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(Washington Post)   Casual emails between "dudes" asking each other for "small" favors actually reveals a plot to fix interests rates on $456 TRILLION in financial trades   (washingtonpost.com ) divider line
    More: Scary, Barclays plc, Financial Services Authority, Canary Wharf, BBA LIBOR, interest rates, international financial center, fixed interest, bankers  
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11047 clicks; posted to Business » on 29 Jun 2012 at 2:05 PM (4 years ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-06-29 12:39:44 PM  
3 votes:
"One trader said this..." "Another trader said that..."

Can we just have their names so we know who these assholes are? Why is it that the names of child rapists are released to the public before trial but we can't get the names of our financial rapists?
2012-06-29 05:44:06 PM  
2 votes:
Could you imagine if a vigilante group modeled after "Los Pepes," the group that terrorized Pablo Escobar's footsoldiers in Columbia, started randomly hitting bankers like these "bros?"

'Cause I can.
2012-06-30 06:28:53 AM  
1 vote:

Dr Dreidel: Tell me - what's the ripple effect if the rate is too high by .01%? .1%? .5%? 1%? This affects all loans, right - that's gotta be, in actual inflated-costs-due-to-fist-bumps terms, billions of pounds' worth of money moving around, all making the bank an extra fraction of a cent (or even whole penny) for each dollar loaned. For you and me, that might be chump change. For a 30yr mortgage holder (call it $250k), a .1% rise in interest rates could mean the difference between paying off your note on time vs paying it off 2 years early (but I haven't run the math on that).

// not a businessman, so these are actual questions


Short answer: There'd have been no noticable negative effect on mortgages.

The numbers are far smaller than you're thinking. Barclays was adjusting their figures by about 0.5-1 basis points. So 0.005 to 0.01%. However, the LIBOR rate isn't just Barclays figures ... it's the average of reports from 18 banks, trimmed of the top and bottom 4 (i.e., it's an average of the middle 10 figures). So if Barclays reported too low/high compared to the other banks, that number would've been thrown out. (That is why it is so hard to tell if theyhad an impact or not ... you have to look at what all the other banks reported on that day to know if Barclays figures were even used.) However, you can use some dodgy napkin math and assume Barclays figures were out by 0.005%, divided by 18 banks, the average effect Barclays had on LIBOR was a shift of 0.000278%.

Whether that 0.000278% means anything at all depends on whether other banks were doing similar things. There were actually 2 different manipulation scenarios.

From 2005-08, submitters were being asked to manipulate the figure by traders who wanted to make a profit. (Sometimes they'd want the figure up, but most of the emails I've seen quoted are actually requesting the number to be dropped). If other banks were also submitting dodgy figures on traders' requests they'd tend to cancel each other out. Say bank A dodgies the figure up, and bank B dodgies the figure down, it's totally unethical but you'll actually end up with close to the "true" number.

From 2007-2009, submitters were asked to manipulate the figures (down) by big bosses who didn't want anyone to think Barclays was having liquidity trouble during the GFC. This is more likely to be something systematic (that is, something many of the banks were doing). If so, the end effect would've been lower LIBOR rates (and lower mortgages). The effect of that on the economy is monetary easing ... if the banks were lowering the LIBOR it is pretty much the same thing as the Fed (or Bank of England in this case), lowering the base interest rate (which all the central banks were doing frantically during the GFC). You could even argue that if the banks hadn't dodgied the LIBOR rate themselves, BoE would've indulged in more monetary easing to get the LIBOR down.

The real story isn't the magnitude of money lost/won (which was tiny if anything), it's about the traders/submitters being so brazenly unethical, and the fact that the regulatory agencies that were supposed to be overseeing this failed.
2012-06-29 08:14:55 PM  
1 vote:

Mr. Potatoass: jayhawk88: Debeo Summa Credo: Terrifyinggiantheadedgreenalienfromfamilyguy.jpg

THAT'S NOT HOW THE DERIVATIVES MARKET WORKS!!

[i0.kym-cdn.com image 320x240]

THAT IS NOT HOW FUTURAMA MEME'S WORK!!

[www.blogodisea.com image 272x307]

THAT IS NOT HOW APOSTROPHES WORK!!


johnrfultz.files.wordpress.com

MORBOS DO NOT WORK THAT WAY!!
2012-06-29 07:51:13 PM  
1 vote:

jayhawk88: Debeo Summa Credo: Terrifyinggiantheadedgreenalienfromfamilyguy.jpg

THAT'S NOT HOW THE DERIVATIVES MARKET WORKS!!

[i0.kym-cdn.com image 320x240]

THAT IS NOT HOW FUTURAMA MEME'S WORK!!


www.blogodisea.com

THAT IS NOT HOW APOSTROPHES WORK!!
2012-06-29 05:06:01 PM  
1 vote:

Tommy Moo: Am I the only one shocked that that much money even exists in all of the ledgers in the world combined? That's like 25 years worth of the GDP of the entire planet.


The out-of-control derivatives market is the inevitable result when you let parties with access to lots of money and who have vast influence bet on anything, and you don't regulate it in any way, shape, or form.

Of course, if they screw up badly enough, they can just get their lobbyists to work their politicians for taxpayer-funded bailouts.
2012-06-29 04:26:08 PM  
1 vote:
Oh for God's sake.

"huh huh the derivatives (note: scary word) were worth $456 trillion (THAT'S A BIG NUMBER!!!1!)"

Look people, if I buy a 6 month call option for 100 shares of Microsoft at $40/share (current price = $30), my investment will be about $8. Not $4,000.

But I guess big numbers create more page views, so derivatives will always get a bad rep in the press.
2012-06-29 03:25:22 PM  
1 vote:
Debeo Summa Credo: Oh wait, thats just the notional value of the derivatives and utterly meaningless. Carry on.

My memory is better than that, liar.
Extreme leverage in an unregulated industry that shouldn't exist in the first place is still a threat. That "utterly meaningless" "notional value" of derivatives almost dragged the economy of the entire planet into the Greater Most Profound Depression from September 14th to October 11th in 2008. We're still experiencing the aftereffects.

/PS They still won't let you in the plutocrat club, no matter how publicly and devotedly you blow them.
2012-06-29 02:39:19 PM  
1 vote:
I say old chaps, it would be greatly appreciated if you might ascend to the peak of a tall structure and then briskly stride forward.
2012-06-29 02:28:23 PM  
1 vote:

HotWingConspiracy: "Aren't you the guy that got arrested for fraud?"

"Yes, yes I am."

"Welcome aboard, we need someone like you here."


A) Its the banking industry
B) No one has been arrested yet. It is merely being "investigated". Chances of an arrest and successful prosecution? I think 10%.
2012-06-29 01:17:37 PM  
1 vote:

bdub77: "One trader said this..." "Another trader said that..."

Can we just have their names so we know who these assholes are? Why is it that the names of child rapists are released to the public before trial but we can't get the names of our financial rapists?


Child rapists aren't usually rich and you never find out about the ones who are.
2012-06-29 12:32:11 PM  
1 vote:

vpb: The only surprise is that they got caught.


Given that they weren't even bothering to code these messages or use any sort of euphemisms, it tells me that either they didn't even think they were doing anything wrong, That they'd never get caught, or they just felt so bullet-proof that they literally had no reason to fear the consequences of thier actions
2012-06-29 11:33:34 AM  
1 vote:
I know these guys weren't exterminating jews or anything, but that whole banality of evil thing comes to mind
 
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