Saturday, August 25, 2012

Left Side of the Aisle #70 - Part 2

Update on: LIBOR

On a somewhat positive note, I told you a few weeks ago about the scandal around LIBOR, the London Interbank Offered (or Offering) Rate.

Just a quick refresher: LIBOR is a daily interest rate set based on information from a group of international banks as to what it would cost them - what interest rate they would pay - on short-term loans they take from each other. The highest few and lowest few are tossed, the rest are averaged, and that is your daily LIBOR.

The importance of LIBOR is that the interest rates on trillions of dollars in financial transactions around the world are ultimately based on LIBOR - and there is clear evidence, in fact a confession from one involved bank, that the rate has been manipulated for the short-term benefit of those same banks.

The good news is that over the past few weeks, the attorneys general of New York and Connecticut have issued subpoenas to seven banks over the scandal. Subpoenas were issued to Barclays, Citigroup, Deutsche Bank, JPMorgan Chase, HSBC, Royal Bank of Scotland and UBS.

We're still waiting to see what the federal DOJ will do - but based on experience, don't expect much.


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