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  #21  
Old 07-03-2012, 04:58 PM
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http://www.investmentnews.com/articl...&utm_term=text

just for the title

Quote:
Libor pains: Banks sitting on potential powder keg with scandal
Extent of damages sought by civil litigants could be astronomical
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  #22  
Old 07-04-2012, 12:52 AM
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They are the biggest bunch of crooks that I have ever seen tbh.

They systematically colluded with other banks in order to set the LIBOR rate. This has been verified and there is AMPLE evidence of wrongdoing.

They need to be sent on a one-way trip to jail tbh.
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  #23  
Old 07-04-2012, 12:58 AM
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You have to be pretty naive to think such an opaque system would not be manipulated, especially with so much to gain. My only surprise is that there is a paper trail.
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  #24  
Old 07-04-2012, 12:59 AM
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The recession made them desperate, so they got sloppy.

Make no mistake though, they've done it even before the recession.
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  #25  
Old 07-04-2012, 07:29 AM
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Well,
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  #26  
Old 07-04-2012, 08:28 AM
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Originally Posted by campbell View Post
I liked the "LIBOR pains" but I thought I was stupid to mix metaphors by adding the "powder keg" portion.
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  #27  
Old 07-04-2012, 08:30 AM
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I imagine that the legal teams in these banks have been completely overwhelmed the last few years. One scandal after another. There are still suits related to the improper handling of mortgages going on.
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  #28  
Old 07-04-2012, 09:06 AM
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I'm curious how regulators decide on the penalty for some of these cases - the number often seems random and there is no explanation.

It is also sickening that you can make billions of dollars on malfeasance and then agree to pay a paltry penalty that is a fraction of the ill gotten gains (think Angelo Mozillo and CountryWide).
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  #29  
Old 07-06-2012, 02:46 PM
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http://www.economist.com/node/21558281

Quote:
In theory, LIBOR is supposed to be a pretty honest number because it is assumed, for a start, that banks play by the rules and give truthful estimates. The market is also sufficiently small that most banks are presumed to know what the others are doing. In reality, the system is rotten. First, it is based on banks’ estimates, rather than the actual prices at which banks have lent to or borrowed from one another. “There is no reporting of transactions, no one really knows what’s going on in the market,” says a former senior trader closely involved in setting LIBOR at a large bank. “You have this vast overhang of financial instruments that hang their own fixes off a rate that doesn’t actually exist.”

A second problem is that those involved in setting the rates have often had every incentive to lie, since their banks stood to profit or lose money depending on the level at which LIBOR was set each day. Worse still, transparency in the mechanism of setting rates may well have exacerbated the tendency to lie, rather than suppressed it. Banks that were weak would not have wanted to signal that fact widely in markets by submitting honest estimates of the high price they would have to pay to borrow, if they could borrow at all.
....
The FSA has identified price-rigging dating back to 2005, yet some current and former traders say that problems go back much further than that. “Fifteen years ago the word was that LIBOR was being rigged,” says one industry veteran closely involved in the LIBOR process. “It was one of those well kept secrets, but the regulator was asleep, the Bank of England didn’t care and…[the banks participating were] happy with the reference prices.” Says another: “Going back to the late 1980s, when I was a trader, you saw some pretty odd fixings…With traders, if you don’t actually nail it down, they’ll steal it.”

....
Another issue is the conflict central banks face, in times of systemic banking crises, between maintaining financial stability and allowing markets to operate transparently. Whether the BoE instructed Barclays to lower its submissions or not, regulators had a pretty clear motive for wanting lower LIBOR: British banks, in effect, were being shut out of the markets. The two hardest-hit banks, RBS and HBOS, were both far too big to fail, and higher LIBOR rates would have made the regulators’ job of supporting them more difficult.

This highlights a deeper question: what is the right level of involvement in influencing or regulating market interest rates, in a crisis, by those responsible for financial stability? Central banks get a slew of sensitive information from banks which they rightly do not want to make public. Data on deposit outflows at banks could trigger unnecessary runs, for example. Yet LIBOR is a measure of market rates, not those picked by policymakers.
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  #30  
Old 07-06-2012, 03:35 PM
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so do we need to incorporate manipulation in our interest rate models now?
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