Wednesday, July 11, 2012

- The Libor (Non) Scandal

As a guy who started his career working on a Swaps trading desk and actually knows something about the Libor fixing process, I have to admit, I don't see what the big deal is. Maybe it's symptomatic of the problem that I don't, or maybe I don't know the whole story. But how exactly was Barclays supposed to determine what it wants to submit as a Libor fixing? Is it really not supposed to take it's positions into account? That's what 100% of all the other banks are doing - so why can't Barclays do it?

More than that, this is how the system was DESIGNED to work. Barclays didn't get to decide the Libor fixing in a bubble. They put their market view in with all the other submitting banks. The fixing mechanism is what the BBA (back in the mists of time) decided would be a 'fair' way to come up with a benchmark that would reflect the consensus market view. So who were the Barclays traders supposed to call before submitting their 'view'... the Whitehouse? David Axelrod or his equivalent in the UK? Maybe they should be calling the NYTimes editorial board to find out what the market for loans is like.

What Bull.

This reads to me as the British version of the JPM "tiny loss" invented scandal. It's something that's being invented to keep the banks in the public eye as villains, and to give the politicians something to gripe about as the pretend heroes. It strikes me most though as another one of those circumstances where left leaning mainstream journalists are discovering that Banks try - not achieve by accident or something but actually go out of their way... on purpose - to make (you'd better sit down) ..... profits.

And the thing that's the real tip-off is that none of the traders that sent emails involved in the scandal even tried to hide what they were discussing. They weren't using code words or being discreet. They weren't meeting under parking garages late at night. They were using a communications medium that EVERYONE in the industry knows is permanent as a function of law, and they were coming right out and saying what were hoping for on the fixing.

This was not because they were brazen enemies of the common man blinded by their own greed. It was because they didn't think they were doing anything wrong. And the truth is, they weren't. It's silly to believe they were. This is how banking works. Or at least... this is how it used to before the worlds politicians and journalists decided to 'change' things and to make the banks work less like self interested corporations and more like a division of the government. As usual, they should be a little more careful what they wish for - but they haven't the experience or the brains.

Liberals (still) live in an entirely invented world. They have now invented a banking scandal, but it's not real. And the best evidence of that, is that they can't even find a pretend victim. "3M Libor set 2 Bips Lower - Women and Minorities Hardest Hit."

Grow up and move on kids.


ikaika said...

JPM bonus clawback is headline today. I hear its all restricted LTRS Units... LOL!!! Jmaie Dimon is a pisser!

Tom said...

Ssshhh... you don't want to get the NYTimes reporters to start looking up what the phrase "restricted units" means do you? God knows what they'll start calling a "scandal" then.

Chess said...

This will be the 2nd time I used this phrase this am.. Simple .Straightforward. To the point.. Well said Tom.

p.s. Maxine Waters will put this all straight..

p.s.s. The dude from Peregrine Financial is getting fitted for his orange jumpsuit. 40 long sir.

ikaika said...

Krugman is on and seems to believe that Sweden is doing quite well in the crisis.
Why the hell do liberals automatically reach for Sweden as some beacon in the gloom?
I can appreciate Joe Kernan this am.

Chess said...

I swore I wouldnt watch him and like a fu......n moth to a flame !!!!.....I unmuted.

I am now kneeling in front of a cross I have on the bedroom wall with a leather strap in hand flogging myself asking for foregiveness..