[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 when 1 or 2 pages are repealed, we hear "They're deregulating!".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?

[tsotha]

The collapse was the result of a real estate bubble. Changes to the law in 1999 had no effect on something that was already underway at the time. The focus on Glass-Steagal is political and a distraction from actual causes.

There are a few things that could have been done to puncture the bubble before it got truly out of hand, but bubbles are a function of peoples' expectations more than any government policy, so we were in for a bad recession no matter what. And there's no way politicians are going to get blamed for a bad recession if someone else can be blamed for a worse one.

At this point the best thing that could happen is regulations simplified and streamlined to the point that Congressional aides (the people who actually write the laws when they're not just passing along something from a lobbyist) can understand them. Also, the GSEs should be recognized as a bad experiment and dealt with accordingly.

[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.