are you? Why pages of jocular "boys will be boys" on UK fraud?
- raesene6 10y ago
  You don't think that people on the other ends of trades that depended on Barclay's Libor rate were depending on it being objective or accurate? So those people on the other end of the trades, literally were aware that Barclays were ripping them off by manipulating the rate and were fine with that?? If so, where can I find these traders who like losing money, so I can make some trades with them.
  - Lazare 10y ago
    > You don't think that people on the other ends of trades that depended on Barclay's Libor rate were depending on it being objective or accurate? I certainly hope that people were not depending on Libor being an objective metric, because that would imply they hadn't the foggiest clue what Libor is or how it's calculated. (Also, "Barclays was ripping them off" implies Barclay's was on the other end of the trade, but that's not typically what happened. A more representative example might be "hedge fund buys a bunch of mortgage backed securities pegged to Libor + some number; Barclay's lies to try and avoid going under and pushes the Libor rate down a fraction of a hair, meaning a few million homeowners pay slightly less interest than they "should", and the hedge fund makes slightly less money that it "should". Which is, sure, horrible, and people have paid large fines and gone to jail for it. But it's hard to get too outraged over it; compare it to, eg, the banks who knowingly resold bad mortgages.)
    - raesene6 10y ago
      well the lawsuits that Barclays and others are facing seem to indicate there was rather more harm than that. One example, from https://en.wikipedia.org/wiki/Libor_scandal https://en.wikipedia.org/wiki/Libor_scandal "Early estimates are that the rate manipulation scandal cost US states, counties, and local governments at least $6 billion in fraudulent interest payments, above $4 billion that state and local governments have already had to spend to unwind their positions exposed to rate manipulation."
blowski 10y ago
If it was a good idea for everyone, why not do it explicitly and transparently? Allowing (or even encouraging) a small group of people to secretly make a lot of money doesn't seem like a fair way to run the economy.
- cm2187 10y ago
  I don't believe the idea was to make money at that time. It was to avoid a run on the banks and a repeat of 1929. I am not convinced the economy would have been better off. In those days you had pretty much one major bank failing every week.
  - blowski 10y ago
    So why not make the change explicitly? I'm not against a change in the rate of LIBOR, nor am I against people making profits, as long as it's done fairly.
    - cm2187 10y ago
      Again, not profits, collapse of the financial system. The problem was: how do you combat fear? The LIBOR submissions were pretty transparent and investors were using it as a way to guess which banks would be the next to fail. I guess the BoE either thought they needed a short term solution / didn't have the time or appetite to change the way LIBOR was submitted. Or they thought that if they were hidding individual bank submissions (which they ultimately did), it would only aggravate fear.
      - branchless 10y ago
        No this is warped. They put profits before stability, then needed low rates forever, then had to lie again.
    - al452 10y ago
      The LIBOR rates were constructed by the BBA phoning around the banks, and reporting an average of the numbers they came up with. How would the BoE "explicitly" change that? By telling the BBA to lie? I don't imagine you'd find that "fair".
paganel 10y ago
> 3. And that nobody involved really thought this was a serious issue, much less a crime. TFA: "Mr Johnson objects, saying that this would mean breaking the rules for setting Libor, which required him to put in rates based only on the cost of borrowing cash. " so it seems like the people involved were well aware of what they were doing. Also, it's been news to me that the Bank of England was actively pushing for the LIBOR rates to go down, and was not merely "happy" with them going down, and I've pretty much followed this scandal since it first came out.
- milesskorpen 10y ago
  Breaking rules != serious issues People speed all the time, no one thinks twice about it. They know they're speeding, they know they're breaking the rules, but the culture they're in doesn't care. I don't know enough about LIBOR rates in banking culture, but it seems possible this is a similar situation.
  - jacquesm 10y ago
    > Breaking rules != serious issues In a nutshell, this is why we're seeing all these financial scandals and stockmarket melt-downs every so many years. Because the perception has become that if you break the rules it is not a serious issue, no matter what level of society you are operating at. If you start equating speeding with breaking banking rules something is fundamentally wrong (not that speeding is ok, but the impact of say going 10 km over the limit versus wrecking the economy seems to be of a qualitatively different level).
    - milesskorpen 10y ago
      Not all rules & rule violations are created equal — embezzling money is different than deleting an innocuous email. Also, 'rules' don't mean 'legal requirement' necessarily.
      - mannykannot 10y ago
        Deleting an innocuous email became a rule violation because of all the times a substantive email was deleted under the cover of allegedly being innocuous.
arca_vorago 10y ago
"The Bank of England knew about the Libor rigging as it happened" Isn't the implication that BoE actually encouraged it in the first place, as opposed to just simply having knowledge of? The distinction is important.
- branchless 10y ago
  Yes, because the UK was about to collapse due to rampant fraud, which the boe also allowed.
futun 10y ago
> "3. And that nobody involved really thought this was a serious issue, much less a crime." I'm not sure where that point came from. It's not only a crime, it's an extremely serious crime. What on Earth are you talking about? LIBOR is a derivative of daily rate data which is shared between banks. It is not rigged centrally. You can't tell investors that the rate is based on a daily measurement of interbank risk, and then just go ahead and base that rate on something entirely different when it suits you. That's called fraud.
- jonwachob91 10y ago
  > I'm not sure where that point came from. It's not only a crime, it's an extremely serious crime. What on Earth are you talking about? The OP never said it wasn't illegal, just that no one thought it was a serious crime. Kind of like how sodomy is illegal for DoD personnel under UCMJ law, no one gives a damn and no one enforces it. > You can't tell investors that the rate is based on a daily measurement of interbank risk, and then just go ahead and base that rate on something entirely different when it suits you. But it's not based on interbank risk, it's based on how much you THINK you can get an interbank loan for. How much you THINK the risk is worth. They base the Libor rate off a lot of thoughts and few facts. The fact that they base it entirely off of thoughts and few facts gives these bank personnel a lot of incentive to lowball, giving whatever number is necessary to get the lowest loan possible and profit the most. Libor rigging will continue at all levels until they change HOW they get to the Libor rate.
- Lazare 10y ago
  > It's not only a crime, it's an extremely serious crime. What on Earth are you talking about? Today it is. Back then it wasn't. (Or rather, it wasn't seen as such.) It was, by definition, a number that people made up based on their gut feeling (NOT hard data), and there was no regulation or precedent for what sort of number you could make up. Notice that in the linked article, the Bank of England carefully doesn't deny putting pressure on banks to keep Libor low, and just says that: "" Or see the article I linked elsewhere in the thread about Barclay's who was perfectly open with analysts and regulators that they were lying about Libor to improve their share price: http://dealbreaker.com/2012/07/same-old-boring-story/ http://dealbreaker.com/2012/07/same-old-boring-story/ Yes, we see it as a serious crime now, but it's pretty clear that circa 2007-2008, that was not a common view. > LIBOR is a derivative of daily rate data which is shared between banks [...] You can't tell investors that the rate is based on a daily measurement of interbank risk It's neither of those things, and I certainly hope investors weren't being told that, because that would be a lie. It's literally the result of asking some banks, "hey, if you went and borrowed some money...how much do you reckon you'd get charged?". And it turns out that's horribly subjective, not very useful, and prone to manipulation!
Allower 10y ago
1. Are you a troll? 2. Maybe you are just an idiot. 3. You are probably a stupid troll

by Lazare 10y ago

Lazare 10y ago

As an update, keep in mind that Barclay's was being pretty open about it. They were talking about it to the NY Fed, US Fed, ECB, World Bank, etc. http://dealbreaker.com/2012/07/same-old-boring-story/ http://dealbreaker.com/2012/07/same-old-boring-story/ Like, literally, a Barclay's guy is on record telling a regulator that they were lying about Libor because telling the truth hurt their share price, so they stopped! And then everyone laughed, and that was the end of it, because it was just Libor, and it's not like there was an assumption that it was somehow accurate or objective. Times change.

branchless 10y ago
Times change! Same Barclays that bailed itself out by lending to Qatar so they could buy back Barclays shares, which UK regulators signed off so one UK bank could appear solvent. Sant, who signed it off, got a job at Barclays shortly after. Who are you? Why pages of jocular "boys will be boys" on UK fraud?
raesene6 10y ago
You don't think that people on the other ends of trades that depended on Barclay's Libor rate were depending on it being objective or accurate? So those people on the other end of the trades, literally were aware that Barclays were ripping them off by manipulating the rate and were fine with that?? If so, where can I find these traders who like losing money, so I can make some trades with them.
- Lazare 10y ago
  > You don't think that people on the other ends of trades that depended on Barclay's Libor rate were depending on it being objective or accurate? I certainly hope that people were not depending on Libor being an objective metric, because that would imply they hadn't the foggiest clue what Libor is or how it's calculated. (Also, "Barclays was ripping them off" implies Barclay's was on the other end of the trade, but that's not typically what happened. A more representative example might be "hedge fund buys a bunch of mortgage backed securities pegged to Libor + some number; Barclay's lies to try and avoid going under and pushes the Libor rate down a fraction of a hair, meaning a few million homeowners pay slightly less interest than they "should", and the hedge fund makes slightly less money that it "should". Which is, sure, horrible, and people have paid large fines and gone to jail for it. But it's hard to get too outraged over it; compare it to, eg, the banks who knowingly resold bad mortgages.)
  - raesene6 10y ago
    well the lawsuits that Barclays and others are facing seem to indicate there was rather more harm than that. One example, from https://en.wikipedia.org/wiki/Libor_scandal https://en.wikipedia.org/wiki/Libor_scandal "Early estimates are that the rate manipulation scandal cost US states, counties, and local governments at least $6 billion in fraudulent interest payments, above $4 billion that state and local governments have already had to spend to unwind their positions exposed to rate manipulation."

blowski 10y ago

If it was a good idea for everyone, why not do it explicitly and transparently? Allowing (or even encouraging) a small group of people to secretly make a lot of money doesn't seem like a fair way to run the economy.

cm2187 10y ago
I don't believe the idea was to make money at that time. It was to avoid a run on the banks and a repeat of 1929. I am not convinced the economy would have been better off. In those days you had pretty much one major bank failing every week.
- blowski 10y ago
  So why not make the change explicitly? I'm not against a change in the rate of LIBOR, nor am I against people making profits, as long as it's done fairly.
  - cm2187 10y ago
    Again, not profits, collapse of the financial system. The problem was: how do you combat fear? The LIBOR submissions were pretty transparent and investors were using it as a way to guess which banks would be the next to fail. I guess the BoE either thought they needed a short term solution / didn't have the time or appetite to change the way LIBOR was submitted. Or they thought that if they were hidding individual bank submissions (which they ultimately did), it would only aggravate fear.
    - branchless 10y ago
      No this is warped. They put profits before stability, then needed low rates forever, then had to lie again.
  - al452 10y ago
    The LIBOR rates were constructed by the BBA phoning around the banks, and reporting an average of the numbers they came up with. How would the BoE "explicitly" change that? By telling the BBA to lie? I don't imagine you'd find that "fair".

paganel 10y ago

> 3. And that nobody involved really thought this was a serious issue, much less a crime. TFA: "Mr Johnson objects, saying that this would mean breaking the rules for setting Libor, which required him to put in rates based only on the cost of borrowing cash. " so it seems like the people involved were well aware of what they were doing. Also, it's been news to me that the Bank of England was actively pushing for the LIBOR rates to go down, and was not merely "happy" with them going down, and I've pretty much followed this scandal since it first came out.

milesskorpen 10y ago
Breaking rules != serious issues People speed all the time, no one thinks twice about it. They know they're speeding, they know they're breaking the rules, but the culture they're in doesn't care. I don't know enough about LIBOR rates in banking culture, but it seems possible this is a similar situation.
- jacquesm 10y ago
  > Breaking rules != serious issues In a nutshell, this is why we're seeing all these financial scandals and stockmarket melt-downs every so many years. Because the perception has become that if you break the rules it is not a serious issue, no matter what level of society you are operating at. If you start equating speeding with breaking banking rules something is fundamentally wrong (not that speeding is ok, but the impact of say going 10 km over the limit versus wrecking the economy seems to be of a qualitatively different level).
  - milesskorpen 10y ago
    Not all rules & rule violations are created equal — embezzling money is different than deleting an innocuous email. Also, 'rules' don't mean 'legal requirement' necessarily.
    - mannykannot 10y ago
      Deleting an innocuous email became a rule violation because of all the times a substantive email was deleted under the cover of allegedly being innocuous.

arca_vorago 10y ago

"The Bank of England knew about the Libor rigging as it happened" Isn't the implication that BoE actually encouraged it in the first place, as opposed to just simply having knowledge of? The distinction is important.

branchless 10y ago
Yes, because the UK was about to collapse due to rampant fraud, which the boe also allowed.

futun 10y ago

> "3. And that nobody involved really thought this was a serious issue, much less a crime." I'm not sure where that point came from. It's not only a crime, it's an extremely serious crime. What on Earth are you talking about? LIBOR is a derivative of daily rate data which is shared between banks. It is not rigged centrally. You can't tell investors that the rate is based on a daily measurement of interbank risk, and then just go ahead and base that rate on something entirely different when it suits you. That's called fraud.

jonwachob91 10y ago
> I'm not sure where that point came from. It's not only a crime, it's an extremely serious crime. What on Earth are you talking about? The OP never said it wasn't illegal, just that no one thought it was a serious crime. Kind of like how sodomy is illegal for DoD personnel under UCMJ law, no one gives a damn and no one enforces it. > You can't tell investors that the rate is based on a daily measurement of interbank risk, and then just go ahead and base that rate on something entirely different when it suits you. But it's not based on interbank risk, it's based on how much you THINK you can get an interbank loan for. How much you THINK the risk is worth. They base the Libor rate off a lot of thoughts and few facts. The fact that they base it entirely off of thoughts and few facts gives these bank personnel a lot of incentive to lowball, giving whatever number is necessary to get the lowest loan possible and profit the most. Libor rigging will continue at all levels until they change HOW they get to the Libor rate.
Lazare 10y ago
> It's not only a crime, it's an extremely serious crime. What on Earth are you talking about? Today it is. Back then it wasn't. (Or rather, it wasn't seen as such.) It was, by definition, a number that people made up based on their gut feeling (NOT hard data), and there was no regulation or precedent for what sort of number you could make up. Notice that in the linked article, the Bank of England carefully doesn't deny putting pressure on banks to keep Libor low, and just says that: "" Or see the article I linked elsewhere in the thread about Barclay's who was perfectly open with analysts and regulators that they were lying about Libor to improve their share price: http://dealbreaker.com/2012/07/same-old-boring-story/ http://dealbreaker.com/2012/07/same-old-boring-story/ Yes, we see it as a serious crime now, but it's pretty clear that circa 2007-2008, that was not a common view. > LIBOR is a derivative of daily rate data which is shared between banks [...] You can't tell investors that the rate is based on a daily measurement of interbank risk It's neither of those things, and I certainly hope investors weren't being told that, because that would be a lie. It's literally the result of asking some banks, "hey, if you went and borrowed some money...how much do you reckon you'd get charged?". And it turns out that's horribly subjective, not very useful, and prone to manipulation!

Allower 10y ago

1. Are you a troll? 2. Maybe you are just an idiot. 3. You are probably a stupid troll