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One reason is that the London Interbank Offered Rates (LIBOR) are just not as relevant as they used to be: "...the scandal has shed light on an inconvenient tr

One reason is that the London Interbank Offered Rates (LIBOR) are just not as relevant as they used to be: "...the scandal has shed light on an inconvenient truth about these interbank rates which are used to determine the price of so many hundreds of trillions of dollars worth of global financial contracts. That inconvenient truth is that even when London Interbank Offered Rates are not "fixed", they may still not bear very much relation to reality - because banks are not actually offering much unsecured money to each other at all." See: Inconvenient truths about Libor http://www.bbc.co.uk/news/business-your-money-18701623 http://www.bbc.co.uk/news/business-your-money-18701623

Tloewald 14y ago
Back in 2008 my ARM's rate was tied to LIBOR. I doubt I Was alone.
- JackFr 14y ago
  But the the manipulation was as likely in your favor as it was against you. Edit: I take it back. Looking at the data, Barclays was definitely cheating against you.
  - retube 14y ago
    Rates were low-balled by the majority of banks. Barclays was high in comparison because for much of the time they were posting accurate rates. This was the reason for calls from the Bank of England (why are you guys so high?). The fact is anyone with a libor-linked mortgage will have benefitted from this.
    - intended 14y ago
      A really important point to add is that at this juncture, LIBOR was also no longer the rate at which Barclays wa being loaned money. Banks would be giving them cash at rates higher than libor. Search for "LIBOR has become dislocated from itself " a beautifully finance speak way of saying "it's bullshit/it's being manipulated and it doesn't matter" Edit: found it! http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9368430/Libor-scandal-How-I-manipulated-the-bank-borrowing-rate.html http://www.telegraph.co.uk/finance/newsbysector/banksandfina... Every time I read one of these I think that the reporting/commenting/story is over the top, and then something else blows by in a few months which makes it look like child's play.
kitsune_ 14y ago
There are hundreds of trillions of dollars of derivates tied to the LIBOR. If the LIBOR moves 0.01% it translates to shifts in billions of dollars around the globe. Fixing the LIBOR is one of the (if not the) biggest thefts in history. Free-market capitalism is a joke. Deregulation and corporate socialism has led to a dysfunctional society ruled by a kleptocratic elite.
- retube 14y ago
  > Fixing the LIBOR is one of the (if not the) biggest thefts in history. Except they've basically stolen from themselves. The vast majority of libor fixing was downwards. Loans they've made that pay libor-linked rates thus pay lower - so the bank earns less interest. The lowballing of libor doesn't (or didn't) affect the actual rate at which banks could fund/borrow, so net the banks lose. Libor was low-balled to paint a better picture of the health of the market. It was a survival tactic, not an attempt to deliberately rip people off. It's quite possible that if real rates had been posted the markets would have got spooked and banks would have gone bust. I'm not saying it's right, just let's have a little perspective here. Banks haven't "stolen" from anyone. And frankly if you were out trading eurodollar futures or something then you should have known something about the libor market.
  - kitsune_ 14y ago
    http://www.nytimes.com/interactive/2012/07/10/business/dealbook/behind-the-libor-scandal.html http://www.nytimes.com/interactive/2012/07/10/business/dealb...
- crusso 14y ago
  > Free-market capitalism is a joke. To paraphrase Churchill: It has been said that free-market capitalism is the worst economic model except all the others that have been tried. You use the word "deregulation", yet thousands of pages of new regulations are churned out each year by the Federal government... when 1 or 2 pages are repealed, we hear "They're deregulating!". Any look at the regulations being emitted from the Federal Government will numerically prove that deregulation isn't our problem. It seems more apparent to me that the problem is that the Government has created really poor regulations and way too many of them at that. They created the regulatory mix that their corporate partners wanted them to in order to protect the business models of those corporate partners. Maybe if the Government tried to do a lot less and just did what it does well, we could keep better track of it and hold it accountable? Instead, the trend seems to be to hand over more power and authority to the Government in hopes that the people in it are somehow more ethical and wiser than the citizenry. That hope would seem to have been misplaced.

Tloewald 14y ago

Back in 2008 my ARM's rate was tied to LIBOR. I doubt I Was alone.

JackFr 14y ago
But the the manipulation was as likely in your favor as it was against you. Edit: I take it back. Looking at the data, Barclays was definitely cheating against you.
- retube 14y ago
  Rates were low-balled by the majority of banks. Barclays was high in comparison because for much of the time they were posting accurate rates. This was the reason for calls from the Bank of England (why are you guys so high?). The fact is anyone with a libor-linked mortgage will have benefitted from this.
  - intended 14y ago
    A really important point to add is that at this juncture, LIBOR was also no longer the rate at which Barclays wa being loaned money. Banks would be giving them cash at rates higher than libor. Search for "LIBOR has become dislocated from itself " a beautifully finance speak way of saying "it's bullshit/it's being manipulated and it doesn't matter" Edit: found it! http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9368430/Libor-scandal-How-I-manipulated-the-bank-borrowing-rate.html http://www.telegraph.co.uk/finance/newsbysector/banksandfina... Every time I read one of these I think that the reporting/commenting/story is over the top, and then something else blows by in a few months which makes it look like child's play.

kitsune_ 14y ago

There are hundreds of trillions of dollars of derivates tied to the LIBOR. If the LIBOR moves 0.01% it translates to shifts in billions of dollars around the globe. Fixing the LIBOR is one of the (if not the) biggest thefts in history. Free-market capitalism is a joke. Deregulation and corporate socialism has led to a dysfunctional society ruled by a kleptocratic elite.

retube 14y ago
> Fixing the LIBOR is one of the (if not the) biggest thefts in history. Except they've basically stolen from themselves. The vast majority of libor fixing was downwards. Loans they've made that pay libor-linked rates thus pay lower - so the bank earns less interest. The lowballing of libor doesn't (or didn't) affect the actual rate at which banks could fund/borrow, so net the banks lose. Libor was low-balled to paint a better picture of the health of the market. It was a survival tactic, not an attempt to deliberately rip people off. It's quite possible that if real rates had been posted the markets would have got spooked and banks would have gone bust. I'm not saying it's right, just let's have a little perspective here. Banks haven't "stolen" from anyone. And frankly if you were out trading eurodollar futures or something then you should have known something about the libor market.
- kitsune_ 14y ago
  http://www.nytimes.com/interactive/2012/07/10/business/dealbook/behind-the-libor-scandal.html http://www.nytimes.com/interactive/2012/07/10/business/dealb...
crusso 14y ago
> Free-market capitalism is a joke. To paraphrase Churchill: It has been said that free-market capitalism is the worst economic model except all the others that have been tried. You use the word "deregulation", yet thousands of pages of new regulations are churned out each year by the Federal government... when 1 or 2 pages are repealed, we hear "They're deregulating!". Any look at the regulations being emitted from the Federal Government will numerically prove that deregulation isn't our problem. It seems more apparent to me that the problem is that the Government has created really poor regulations and way too many of them at that. They created the regulatory mix that their corporate partners wanted them to in order to protect the business models of those corporate partners. Maybe if the Government tried to do a lot less and just did what it does well, we could keep better track of it and hold it accountable? Instead, the trend seems to be to hand over more power and authority to the Government in hopes that the people in it are somehow more ethical and wiser than the citizenry. That hope would seem to have been misplaced.