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Libor and the Retiree
Old 07-25-2012, 06:18 PM   #1
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Libor and the Retiree

6 Ways Big Banks Screwed Grandma in the Price-Fixing Scandal That's Rocking the World | Alternet
Probably what you already knew, but the article title tells all.

The past twelve years of seeing CD's go from 6.5% to 1.3%... is a part of the story I'm familiar with.

Wonder how many of the people who are affected will ever understand HOW it happened.
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Old 07-25-2012, 06:27 PM   #2
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"Six Ways Big Banks Screwed Grandma"

Old news. Everybody's doing it: Sexually Transmitted Diseases on the Rise for Senior Citizens
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Old 07-26-2012, 07:27 AM   #3
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John Stewart wondered how it affected him the other night. Very funny. But as I thought about it, I realized that I wasn't really sure. To the extent that traders at Barclays and some other banks gamed the system, they clearly made scads of money. But the actual LIBOR rate was probably not skewed any particular way in the long term. It probably bounced around in a non-random way always returning to something like reality. So was a mortgage refinancer or business loan applicant likely to get a higher rate from that? Not necessarily. Whether the destruction of trust will have a strong negative affect of the financial system now that the chicanery is public, who knows? I suspect it wasn't enough of a shock to have much impact.
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Old 07-26-2012, 08:54 AM   #4
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.......... But the actual LIBOR rate was probably not skewed any particular way in the long term......... .
I guess one could make the same case for insider trading.
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Old 07-26-2012, 09:20 AM   #5
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I guess one could make the same case for insider trading.
Yeah, basically. Manipulating the LIBOR back and forth by a tiny percentage is, in effect, insider trading for those in the know. The impact on the rest of us is as individuals is probably relatively small, although the advantages to be had by the criminals is huge. I am not excusing this -- I think they should toss the whole bunch in jail. And, unlike many here, I think we should have stronger regulatory structure and enforcement with some real teeth. I just doubt that this is much of a crisis.
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Old 07-26-2012, 09:26 AM   #6
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The rule breakers here seem to be all males. Perhaps a "male-oriented" punishment would be a more effective deterrence. Works with other species...
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Old 07-26-2012, 09:56 AM   #7
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It took me a while to understand the trickle down implications their effect on my own situation. Based on the "6 ways" in the article, I can see many of them in my own life.

The part that was hard to understand, was the argument that, in the end, the actual average LIBOR looked to be a zero sum gain, and until I understood that the daily fluctuations were used to set rates for things like municipal bonds, it didn't seem to matter. Any manipulation would be difficult to track... probably the reason for the two year study.

Now I can see some of the direct results as our local municipal bond funds and public pension funds are suffering, and services are being curtailed. Not directly from the manipulation of LIBOR? Maybe... I do know that our village boards are not too sophisticated, and that the fund losses have been escalating... both here in IL and in Fl... We haven't had a direct loss yet, but reserves have been depleted, and our bond ratings have dropped. One bond renewal saw a 2% rate increase.

Along with everyone else, we've had to adjust our worth, by the real estate value drop.

Indirectly, 4 of the 6 "ways" would seem to affect us, but the real worrisome part, is the "Grandma" part... quite a bit different than being age 35. No truly safe way to recover losses, even if the economy recovers (last hope Walmart Greeter jobs are no more).

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The revelations have triggered a political furor in the U.K.— but nothing comparable, so far, in the U.S. But this might soon change if a two-year investigation concludes that any U.S. reference bank — including Bank of America, Citibank and J.P. Morgan Chase, or even all three – was in on the fix.
We'll have to wait to see if this turns out to be a blip on the radar, or if the author is correct.
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Old 07-26-2012, 10:14 AM   #8
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The rule breakers here seem to be all males. Perhaps a "male-oriented" punishment would be a more effective deterrence. Works with other species...
Public wedgies with their tighty whiteys?
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Old 07-26-2012, 10:27 AM   #9
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Public wedgies with their tighty whiteys?
Good thinking. Maybe for the first offenders?
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Old 07-26-2012, 04:44 PM   #10
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Arianna Huffington: Good Banks Turn Bad: Barclays, Libor and Me

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Quote:
Just how serious is the scale of this fraud? Some say that the amount tied to Libor is $360 trillion, some say $500 trillion, while others put it as high as $800 trillion.
Probably not important enough to worry about.
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Old 07-26-2012, 09:28 PM   #11
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Arianna Huffington: Good Banks Turn Bad: Barclays, Libor and Me

Excerpt:


Probably not important enough to worry about.
Surprising they didn't go all in and call it an even quadrillion.
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Old 07-27-2012, 12:55 AM   #12
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Surprising they didn't go all in and call it an even quadrillion.
Arianna over the top $800 trillion (gee 50 times the US GDP I kinda of doubt it) exaggeration aside. It is a wound inflicted on us savers.


Now admittedly in the overall scheme of things no where near as bad as the zero percent interest rates thanks to the Fed.

Still if LIBOR was systemically kept low by a couple of basis points, on a $1 million fixed income portfolio over 5 years that adds up to $1,000. I'd much rather have this money than some slimy trader in London. Plus you add it the money lost by traders on the other side, which impacted their firms earnings multiply that by the PE and starts to impact even us little guys.
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Old 07-27-2012, 07:04 AM   #13
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The Libor thing stinks. I have no idea how it affects me and doubt anyone else does either. Vanguard has lots of smart folks, so I'll let them take the lead on this. If they can quantify the cost, they surely will, they will let us know and then we can talk about what to do. In the meantime, there are other, more important things to not worry about.
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