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LIBOR, Regulation, City, London

Zetsubou
Posts: 4,933
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7/16/2012 6:06:34 PM
Posted: 4 years ago
For those of you who don't know. Members of the British Bankers' Association in the City of London are being investigated over the so called Libor scandal. Last month it was revealed that Barclays bank, through the BBA declared a LIBOR (London Interbank Offered Rate) of 5.39, which was lower than it really was. The LIBOR rate being the interest rate at which city banks lend money to one another. This created the affectation of health in Barclays among other thing.

Anyway, this is really bad; in fact, it's gross fraud; because financial derivatives and mortgages use LIBOR for reference. It's the end of the world, worse than that time France voted in Hollande. The bank of England is being charged with misfeasance and people are being sued, fined and vilified.

So yeah, thoughts?

Question: What's the worst part about this?
'sup DDO -- july 2013
NixonianVolkswagen
Posts: 481
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7/16/2012 6:38:23 PM
Posted: 4 years ago
The possibility that the New York Federal Reserve and The Bank of England may have been complicit. If it's "just" guilty bankers, then that can be corrected, but if the rot extends to such important economic institutions, that's more difficult to solve (although none of this will be easy, given that LIBOR manipulation doesn't seem to be limited to Barclays alone).
"There is an almost universal tendency, perhaps an inborn tendency, to suspect the good faith of a man who holds opinions that differ from our own opinions."

- Karl "Spartacus" Popper
LaissezFaire
Posts: 2,050
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7/17/2012 1:47:31 AM
Posted: 4 years ago
So, the rate was artificially lower than it should have been, and this lower rate was used to determine mortgage/etc rates? I fail to see the the big deal--it sounds like this benefited borrowers at the expense of banks.
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Stephen_Hawkins
Posts: 5,316
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7/17/2012 5:17:20 PM
Posted: 4 years ago
At 7/17/2012 1:47:31 AM, LaissezFaire wrote:
So, the rate was artificially lower than it should have been, and this lower rate was used to determine mortgage/etc rates? I fail to see the the big deal--it sounds like this benefited borrowers at the expense of banks.

We benefit from the public services, which are funded by the government, financial institutions and cities in general, which have their money in investment vehicles. This directly states what the Libor rate (international interest, in a snappy phrase) is. Now, the importance is drastic. The US GDP is 15 trillion dollars. The World GDP is a bit under 70 trillion. What Libor affects is 800 trillion dollars. The underrating of the interests mean that the investment vehicles don't have as much money. This means the government, financial institutions and cities in general have less money. This means that public services have less money. This means we got less. Simply, the government loses masses of money, as well as private businesses, as well as cities, that have investments of any kind. In the words of Taibbi, "it's the equivalent of robbing a charity or a church to pay for a lap dance".
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Erik_Erikson
Posts: 26
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8/1/2012 1:19:01 AM
Posted: 4 years ago
At 7/17/2012 5:17:20 PM, Stephen_Hawkins wrote:
At 7/17/2012 1:47:31 AM, LaissezFaire wrote:
So, the rate was artificially lower than it should have been, and this lower rate was used to determine mortgage/etc rates? I fail to see the the big deal--it sounds like this benefited borrowers at the expense of banks.

We benefit from the public services, which are funded by the government, financial institutions and cities in general, which have their money in investment vehicles. This directly states what the Libor rate (international interest, in a snappy phrase) is. Now, the importance is drastic. The US GDP is 15 trillion dollars. The World GDP is a bit under 70 trillion. What Libor affects is 800 trillion dollars. The underrating of the interests mean that the investment vehicles don't have as much money. This means the government, financial institutions and cities in general have less money. This means that public services have less money. This means we got less. Simply, the government loses masses of money, as well as private businesses, as well as cities, that have investments of any kind. In the words of Taibbi, "it's the equivalent of robbing a charity or a church to pay for a lap dance".

It can also directly hurt consumers in that their adjustable rate mortgages are based on LIBOR. (just doing my part to start up the lynching mobs)
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Erik_Erikson
Posts: 26
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8/2/2012 5:46:09 PM
Posted: 4 years ago
But seriously, our global financial system is built on sand and BS. This should be a much bigger deal.
I know nothing. That is, probably, the first step to true knowledge (I'm not too sure).