Libor was "fixed" by design. Literally, the concept behind Libor was to ask some guys to make up a rate they thought they could borrow money at (note: Not the rate they WERE borrowing money at). Totally subjective. For the purposes it was originally intended for, that was fine. Later it began to be used for other purposes, but it seems like a lot of people forgot that it was, at base, asking some bankers to make up a number. Which...they did. And then people got upset, because they didn't want a made up number, they wanted some objective benchmark. Well, maybe you shouldn't have been using Libor?
Okay, sure, the number was being made up for selfish reasons and did not represent a good faith effort to try and make up a number that accurately reflected the rate that the people being asked believed they could borrow hypothetical money, if they tried. If you squint a bit, that's...I dunno, I guess it's bad? It wasn't obviously against the law, and I'm hard pressed to articulate a clear moral argument about how bankers should make up hypothetical numbers, but okay, let's just say it was bad and wrong.
But... At any given point some banks were trying to drive the numbers up; others down. Net movement was often nil but generally downwards. Since mortgages are often linked to Libor (in some countries) that means all this probably means a bunch of people saved a few pennies (literally) on their mortgage payments a few years back, mostly at the expense of large investors. Yeah, I know, that doesn't mean it's either moral or legal but...stealing an almost immeasurably small amount of money from a hedge fund and giving it to a home owner is not exactly "robbing widows and orphans" territory.
In short, I'm decidedly underwhelmed by the entire "scandal". And I think the sentence was wildly disproportionate; there's no way you can say the magnitude of the crime justified it, especially given the small scale and vague legal situation.
I think the issue was the collusion in making up this number, and not the fact that the number was made up.
You're right about every single thing you said. However, the conclusion is slightly off.
Think about prices at a gas station. Each gas station owner is free to price their gas at a price at which he thinks people will buy it from him. This is normal and most definitely legal.
What is not legal is if even two or more has station owners make a secret pact to keep prices the same. This is called price fixing. It does not matter if the price is a bit higher than normal (to maximize profits) or lower than normal (to keep a third gas station from opening up). What matters is that the prices are being fixed.
If you slice and dice price fixing, you can come up with the same conclusion as you have. And yet price fixing is considered illegal and bad.
In the case of LIBOR, it is a situation very similar to price fixing, but at an imaginably large scale. That is why it was a huge scandal and that is why people and institutions got punished for it.
> Since mortgages are often linked to Libor (in some countries) that means all this probably means a bunch of people saved a few pennies (literally) on their mortgage payments a few years back, mostly at the expense of large investors. Yeah, I know, that doesn't mean it's either moral or legal but...stealing an almost immeasurably small amount of money from a hedge fund and giving it to a home owner is not exactly "robbing widows and orphans" territory.
Many of those large investors are mutual funds and pension funds. Some of which do fund widows and orphans. E.g. I think CALPERS was involved in one of the lawsuits?
Stealing a penny each from a million people surely must be just as evil bad and wrong as stealing a million pennies from one person (any sensible way of relating money and harm comes up with that result). I think the reason it seems less bad is that our monkey brains aren't good at comprehending the concept of millions of people, so when we say "a million people" our moral intuition just interpreters that as "lots of people", i.e. "a couple of hundred people".
Stealing an almost immeasurably small amount of money from a hedge fund and giving it to a home owner is not exactly "robbing widows and orphans" territory."
The amount of money involved was hardly insignificant. Per WP:
"Early estimates are that the rate manipulation scandal cost US states, counties, and local governments at least $6 billion in fraudulent interest payments, above $4 billion that state and local governments have already had to spend to unwind their positions exposed to rate manipulation.[53] ... Timothy Lee, a capital markets expert at the Federal Housing Finance Agency Office of Inspector General, said in a 3 November memo that Fannie Mae and Freddie Mac may have lost more than $3 billion because of the manipulation.[57]"
And I hate to break this to you, but the people who benefit from these schemes weren't "giving [their gains] to home owners."
There's no way you can say the magnitude of the crime justified it, especially given the small scale and vague legal situation.
As to the crime, it's called "market manipulation", and there's nothing at all legally vague about it. These people knew what they were doing, and by and large, were perfectly aware that it was agains the law. The just didn't think they'd get caught.
They could have used eurodollars but as you note it all began long ago and nobody could be bothered to change. And these fixings were not even far from whatever rate was believed to be their true rate ((for how much and from who? Always left out). Why anybody would use it in swaps was crazy. And the fx fix outlived its usefulness in the early 80s yet some clients still insisted on using it.
The flip side of libor is the rage against spoofing. As long as the price is available to be dealt on for some minimum time, who cares? You think its wrong then go deal on it. In the days when fx and money/bond markets were not totally automated trading was all about psychology- which side would cave first. Pushing prices and then calling off the weak side was just good market making.
> Libor was "fixed" by design. Literally, the concept behind Libor was to ask some guys to make up a rate they thought they could borrow money at (note: Not the rate they WERE borrowing money at).
..
>Later it began to be used for other purposes, but it seems like a lot of people forgot that it was, at base, asking some bankers to make up a number.
To be clear, it was never intended to be a measure of credit quality for banks. It was supposed to be a measure of supply and demand in the money market, a substitute for the Fed Funds rate, only for the non-US domiciled dollar market.
I actually traded with these guys. Not personally but definitely through agents.
It's interesting to note that whenever there was a fixing of any kind in a visible market like fx or equities, people who held dependent instruments such as options would always comment on how it seemed fixed.
You'd stare at the graph during the fixing and wonder why on earth it was moving so strangely. They'd typically be rumours of someone having a large interest via barriers and such but of course your broker would not actually tell you who.
I'm not surprised libor was also rigged, it actually seems to suit the culture. Add to that the fact a lot of these guys (these types of traders and brokers, not necessarily these exact guys) knew each other from childhood, or at least had a very strong common culture.
Former algorithmic options market maker. Brokers don't tell because they don't know. (We did, along with the one broker whose client placed the order did.)
I think it's worth clarifying a couple of things. This is my personal understanding of what happened.
There were two separate scandals in the libor fixing scandal.
Scandal one is the one covered in this article. Before the crisis, swap traders getting the libor submitters to skew their submissions in one way or another to fit their positions. One thing to know about that is that the amount by which the libor fixings were moved was very marginal, typically 5-10 basis points (0.05-0.1%), which would then get averaged out, and probably well within the range of uncertainty for the cost of funding of a bank. The impact would be nothing more than a rounding error to pretty much any borrower with a loan indexed on Libor. It would matter to a swap trader as he would be sitting on a massive libor future position, and would be running the basis risk between that position and the derivatives this position is hedging. But it is kind of like stealing 1 cent from 10 millions bank accounts. It is still stealing, it doesn't excuse it, but people who pretend that the economy has been impacted are insincere.
The other scandal was of a whole different nature and scale. During the peak of the crisis, as banks were going bust one after the others, the management of these banks were asking libor submitters to lower their contribution significantly, typically by several percents, because these contributions were public, and they did not want to give the sentiment that the bank was struggling to fund itself, and may go bust soon too. This had a much larger impact on everyday loans, though at the benefit of the borrowers, as rates were lower than they should. People who pretend that struggling borrowers were cheated got their math wrong. Investors were cheated. Although one could argue that when people were choosing libor for their contract, they meant it as a good indicator of the general level of interest rates, but didn't mean to index their own borrowing cost to the credit risk of a bank, which has very little to do with interest rates, and is what caused libor to spike, as interest rates were otherwise going down.
That second scandal though, was not something that happened, hidden, between a handful of traders. Regulators were informed either by whistle blowers, or even potentially by the management of banks. They decided not to act as they percieved the threat of major banks going bust as a much greater problem than where interest rates were. Now I am not saying I condone manipulating rate submissions. But people who are outraged on HN should ask themselves whether they would have preffered the alternative, a much more violent financial crisis than 2008, which was already off the chart.
"[November 15, 2007], the Sterling Money Markets Liaison Group [...] including bankers from Barclays, Citigroup, JP Morgan Chase, Royal Bank of Scotland, Deutsche, Goldman Sachs, HSBC Holdings and Lloyds. Eight attended from the Bank of England, including Tucker.
According to the minutes, "Several group members thought that Libor fixings had been lower than actual traded interbank rates throughout the period of stress."
Reading back the messages on libor fixing is why I have a "how would this look being read out in court" mental check before communicating with colleagues on internal IM or email. There's nothing illegal that I do (or even that I can do, really) but I've no idea what anyone else is up to, and it would be extremely embarrassing for a silly in-joke or throwaway comment to be taken completely out of context. What these folks were up to was pretty bad but the pally, casual way they talked about it probably didn't help them one bit.
What I'm curious about is when he said things like "I'll pay you, you know, $50,000, $100,000, whatever. Whatever you want, all right?", was it just hot air, or did he actually follow through with these people? And if so, how (bank transfer, super-cars as gifts, cash in briefcases, etc.), and why weren't these picked up by things like Anti Money Laundering, Gifts & Entertainment policies etc.?
Its one thing I try to keep in mind when reading news articles that pull quotes from court transcripts. If you pulled random quotes from many of my chat transcripts, even in professional settings, they might seem insanely terrible without context.
Just yesterday I said in chat that I needed to "put a bullet in his head". The "his" in that quote was an old daemon that was performing badly and needed to be shut down.
If you are not completely paranoid already, the Fabrice Tourre scandal should push you over the edge. The SEC and congress edited sentences and took them out of context in a pretty shameless way.
Two examples I noted:
First the SEC quotes Tourre "More and more leverage in the system, The whole building is about to collapse anytime now…Only potential survivor, the fabulous Fab[rice Tourre]…standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!" [1]
Where the actual sentence was (translating the bits in French): You should take a look at this article... Very insightful... More and more leverage in the system, the whole building is about to collapse anytime. Only potential survivor, the fabulous fab (as Mitch would kindly call me, even though there is nothing fabulous about me, just kindness, altruism and deep love for some gorgeous and super-smart French girl in London), standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all the implications of these monstruosities!!! Anyway, not feeling too guilty about this, the real purpose of my job is to make capital markets more efficient and ultimately provide the US consumer with more efficient ways to leverage and finance himself, etc [2]
I wouldn't write that in an email, but still, the sentence has a very different meaning with the bits edited out by the SEC back in.
Second example, one of Tourre's managers was quoted writing "boy that timeberwof was one shitty deal". This was repeated over and over by congress as if it was a reference to the quality of the collateral of the transaction, i.e. Goldman Sachs sells some product to a client that they call internally a shitty product. But if you look at the actual email trail [3], they are not discussing about the quality of the collateral in that CDO, but of the fact that they are left with a $300m unsold position, which understandably is undesirable as a market maker.
So my advice to everyone. No personal stuff in professional emails. No humor, no joke, no second degree, no sarcasm. None of that is safe. The sentence you add at the end to provide context in case a third party reads it will not help you, it will be edited out.
I use SMS Backup + [1] which saves all my text messages to my Google account allowing me to easily search and archive. It's followed me through android phones for many years, automagically installing as I sign-in for the first time on each 'new' device.
They are likely to be either Bloomberg messages or on banks' internal chat systems, similar to IRC but recorded. For example Mindalign is a chat system that was spun out of UBS and bought by Microsoft.
I'd prefer shorter sentences for non-violent drug offenses.
Tom Hayes interned at UBS in 2001 [1]. Most interns are about 20 years old; we can thus estimate his age at about 35. A man born in the UK in 1981 is expected to live about 70 years [2]. Hayes' 14-year sentence thus represents almost 40% of his remaining life.
I'm amazed he got any jail time at all. Look back at the 2008 financial crisis. The crisis was riddled with fraud, and yet the executives from many of those banks that caused the crisis left with multi-million dollar bonuses and zero jail time.
According to the article, Hayes was "chief informant, who in return would receive leniency and, more importantly, an agreement that he would be dealt with in the UK. To secure this arrangement Hayes had to agree to tell the SFO everything he knew and promise to testify against everybody involved. Crucially, he also had to plead guilty..."
They don't know the basis of economical science and are stuck in a self-limiting (hence deflationary) monetary base. Not to mention some of the fundamentalism that runs around
I don't get how someone can write about Libor and not get into more details about the structure. I consider it one of the most important and yet most under-reported key stories of the 08 crash.
My primary issue isn't with LIBOR persay, because, as the name implies, it's a London bank rate. My primary issue is with the fact that the Fed board of governors so quickly and easily chose it as the rate, in effect ceding a huge part of their power (interest rate setting) to fucking London bankers! They had all the power to choose an American rate or create one of their own, but chose not to.
To me, this is a perfect example of the danger of the Fed and it's unsupervised, unchecked power of agency, and it leads credence to the anti-fed sentiment and documentation I have read.
That the Wall Street bankers truly are subservient to The City (London) is more of a threat to US national security than ISIS.
In 2014 "a private corporation called ICE Benchmark Administration (IBA) took over the daily production and administration of [LIBOR] subject to the regulation and supervision of" the UK's Financial Conduct Authority [1]. ICE is an American company that trades on the NYSE.
> the Fed [ceded]...power...to...London
Of the 18 LIBOR member banks, 3 are American and all have a presence in New York City [2]. That's how the Fed is able to regulate them. Also, I don't think the Fed pushes LIBOR. Lenders baked it into their private contracts much as the Wall Street Journal prime rate is baked into some mortgages.
> Wall Street bankers...are subservient to The City
Other way around. If Washington cut London's dollar clearing privileges the City would implode.
> My primary issue is with the fact that the Fed board of governors so quickly and easily chose it as the rate
What are you talking about? LIBOR was a de facto standard because the market overwhelmingly chose to use it as the short rate by writing it into private counterparty contracts. The market could have easily settled into something else (right now it's moving towards Fed Funds and OIS rates).
If you look at how the LIBOR rate is actually set, it's a trimmed average, meaning you poll something like 18 banks, then you discard the highest 4 and lowest 4. This is actually a good fraud-resistant design.
The Fed had little directly to do with what index banks and other private counterparties chose to use with one another at the time.
Despite other reasons it's probably also political. Sometimes in a high position it's actually better to not know stuff. Set up an employment contract that forces others to do illegal things in your favor but never ask what they do. When sh*t hits the fan you can exit fast, since you know you set up your guy to do bad things, and since you can access all the information that is and therefore can make smart decisions for yourself. But when the scheme gets caught on by the public your employer goes to jail, not you. Nobody ever asks for who set up the system in a way that traders feeled compelled to act dishonest.
So yes, they handed off the power to do their jobs right, but their goal was not to do their jobs right. Their goal was to make money as long as it's good and not go to jail when it's bad. And the power to do that they didn't hand of to anyone.
[+] [-] Lazare|9 years ago|reply
Libor was "fixed" by design. Literally, the concept behind Libor was to ask some guys to make up a rate they thought they could borrow money at (note: Not the rate they WERE borrowing money at). Totally subjective. For the purposes it was originally intended for, that was fine. Later it began to be used for other purposes, but it seems like a lot of people forgot that it was, at base, asking some bankers to make up a number. Which...they did. And then people got upset, because they didn't want a made up number, they wanted some objective benchmark. Well, maybe you shouldn't have been using Libor?
Okay, sure, the number was being made up for selfish reasons and did not represent a good faith effort to try and make up a number that accurately reflected the rate that the people being asked believed they could borrow hypothetical money, if they tried. If you squint a bit, that's...I dunno, I guess it's bad? It wasn't obviously against the law, and I'm hard pressed to articulate a clear moral argument about how bankers should make up hypothetical numbers, but okay, let's just say it was bad and wrong.
But... At any given point some banks were trying to drive the numbers up; others down. Net movement was often nil but generally downwards. Since mortgages are often linked to Libor (in some countries) that means all this probably means a bunch of people saved a few pennies (literally) on their mortgage payments a few years back, mostly at the expense of large investors. Yeah, I know, that doesn't mean it's either moral or legal but...stealing an almost immeasurably small amount of money from a hedge fund and giving it to a home owner is not exactly "robbing widows and orphans" territory.
In short, I'm decidedly underwhelmed by the entire "scandal". And I think the sentence was wildly disproportionate; there's no way you can say the magnitude of the crime justified it, especially given the small scale and vague legal situation.
[+] [-] koliber|9 years ago|reply
You're right about every single thing you said. However, the conclusion is slightly off.
Think about prices at a gas station. Each gas station owner is free to price their gas at a price at which he thinks people will buy it from him. This is normal and most definitely legal.
What is not legal is if even two or more has station owners make a secret pact to keep prices the same. This is called price fixing. It does not matter if the price is a bit higher than normal (to maximize profits) or lower than normal (to keep a third gas station from opening up). What matters is that the prices are being fixed.
If you slice and dice price fixing, you can come up with the same conclusion as you have. And yet price fixing is considered illegal and bad.
https://en.wikipedia.org/wiki/Price_fixing
In the case of LIBOR, it is a situation very similar to price fixing, but at an imaginably large scale. That is why it was a huge scandal and that is why people and institutions got punished for it.
[+] [-] lmm|9 years ago|reply
Many of those large investors are mutual funds and pension funds. Some of which do fund widows and orphans. E.g. I think CALPERS was involved in one of the lawsuits?
Stealing a penny each from a million people surely must be just as evil bad and wrong as stealing a million pennies from one person (any sensible way of relating money and harm comes up with that result). I think the reason it seems less bad is that our monkey brains aren't good at comprehending the concept of millions of people, so when we say "a million people" our moral intuition just interpreters that as "lots of people", i.e. "a couple of hundred people".
[+] [-] kafkaesq|9 years ago|reply
The amount of money involved was hardly insignificant. Per WP:
"Early estimates are that the rate manipulation scandal cost US states, counties, and local governments at least $6 billion in fraudulent interest payments, above $4 billion that state and local governments have already had to spend to unwind their positions exposed to rate manipulation.[53] ... Timothy Lee, a capital markets expert at the Federal Housing Finance Agency Office of Inspector General, said in a 3 November memo that Fannie Mae and Freddie Mac may have lost more than $3 billion because of the manipulation.[57]"
And I hate to break this to you, but the people who benefit from these schemes weren't "giving [their gains] to home owners."
There's no way you can say the magnitude of the crime justified it, especially given the small scale and vague legal situation.
As to the crime, it's called "market manipulation", and there's nothing at all legally vague about it. These people knew what they were doing, and by and large, were perfectly aware that it was agains the law. The just didn't think they'd get caught.
[+] [-] beezle|9 years ago|reply
The flip side of libor is the rage against spoofing. As long as the price is available to be dealt on for some minimum time, who cares? You think its wrong then go deal on it. In the days when fx and money/bond markets were not totally automated trading was all about psychology- which side would cave first. Pushing prices and then calling off the weak side was just good market making.
[+] [-] JackFr|9 years ago|reply
To be clear, it was never intended to be a measure of credit quality for banks. It was supposed to be a measure of supply and demand in the money market, a substitute for the Fed Funds rate, only for the non-US domiciled dollar market.
[+] [-] retube|9 years ago|reply
[+] [-] JohnJamesRambo|9 years ago|reply
Why didn't people and banks just use this number?
[+] [-] lordnacho|9 years ago|reply
It's interesting to note that whenever there was a fixing of any kind in a visible market like fx or equities, people who held dependent instruments such as options would always comment on how it seemed fixed.
You'd stare at the graph during the fixing and wonder why on earth it was moving so strangely. They'd typically be rumours of someone having a large interest via barriers and such but of course your broker would not actually tell you who.
I'm not surprised libor was also rigged, it actually seems to suit the culture. Add to that the fact a lot of these guys (these types of traders and brokers, not necessarily these exact guys) knew each other from childhood, or at least had a very strong common culture.
[+] [-] JumpCrisscross|9 years ago|reply
Former algorithmic options market maker. Brokers don't tell because they don't know. (We did, along with the one broker whose client placed the order did.)
[+] [-] elastic_church|9 years ago|reply
http://quant.stackexchange.com/questions/3753/what-really-dr...
[+] [-] cm2187|9 years ago|reply
There were two separate scandals in the libor fixing scandal.
Scandal one is the one covered in this article. Before the crisis, swap traders getting the libor submitters to skew their submissions in one way or another to fit their positions. One thing to know about that is that the amount by which the libor fixings were moved was very marginal, typically 5-10 basis points (0.05-0.1%), which would then get averaged out, and probably well within the range of uncertainty for the cost of funding of a bank. The impact would be nothing more than a rounding error to pretty much any borrower with a loan indexed on Libor. It would matter to a swap trader as he would be sitting on a massive libor future position, and would be running the basis risk between that position and the derivatives this position is hedging. But it is kind of like stealing 1 cent from 10 millions bank accounts. It is still stealing, it doesn't excuse it, but people who pretend that the economy has been impacted are insincere.
The other scandal was of a whole different nature and scale. During the peak of the crisis, as banks were going bust one after the others, the management of these banks were asking libor submitters to lower their contribution significantly, typically by several percents, because these contributions were public, and they did not want to give the sentiment that the bank was struggling to fund itself, and may go bust soon too. This had a much larger impact on everyday loans, though at the benefit of the borrowers, as rates were lower than they should. People who pretend that struggling borrowers were cheated got their math wrong. Investors were cheated. Although one could argue that when people were choosing libor for their contract, they meant it as a good indicator of the general level of interest rates, but didn't mean to index their own borrowing cost to the credit risk of a bank, which has very little to do with interest rates, and is what caused libor to spike, as interest rates were otherwise going down.
That second scandal though, was not something that happened, hidden, between a handful of traders. Regulators were informed either by whistle blowers, or even potentially by the management of banks. They decided not to act as they percieved the threat of major banks going bust as a much greater problem than where interest rates were. Now I am not saying I condone manipulating rate submissions. But people who are outraged on HN should ask themselves whether they would have preffered the alternative, a much more violent financial crisis than 2008, which was already off the chart.
[+] [-] bboreham|9 years ago|reply
According to the minutes, "Several group members thought that Libor fixings had been lower than actual traded interbank rates throughout the period of stress."
http://reuters.com/article/idUSBRE86114M20120703
[+] [-] gd1|9 years ago|reply
[deleted]
[+] [-] smcl|9 years ago|reply
[+] [-] m-i-l|9 years ago|reply
[+] [-] kasey_junk|9 years ago|reply
Just yesterday I said in chat that I needed to "put a bullet in his head". The "his" in that quote was an old daemon that was performing badly and needed to be shut down.
[+] [-] cm2187|9 years ago|reply
Two examples I noted:
First the SEC quotes Tourre "More and more leverage in the system, The whole building is about to collapse anytime now…Only potential survivor, the fabulous Fab[rice Tourre]…standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!" [1]
Where the actual sentence was (translating the bits in French): You should take a look at this article... Very insightful... More and more leverage in the system, the whole building is about to collapse anytime. Only potential survivor, the fabulous fab (as Mitch would kindly call me, even though there is nothing fabulous about me, just kindness, altruism and deep love for some gorgeous and super-smart French girl in London), standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all the implications of these monstruosities!!! Anyway, not feeling too guilty about this, the real purpose of my job is to make capital markets more efficient and ultimately provide the US consumer with more efficient ways to leverage and finance himself, etc [2]
I wouldn't write that in an email, but still, the sentence has a very different meaning with the bits edited out by the SEC back in.
Second example, one of Tourre's managers was quoted writing "boy that timeberwof was one shitty deal". This was repeated over and over by congress as if it was a reference to the quality of the collateral of the transaction, i.e. Goldman Sachs sells some product to a client that they call internally a shitty product. But if you look at the actual email trail [3], they are not discussing about the quality of the collateral in that CDO, but of the fact that they are left with a $300m unsold position, which understandably is undesirable as a market maker.
So my advice to everyone. No personal stuff in professional emails. No humor, no joke, no second degree, no sarcasm. None of that is safe. The sentence you add at the end to provide context in case a third party reads it will not help you, it will be edited out.
[1] https://www.sec.gov/litigation/complaints/2010/comp-pr2010-5... page 7
[2] http://i.telegraph.co.uk/multimedia/archive/01623/Fabrice_To...
[3] http://www.hsgac.senate.gov//imo/media/doc/Financial_Crisis/... page 224
[+] [-] djhworld|9 years ago|reply
I mean, he's a millionaire, millions of pounds in bonuses and salary, getting a job like his isn't easy - why throw all that away?
[+] [-] known|9 years ago|reply
[+] [-] kevin_thibedeau|9 years ago|reply
[+] [-] illektr1k|9 years ago|reply
[1] https://play.google.com/store/apps/details?id=com.zegoggles....
[+] [-] bboreham|9 years ago|reply
[+] [-] TwoBit|9 years ago|reply
[+] [-] middus|9 years ago|reply
[+] [-] JumpCrisscross|9 years ago|reply
Tom Hayes interned at UBS in 2001 [1]. Most interns are about 20 years old; we can thus estimate his age at about 35. A man born in the UK in 1981 is expected to live about 70 years [2]. Hayes' 14-year sentence thus represents almost 40% of his remaining life.
[1] https://en.wikipedia.org/wiki/Tom_Hayes_(trader)
[2] https://www.ons.gov.uk/peoplepopulationandcommunity/birthsde...
[+] [-] djsumdog|9 years ago|reply
[+] [-] m-i-l|9 years ago|reply
[+] [-] rissicay|9 years ago|reply
[+] [-] neximo64|9 years ago|reply
Likewise interest rates on bitcoin would be exactly the same.
[+] [-] raverbashing|9 years ago|reply
They don't know the basis of economical science and are stuck in a self-limiting (hence deflationary) monetary base. Not to mention some of the fundamentalism that runs around
Good luck with that
[+] [-] arca_vorago|9 years ago|reply
My primary issue isn't with LIBOR persay, because, as the name implies, it's a London bank rate. My primary issue is with the fact that the Fed board of governors so quickly and easily chose it as the rate, in effect ceding a huge part of their power (interest rate setting) to fucking London bankers! They had all the power to choose an American rate or create one of their own, but chose not to.
To me, this is a perfect example of the danger of the Fed and it's unsupervised, unchecked power of agency, and it leads credence to the anti-fed sentiment and documentation I have read.
That the Wall Street bankers truly are subservient to The City (London) is more of a threat to US national security than ISIS.
[+] [-] JumpCrisscross|9 years ago|reply
In 2014 "a private corporation called ICE Benchmark Administration (IBA) took over the daily production and administration of [LIBOR] subject to the regulation and supervision of" the UK's Financial Conduct Authority [1]. ICE is an American company that trades on the NYSE.
> the Fed [ceded]...power...to...London
Of the 18 LIBOR member banks, 3 are American and all have a presence in New York City [2]. That's how the Fed is able to regulate them. Also, I don't think the Fed pushes LIBOR. Lenders baked it into their private contracts much as the Wall Street Journal prime rate is baked into some mortgages.
> Wall Street bankers...are subservient to The City
Other way around. If Washington cut London's dollar clearing privileges the City would implode.
[1] https://www.federalreserve.gov/newsevents/speech/powell20140...
[2] https://en.wikipedia.org/wiki/Libor
[+] [-] smallnamespace|9 years ago|reply
What are you talking about? LIBOR was a de facto standard because the market overwhelmingly chose to use it as the short rate by writing it into private counterparty contracts. The market could have easily settled into something else (right now it's moving towards Fed Funds and OIS rates).
If you look at how the LIBOR rate is actually set, it's a trimmed average, meaning you poll something like 18 banks, then you discard the highest 4 and lowest 4. This is actually a good fraud-resistant design.
The Fed had little directly to do with what index banks and other private counterparties chose to use with one another at the time.
[+] [-] erikb|9 years ago|reply
So yes, they handed off the power to do their jobs right, but their goal was not to do their jobs right. Their goal was to make money as long as it's good and not go to jail when it's bad. And the power to do that they didn't hand of to anyone.