Sun Jul 8, 2012, 04:24 PM

What Does London's LIBOR Mean To The U.S.?

http://www.npr.org/2012/07/07/156428433/what-does-londons-libor-mean-to-the-u-s

...Matt Taibbi: "Because the scale is just mind-boggling. Every town and municipality in America probably has investment holdings that are pegged to LIBOR. I think The Wall Street Journal calculated $800 trillion of financial products. So if there's cartel-style corruption that is affecting the LIBOR rate, it is just impossible to imagine a financial corruption scandal that is bigger in scope than this."

...Simon Johnson: "Pensioners. Everyone who has saved ... put any kind of money into products that linked to a fixed interest rate – you may not even know that that is where your pensions come from, but it typically is – all of those people are losing when interest rates are manipulated down."

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10 replies	Author	Time	Post
What Does London's LIBOR Mean To The U.S.? (Original post)	just1voice	Jul 2012	OP
What about savings accounts? There has been virtually no interest on savings accounts	sabrina 1	Jul 2012	#1
Yes, I believe so.	Kaleko	Jul 2012	#4
Thanks, that is a good article.	sabrina 1	Jul 2012	#7
I doubt it	dipsydoodle	Jul 2012	#5
From what I've gleaned so far,	Kaleko	Jul 2012	#8
Swings and roundabouts	dipsydoodle	Jul 2012	#10
US sets its own rate based on Libor	dipsydoodle	Jul 2012	#2
Wake up folks	Wellstone ruled	Jul 2012	#3
Yup.	Igel	Jul 2012	#6
i have a loan linked to LIBOR	rdking647	Jul 2012	#9

Response to just1voice (Original post)

Sun Jul 8, 2012, 04:37 PM

sabrina 1 (34,038 posts)

1. What about savings accounts? There has been virtually no interest on savings accounts

which takes away the ability of ordinary people to make some money on their savings.

Was this also part of this scheme?

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Response to sabrina 1 (Reply #1)

Sun Jul 8, 2012, 05:05 PM

Kaleko (4,986 posts)

4. Yes, I believe so.

Remember the name David Martin. He is an insider, a banking executive no less.
David Martin:
Industry: Banking
Occupation: Executive Chairman
Location: Charlottesville, Virginia, United States
Interests: Integral Economics, Heritable Knowledge and Indigenous Rights, Ethical Capital

Here he is talking about the Libor scandal's immediate implications:

http://www.invertedalchemy.com/2012/07/conclusion-collusion.html

A little history is important. LIBOR or the London Interbank Offered Rate is an inextricable warp in the fabric of our global economy. The magic carpet woven on that warp includes momentarily values for currencies, short term credit and over $800 trillion in financial products such as derivatives, swap agreements and a host of other debt instruments (according to the Economist while the Washington Post reports the LIBOR linked instruments to $360 trillion). The LIBOR is supposed to reflect the liquidity of market acceptance for money, the credit risk associated with financial institutions and their primary constituents, and the nature of currency confidence reasonably expected to support monetary instruments. If you have ANY investment, any money, or any debt, this story not only directly impacts you - your pocket has been picked and you didn't even know it!

It gets worse - or better depending on where people stand. Take a peek at the rest of the article.

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Response to Kaleko (Reply #4)

Mon Jul 9, 2012, 02:02 PM

sabrina 1 (34,038 posts)

7. Thanks, that is a good article.

I am trying to figure it all out, how widespread the effects were etc. And still wondering, who will hold them accountable?

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Response to sabrina 1 (Reply #1)

Sun Jul 8, 2012, 05:13 PM

dipsydoodle (32,585 posts)

5. I doubt it

The main effect is on loans which tend to be expressed as Libor + so many percent. Variable rate motgages run in such a fashion.

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Response to dipsydoodle (Reply #5)

Mon Jul 9, 2012, 02:34 PM

Kaleko (4,986 posts)

8. From what I've gleaned so far,

the yields of ordinary savings accounts are also affected by rigging the Libor rate , though more indirectly than, say, credit card and mortgage rates.

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Response to Kaleko (Reply #8)

Mon Jul 9, 2012, 02:50 PM

dipsydoodle (32,585 posts)

10. Swings and roundabouts

What favoured borrowers may have adversely affected those with savings accounts and vice versa. It may follow from that that those who lot as a result of this may be owed by those who won overall.

The reductions in rate which are the subject of this issue were fractional only aside from which deposit a/c interest is related to Libor : not actually based on it. The fractional aspect obviously would've have had a larger impact on multi million pound trades.

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Response to just1voice (Original post)

Sun Jul 8, 2012, 04:45 PM

dipsydoodle (32,585 posts)

2. US sets its own rate based on Libor

Last edited Sun Jul 8, 2012, 04:55 PM USA/ET - Edit history (2)

In the case of Barclays in the UK they were understatinging the rate which would've meant loans cost less. I don't know the equivalent for investors but I'd be surprised if pensions schemes were using short term investments.

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Response to just1voice (Original post)

Sun Jul 8, 2012, 04:51 PM

Wellstone ruled (1,154 posts)

3. Wake up folks

this has a lot of impact on your mortgage. Most mortgages have Libor clauses,so,hang on for some big banking bail outs to come. This is a Trillion's of dollars issue. Possibly cause some of the big banksters to go down. Timmy the turd will have his chance to screw the USA again.

Here we go!!! Did I say bend over!!

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Response to Wellstone ruled (Reply #3)

Sun Jul 8, 2012, 06:13 PM

Igel (17,557 posts)

6. Yup.

By reducing the LIBOR rate, they forced people getting mortgages to accept a lower interest rate than they would have. Variable-rate mortgages had their rates unfairly lowered.

There's a reason that the OP looks at investors like pensions. Those are creditors, and if the interest rates were lowered then they'd charge less from their borrowers.

(Passbook saving rates, I thought, were tied to the Fed rate, through.)

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Response to just1voice (Original post)

Mon Jul 9, 2012, 02:35 PM

rdking647 (2,502 posts)

9. i have a loan linked to LIBOR

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