The Libor rate scandal

[David Johnson]

There are a lot of people who seem to be getting very hot and bothered about the accusation that Labour was involved in getting the banks to fiddle the libor rate downwards during the global financial collapse.

For those people on the forum who are getting hot and bothered and are convinced that the Labour government did this, a couple of questions:

1. How did they do this?

2. In the context of a global financial collapse, with banks going kaput left, right and centre and umpteen billions of taxpayers' money being spent on bailing them out, assuming they were involved, what would be so bad about a government trying to manipulate the rate downwards during this crisis?

In your own time, lads!

[David Johnson]

After spending a week or so, trying to smear Ed Balls, inside and outside parliament, it looks like Osborne has backed down.

http://www.bbc.co.uk/news/uk-politics-18716828

An extract

"During the Commons debate, Mr Osborne urged his shadow counterpart to "explain what Labour's involvement was, who were the ministers, who had the conversation, who were the senior figures".

But Mr Balls called on the chancellor to withdraw the "false, personal accusations", describing them as "cheap, partisan and desperate".

After the debate, the chancellor's aides told BBC political editor Nick Robinson that Mr Osborne now accepted that Mr Balls had taken part in no such conversations.


What a clown Osborne is, eh?

[Arginald Valleywater]

I thought it was the next Labor leader, Miss Cooper, whose job was to smear Ed's Balls?? Oxford, Harvard, La Sorbonne, Yale, Cambridge....vote Labor!!

[David Johnson]

"I thought it was the next Labor leader, Miss Cooper, whose job was to smear Ed's Balls?? "

No, that's the job of Osborne and his working class fellow travellers like you.

I assume you suspect that Yvette Cooper married Ed Balls and had children with him, in order to smear him more easily. What a cunning plot!

As for their background, being the son of a zoologist and the daughter of a trade union general secretary, obviously Balls and Cooper had access to riches that makes the inherited wealth of Diamond Dave and Ozzie look like small change.

Re. Harvard, Balls and Cooper won Kennedy Scholarships which are fully funded.

Any more smears, Argie, in the absence of your failure to answer the questions in this thread? So much easier to try and smear, isn't it, Argie?

[David Johnson]

"Any more smears, Argie, in the absence of your failure to answer the questions in this thread?"

Should read ""Any more smears, Argie, in the absence of an attempt to answer the questions in this thread?"

Oh for an edit option.

[Arginald Valleywater]

No matter how much you want to hate anything non Labor most of this went on under McBroon and Captain Darling. Shit happens outside of Conservative and Coalition governments. I don't like a lot of what Dave and Ozzy are doing but at least we don't dance to Washington's tune anymore. I can't recall a Labor government where we had zero crime, nobody out of work, no NHS waiting lists, no foreign conflict and no lefty luvvies dry bumming the BBC....Britain ain't that big a player anymore...India and China will take first and second in the rich list and we just tag along. Our status was well and truly fucked by Tony being Bush's lapdog.

[David Johnson]

This has nothing to do with the thread.

"I can't recall a Labor government where we had zero crime, nobody out of work, no NHS waiting lists, no foreign conflict and no lefty luvvies dry bumming the BBC...."

Who said there was?

[planeterotica]

David Johnson wrote:
>
> 2. In the context of a global financial collapse, with banks
> going kaput left, right and centre and umpteen billions of
> taxpayers' money being spent on bailing them out, assuming they
> were involved, what would be so bad about a government trying
> to manipulate the rate downwards during this crisis?
>
> In your own time, lads!

planeterotica wrote:

Maniplate the rate downwards at the same time as the BOE pumps money into the economy means your savings and pensions are losing around 4% a year, ie: inflation will wipe out your savings, if you are now aged 40 by the time you come to retire your savings to date will be worth zilch..

The national debt of the UK averages out at ?70.000 for every adult of working age, inflation is the only tool in the box to wipe this out, savers get screwed, debtors get bailed out !rant!

[David Johnson]

"Maniplate the rate downwards at the same time as the BOE pumps money into the economy means your savings and pensions are losing around 4% a year, ie: inflation will wipe out your savings, if you are now aged 40 by the time you come to retire your savings to date will be worth zilch."

Not sure where you get these figures from but the task is to try to isolate what part Libor plays in this.

For example, the various factors affecting savings include:

1. The Bank of England interest rate which is independently set by Mervyn and his merry band. That is a key factor and is obviously quite legal to change upwards or downwards to "fiddle" with the economy. THE BOE have had the interest rate at a historical low ever since the crash. This has had a major impact on savings. Great for people on some mortgages though.
2. The Libor rate which to fiddle is illegal. However to fiddle the overall Libor rate requires a large number of banks to get involved i.e. some of the 8 banks in the middle range of libor rates, used to set the overall rate.
3. Quantitative easing which is a type of printing money. Obviously perfectly legal. Helps to reduce the interest on savings
4. The greed of the banks and the pension industry. Again, perfectly legal is greed!

If we look at this in the round and include mortgages as well as savings,
the Libor rate fixing in terms of what Ozzie is accusing Labour of, without any evidence, has probably had little or no impact on your average consumer, I suspect.

Unless you had a variable rate tracker mortgage, where your interest rate is calculated with reference to LIBOR, often expressed as LIBOR plus a percentage your mortgage would not have been affected. Even if you did have one of these mortgages, the investigation suggests that Barclays were actually pushing the LIBOR rate down, thereby actually reducing your mortgage interest payments.

LIBOR (or EURIBOR) is not normally used for retail savings either, so people with ordinary savings accounts will not have suffered lower interest rates. However, large investors (like pension funds and other financial institutions) who may have invested in bundled mortgage bonds would have received a lower return, if mortgage rates were artificially depressed. Bundled mortgage bonds is the Wild West anyway so pension funds might have lost their shirts anyway on that garbage. Nothing to do with Libor rate fixing.

For a start, it wasn?t just Barclays doing this. And not all banks would have been pushing rates in the same direction. some banks wanted Libor too low, some wanted it too high.

For another thing, we?re talking about tiny shifts in rates here. Because of the amount of leverage involved, even a difference of one basis point (that?s 0.01 of a percent), would make a huge difference to these traders. Put it this way, you haven?t been paying too much on your mortgage or your credit card bill because of this.

So I suspect the impact on Joe Public of specifically Libor rate changes in the context of the other things mentioned is largely minimal.

Still doesn't make it right, of course!

[Arginald Valleywater]

Are you going to stand for election next time round DJ?