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Lies, Damn Lies and LIBOR

londonbanker.blogspot.co.uk

31–40 of 140 posts

Re: Lies, Damn Lies and LIBOR

#31
post #21
post #4

I don't understand why this stuff isn't front page news of mainstream (cnn, fox news, etc.) newspapers. You'd figure with all the lingering resentment this would be a huge field day. Currently relegated to business news journals.

It's very big news in the UK.

It's big news in the very narrow segment of American society that pays attention to hard news. In the sense that we can see the mechanisms by which the general public is being robbed. It is not news in the sense that most anyone who has been paying attention the last 3 decades knows that the both the markets and the regulation of the markets is a rigged game.

Re: Lies, Damn Lies and LIBOR

#32

> We need to rethink as a society what banks are for, what exchanges are for, and what clearing houses are for. If they are for the profit of the few at the expense of the many now, that is because it is the business model we have permitted. Is that really true compared to Silicon Valley? Do banks concentrate wealth a lot more than a Google or a Facebook? If not, how would you feel about some random dude commenting o…

"Financial innovation" seems to in large part consist of creating private information asymmetries, where the large banks are the only ones with enough data to accurately price the securities they engineer and then make a market for.

Thus it's not at all clear here that financial innovation is a net win, and, further, any comparison with innovation in the tech world is fatuous.

Re: Lies, Damn Lies and LIBOR

#33
post #24

Earlier quoted context omitted.

Tucker has fallen back on the "no recollection" defence, which is only one step up from "only following orders". Looks like him and Diamond are sacrificing themselves to protect the real power brokers.

The emails are available though, so recollection or not it's clear no pressure is being applied. At the same time it's clear that the traders were pushing for rates to be fixed, which is why they got fined.

The story of Thomas Becket is relevant here http://www.bbc.co.uk/history/british/middle_ages/becket_01.s...

"Who will rid me of this turbulent rate?"

Re: Lies, Damn Lies and LIBOR

#34

Earlier quoted context omitted.

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 b…

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.

> 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.

Re: Lies, Damn Lies and LIBOR

#35
post #4

I don't understand why this stuff isn't front page news of mainstream (cnn, fox news, etc.) newspapers. You'd figure with all the lingering resentment this would be a huge field day. Currently relegated to business news journals.

I heard about "LIBOR fixing" but this was the most detail I found on it so far. (To be fair I've been busy and haven't gone proactively digging for information on it.)

The always interesting Matt tabibi - http://www.rollingstone.com/politics/blogs/taibblog/why-is-n...

The always good ft/alphaville

http://ftalphaville.ft.com/blog/2012/07/09/1075161/almost-ev...

You can read the trader emails which were part of the initial explosion http://www.thedailybeast.com/articles/2012/07/05/barclays-se...

I thought this was a great line "One trader had a few choice words of advice for another: “This is the way you pull off deals like this chicken, don’t talk about it too much … the trick is you must not do this alone …  this is between you and me but really don’t tell ANYBODY.” "

I'll dig up more if I can. Do note that the big picture blog would also probably be talking about this, and there was an economist article on hacker news a day or two ago.

Re: Lies, Damn Lies and LIBOR

#36

> We need to rethink as a society what banks are for, what exchanges are for, and what clearing houses are for. If they are for the profit of the few at the expense of the many now, that is because it is the business model we have permitted. Is that really true compared to Silicon Valley? Do banks concentrate wealth a lot more than a Google or a Facebook? If not, how would you feel about some random dude commenting o…

Google organizes the worlds information. Facebook does something that lots of people like (I guess). There is a vast difference between those and the banks in question. Banks should be run by accountants, doing boring accounting things, and being paid a fair wage for it. It should not be a license to extract trillions of dollars from taxpayers, without their consent or knowledge.

"Regardless, if banks are "concentrating wealth" they must be doing something right since after all, the ultimate purpose of a business is to make money. If they do so through illegal means (fraud, deception, etc.), we already have a legal system in place to deal with that."

You're not grasping the situation or what actions have been taken in this example, and with the crisis and bailouts in the US. These are banks setting the rates at which governments borrow money, and the rates at which banks receive money to lend. Manipulation of those rates is illegal, unethical, and highly profitable. It's been abused on a monumental scale, so much so that it has begun to appear "normal" to the people participating in it. But, despite being the norm, it's fraud on a massive scale, and it destroys wealth and robs taxpayers.

I'm not at all arguing that more government/bank interaction is the solution. But, as long as banks have access to all the levers in our economy, and the ability to borrow money at rates they control and lend it out to governments at market rates (a free money funnel for taxpayer dollars), there needs to be regulation of those banks. If you can convince our government to remove that intimate connection between creating money (not wealth; we're taking about the currency that represents debts) and lending money and the rates at which banks borrow money being introduced into the economy (i.e. end or dramatically rethink the Federal Reserve in the US, and figure out a way to resolve the fraud in LIBOR in the UK, and whatever equivalent there is for the Euro), I'll sign right on for your cause. Independent currencies, like Bitcoin, are something I have high hopes for, but the Bitcoin economy is measured in millions...it'll be decades before we have an alternative economy and an ability to opt out of the horribly broken state currency markets and into a free market currency.

In the short term, laws need to be upheld, in London, in the US, in the world markets. People who have committed fraud worth billions or trillions of dollars need to go to jail. Just because someone is rich, well-educated, and doing what everybody else in their industry is doing, doesn't mean they should get a pass.

Re: Lies, Damn Lies and LIBOR

#37
post #16
post #9

Earlier quoted context omitted.

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

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.

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.

Re: Lies, Damn Lies and LIBOR

#38
post #32

> We need to rethink as a society what banks are for, what exchanges are for, and what clearing houses are for. If they are for the profit of the few at the expense of the many now, that is because it is the business model we have permitted. Is that really true compared to Silicon Valley? Do banks concentrate wealth a lot more than a Google or a Facebook? If not, how would you feel about some random dude commenting o…

"Financial innovation" seems to in large part consist of creating private information asymmetries, where the large banks are the only ones with enough data to accurately price the securities they engineer and then make a market for. Thus it's not at all clear here that financial innovation is a net win, and, further, any comparison with innovation in the tech world is fatuous.

Seems like the "vote with your money" mechanism should solve that: don't buy those securities. Do you claim that this mechanism doesn't work? If so, why is that?

Re: Lies, Damn Lies and LIBOR

#39
Why do we tolerate price-fixing and interest rate manipulation of the whole economy through the Bank of England's control of the pound sterling dealing rate? The central bank of the UK is setting interest rates for the entire economy yet people only care about Libor rates being manipulated. It's a hypocrisy.

Re: Lies, Damn Lies and LIBOR

#40

> We need to rethink as a society what banks are for, what exchanges are for, and what clearing houses are for. If they are for the profit of the few at the expense of the many now, that is because it is the business model we have permitted. Is that really true compared to Silicon Valley? Do banks concentrate wealth a lot more than a Google or a Facebook? If not, how would you feel about some random dude commenting o…

Google organizes the worlds information. Facebook does something that lots of people like (I guess). There is a vast difference between those and the banks in question. Banks should be run by accountants, doing boring accounting things, and being paid a fair wage for it. It should not be a license to extract trillions of dollars from taxpayers, without their consent or knowledge. "Regardless, if banks are "concentrat…

I agree with you on most points. Perhaps legalizing the creation and use of alternative currencies would be a step in the right direction.
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