[cluda01]

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.

[danboarder]

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

[kitsune_]

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]

> 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_]

http://www.nytimes.com/interactive/2012/07/10/business/dealb...

[crusso]

> 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.

[kitsune_]

With deregulation I don't mean the lack of regulatory laws. It's not about the quantity here, it's about the QUALITY of the regulatory framework.

What good are thousands of pages of "regulatory" law when they are filled with loop holes? In fact these monstrous laws are perfect for the big corporations, their lobbyists and lawyers. These people live for this. Heck, they even often write the laws themselves!

Have a look at the deregulation of California's energy system. These are not small laws. However, this is an example of clear deregulation, and was not a regulatory effort.

In fact Enron was able to pull off completely immoral, but often at many times legal, shenanigans. I mean they shut down half of the power plants because their energy traders could make a profit from the rising prices. Holy shit. In the mean time they cried wolf and said that regulation was killing them. BULL SHIT. It was the exact opposite.

People actually died from these power outages. Again, holy shit.

With big so-called regulatory and "deregulatory" frameworks filled with loop holes, small business owners are basically shut out of the market because they don't have the resources necessary to even begin to understand the matter.

In the mean time, big corporations can fully exploit these custom-made laws, profit from them and then later, call for "more deregulation".

I hope you do realize that this is a vicious cycle.

[crusso]

Nah, I don't disagree with anything you said.

I guess what I don't understand is your connection between "Free Market Capitalism is a joke" and the true statements above. A bunch of companies writing laws isn't Capitalism. It's Cronyism and Corporatism.

It's a direct result of investing too much power in the government to control things since there are no real protections to keep the government from being corrupted by anyone with some money.

It's one thing to have a powerful corporation that dominates a marketplace. That can make it uncomfortable when you're looking for an alternative product or service. It's quite another thing when powerful corporations write the laws. In that case, we're screwed since the guys with the tanks no longer allow us any choices but to fall in line.

[tsotha]

What deregulation? The financial industry is the most heavily regulated industry save medicine. The problem is there are too many regulations - banking regulations are so complex only the bankers understand them, which is the basis of the revolving door between banks and government regulating agencies.

Too much regulation gives companies as much freedom as too little.

[intended]

Since you are getting downvoted, a quick point - the reduction of regulations was what helped create the crisis - removal of glass steagal in 1999 in particular.

[tsotha]

I hear people say that, but I don't believe it's true. The roots of the financial crisis were elsewhere, and it would have been just as bad either way.

[intended]

belief? I mean ... Ok, what is your belief?

[Tloewald]

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

[JackFr]

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]

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]

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/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.

[neilk]

I think we overestimate what the media can really do. The public always wants them to lead the charge, but traditionally, they've rarely done so. They've always trailed behind activists, politicians, and social movements.

And to some extent it makes sense; things really become "stories" when there's a nonzero possibility things might change. And that doesn't happen unless there are champions, pointing the way to some other possible future. In the USA, both parties favor hushing up financial scandal, so it's really hard to break through.

There's this great fantasy show on HBO right now, The Newsroom, where one news show decides to lead the public rather than following them.

[debacle]

Because people don't understand it or don't care, and that doesn't garner eyeballs like the story about Tom and Katie's split.

[danielweber]

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.)

[intended]

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.

[Tycho]

It's very big news in the UK.

[olefoo]

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.

[Tycho]

This angle seems a bit overplayed to me. The main victims of the fraud are just the counter parties on these large derivative trades that investment banks make between each other. One side was tilting the scales.

At least that's what I make of it.

[intended]

Considering that libor affects mortgage rates, I'd say that's a lot of people affected.

that's like saying the only people affected by oil speculation are the counter parties.

[Tycho]

I've not been able to find any analyses about mortgage borrowers being adversely affected. Regardless, they are not the targets of the fraud, so the idea about libor rate fixers robbing the public is disingenuous.

[intended]

What should probably get your goat though, is that this method completely destroys price discovery and was a clear case of the market not working because of collusion.

The other things that should strike you is the scale of the fiasco and the collateral damage -

Lets see... I would likely be using LIBOr for financial models, at the very least those focused on bond pricing and hence any shorts/longs made on that - all of those are off.

LIBOR does get used to set variable rate mortgages, Switzerland uses it for national projections for a few other things.

In essence those few terms I've mentioned are already fast approaching nearly a trillion dollars in affected securities and financial instruments.

> they are not the targets of the fraud...

Not being the target means little if you are still collateral damage. Heck the collateral damage was higher, since all the financiers were away the game was rigged by 2006. "LIBOR has become dislocated from itself".

Losers who weren't direct targets would be someone making a deposit - they were getting lower interest rates than they should have.

[olefoo]

Your savings account underperforming, or your adjustable rate mortgage being more expensive than it would be otherwise aren't obvious forms of theft...

And the second order effects as businesses smaller than major banks attempt to make up for their losses are even less obvious forms of theft.

And if the marks don't know they're being clipped, what's the harm, right?

[mibbitier]

I'd say it's only big news because we're still in the "bash bankers, everything is their fault" climate sadly.