Taibbi: Is LIBOR, Benchmark for Trillions of Dollars in Transactions, a Lie?
So, everything we know about one of the fundamental indices in the world is a crock of crap? Journalist Matt Taibbi tackles a massive admission by British bank regulators that LIBOR is a giant sham based on fake numbers. The index has literally been manipulated for years by unscrupulous bankers buying off corrupt regulators.
“The admission comes by way of Andrew Bailey, head of Britain’s Financial Conduct Authority. He said recently (emphasis mine):
‘The absence of active underlying markets raises a serious question about the sustainability of the LIBOR benchmarks. If an active market does not exist, how can even the best run benchmark measure it?’ ”
This is mind-blowing. In the stock world, this is equivalent to S&P Global coming out tomorrow with the news that the Dow Jones Industrial Average is a made up number, and they don’t really measure anything from 30 of the New York Stock Exchange’s top companies, they just throw out a guess. Or worse, the DJIA is a made up number manipulated by the top dozen banks in the US for their own gain, and S&P Global was in on it.
These numbers, even when sociopathic lunatics weren’t fixing them, were arbitrary calculations based on previous, similarly arbitrary calculations — a rolling fantasy that has been gathering speed for decades.
LIBOR used to track the United State Prime Rate pretty closely, which we know is controlled by the Federal Reserve. So, in order to keep up the ruse, did the British regulators and LIBOR officials just keep some kind of arbitrary margin between the two, just so that it didn’t smell funny?
The impact on the credit community is still unknown. One thing is for certain, financial attorneys, US government officials and regulators, as well as other interested parties are gearing up for a ton of scrutiny. Taibbi indicates as much, and then some:
“It’s going to be a feast for financial lawyers,” Bill Blain, head of capital markets and alternative assets at Mint Partners, told Bloomberg.
If you are an average American consumer, our guess is that your life probably isn’t going to be radically changed, unless American lenders decide to change their index to Prime exclusively. Many different kinds of loan rates in the US are currently based on Prime, so even then, the likelihood of groundbreaking changes are remote. British regulators obviously don’t think it is much of an issue, and have pledged to replace the index with “viable, risk-free alternatives by 2021.” That is not much dedication, but if a few massive decisions come down from Federal courts in the US, China, Singapore, Hong Kong, and other heavyweights, they are likely to change their tune.
With Donald Trump in office, most other things are not worth worrying about. But global finance being a twenty-year psychedelic delusion is probably worth pondering for a few minutes. Man, do we live in crazy times.
Couldn’t have said it better myself.
