How much do news networks value reporting on massive banking. Interest rates: The fog of LIBOR. RGE Analysts » How Much Did Barclays Make From Manipulating Libor? Author: David Nowakowski · · Share This Print No doubt at some point a full calculation will be forthcoming.
It is important to remember that many banks are involved in the scandal, and that for every long derivative there’s a short, so there were winners and losers and the sums are all mixed up. It may well be that just as Bank X’s trader was pleading with Barclays for a low fixing, Bank Y was pleading with Bank Z for a high one because they had an opposite position. If each bank shaded by the same amount in the opposite direction, their efforts at manipulation came to naught. Now, remember that Barclays was sometimes manipulating Libor for someone else — meaning they weren’t directly profiting unless that someone else was in their own bank, on the other side of what proved to be a porous “Chinese Wall”. Lies, Damn Lies and LIBOR. I’ve been hesitant to write about the LIBOR scandal because what I want to say goes so much further.
We now know that Barclays and other major global banks have been manipulating the calculation of LIBOR through the quotation data they provided to the British Bankers Association. What I suspect is that this is not a flaw but a feature of modern financial markets. And if it was happening in LIBOR for between 5 and 15 years, then the business model has been profitably replicated to many other quotation-based reference prices. Price discovery is not a sexy function of markets, but it is critical to the efficient allocation of scarce capital and resources, and to the preservation of the long term wealth of investors and the economy as a whole.
If price discovery is compromised by manipulation, then we will all be gradually impoverished and the economy will be imbalanced and unstable. The LIBOR scandal: The rotten heart of finance. Why is Nobody Freaking Out About the LIBOR Banking Scandal? LIBOR Banking Scandal Deepens; Barclays Releases Damning Email, Implicates British Government. Talking LIBOR Banking Scandal with Eliot Spitzer.