One of the few issues which both the political left and the right
agree upon is rooting out financial corruption by the banking industry.
The latest banking scandal involves big banks submitting falsified data
in order to keep their borrowing rates low. As many as 16 banks
worldwide have been submitting false information to LIBOR, the London
interbank offer rate. LIBOR is considered one of the most crucial
interest rates in finance. It is the average interest rate the world's
largest banks pay when they borrow money from each other, and affects
the rate of interest borrowers pay on everything from student loans to
credit cards to corporate debt. It is the benchmark for three-quarters
of a quadrillion dollars in financial dealings.
16 banks contribute daily estimates to LIBOR of what interest rate they would have to pay if they borrowed money. Banks borrow from each other on occasion when they find that more withdrawals have been made in a day than deposits by customers. By submitting artificially low interest rates, the banks were able to disguise their financial troubles. This heavily contributed to the subprime mortgage meltdown. Subprime mortgage lenders preferred using the LIBOR index to tie adjustable rate mortgages to due to their overly rosy picture.
The New York Fed, which was headed by TARP bailout architect and now Secretary of the Treasury Timothy Geithner, knew in 2007 that banks were rate rigging. Although Geithner offered suggestions to increase transparency, nothing was done and the rate rigging continued. Evidence of the rate rigging goes back to 2005.
The brazenness with which Barclay traders would commit these crimes is astounding. Matt Levine at Dealbreaker has reprinted some of the conversations between LIBOR and Barclays traders joking about submitting falsified numbers. One Barclay trader wrote in an email to a submitter: “We have another big fixing tom[orrow] and with the market move I was hoping we could set [certain] LIBORS as high as possible.”
Read more: http://townhall.com/columnists/rachelalexander/2012/07/19/tarp_banks_caught_falsifying_interest_rates_in_libor_ratesetting_scandal
16 banks contribute daily estimates to LIBOR of what interest rate they would have to pay if they borrowed money. Banks borrow from each other on occasion when they find that more withdrawals have been made in a day than deposits by customers. By submitting artificially low interest rates, the banks were able to disguise their financial troubles. This heavily contributed to the subprime mortgage meltdown. Subprime mortgage lenders preferred using the LIBOR index to tie adjustable rate mortgages to due to their overly rosy picture.
The New York Fed, which was headed by TARP bailout architect and now Secretary of the Treasury Timothy Geithner, knew in 2007 that banks were rate rigging. Although Geithner offered suggestions to increase transparency, nothing was done and the rate rigging continued. Evidence of the rate rigging goes back to 2005.
The brazenness with which Barclay traders would commit these crimes is astounding. Matt Levine at Dealbreaker has reprinted some of the conversations between LIBOR and Barclays traders joking about submitting falsified numbers. One Barclay trader wrote in an email to a submitter: “We have another big fixing tom[orrow] and with the market move I was hoping we could set [certain] LIBORS as high as possible.”
Read more: http://townhall.com/columnists/rachelalexander/2012/07/19/tarp_banks_caught_falsifying_interest_rates_in_libor_ratesetting_scandal
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