Bankers Gone Wild

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Bankers Gone Wild

Posted By: DannyCahalin [Send E-Mail]
Date: Monday, 23-Jul-2012 21:20:49

This week in The New Yorker ******* In order to work well, markets need a basic level of trust. As Alan Greenspan said, in 1999, “In virtually all transactions we rely on the word of those with whom we do business.” So what happens to a market in which the most fundamental assumptions turn out to be lies? That is the question in a scandal that has roiled the banking industry all summer. The LIBOR (London Inter-bank Offered Rate) index is the most important set of numbers in the global financial system. Used as a benchmark for interest rates around the world, it’s assembled by asking a panel of big banks to estimate what it would cost them to borrow money today, if they had to. Hundreds of trillions of dollars in derivatives, corporate loans, and mortgages are pegged to these rates. Yet we now know that for years LIBOR rates were rigged. Barclays has agreed to pay nearly half a billion dollars to regulators for its manipulations, and a host of other big banks are under investigation for similar misdeeds. Rigging LIBOR was shockingly easy. Read more http://www.newyorker.com/talk/financial/2012/07/30/120730ta_talk_surowiecki#ixzz21UyJB44i