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> "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'

by futun 9y 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 9y 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 9y 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!
- jnordwick 9y ago
  That people think LIBOR is some objectively calculated rate is probably an even bigger lie than LIBOR itself. How did that view come about, poor financial reporting?
  - tialaramex 9y ago
    The calculations are objective, the input values are subjective. ICE says they ask a particular bunch of people "If _your_ bank wants to borrow money, how much does that cost?" and then they do a particular calculation to turn all those inputs into LIBOR 90 days later we can see all the individual numbers, so we can check if ICE did their job properly, and also we can see if, say, Lloyds have been ridiculously low-balling their numbers every Tuesday. Because the question is subjective, that's still subject to bias, in particular it makes an unspecified assumption: that the bank asked could in fact secure such a loan because it's available to them if they wanted it. As a result loss of liquidity in parts of the market is not visible through LIBOR even with reforms.
    - jnordwick 9y ago
      There seems to be a pattern lately of people replying to comments assuming the poster doesn't know anything. It is getting really annoying. Pro tip: many of us here work in finance or related fields. It is like people are just itching to show how much they know.
      - deleted 9y ago
        [deleted]

by futun 9y ago

jonwachob91 9y 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 9y 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!

jnordwick 9y ago
That people think LIBOR is some objectively calculated rate is probably an even bigger lie than LIBOR itself. How did that view come about, poor financial reporting?
- tialaramex 9y ago
  The calculations are objective, the input values are subjective. ICE says they ask a particular bunch of people "If _your_ bank wants to borrow money, how much does that cost?" and then they do a particular calculation to turn all those inputs into LIBOR 90 days later we can see all the individual numbers, so we can check if ICE did their job properly, and also we can see if, say, Lloyds have been ridiculously low-balling their numbers every Tuesday. Because the question is subjective, that's still subject to bias, in particular it makes an unspecified assumption: that the bank asked could in fact secure such a loan because it's available to them if they wanted it. As a result loss of liquidity in parts of the market is not visible through LIBOR even with reforms.
  - jnordwick 9y ago
    There seems to be a pattern lately of people replying to comments assuming the poster doesn't know anything. It is getting really annoying. Pro tip: many of us here work in finance or related fields. It is like people are just itching to show how much they know.
    - deleted 9y ago
      [deleted]