FT's Gillian Tett on LIBOR

[DRumsfeld2000]

A very interesting article:-

http://www.ft.com/cms/s/0/3d447b98-5...#axzz1lxBDgsok

[*T*]

Re: FT's Gillian Tett on LIBOR

Tett is among the last of a dying breed.

[cjppjc]

Re: FT's Gillian Tett on LIBOR

Could you share the thoughts. The site is not letting me in.

[doom&gloom]

Re: FT's Gillian Tett on LIBOR

If they would put up the TITLE of the article with the link, you can Google the title and read it... *hint* *hint*

[DRumsfeld2000]

Re: FT's Gillian Tett on LIBOR

Perhaps this helps:-

Bank lending probe lights up dark financial corners
By Gillian Tett

[cjppjc]

Re: FT's Gillian Tett on LIBOR

Thank you. I was finally able to read the article. Nothing new it seems, and no real surprise to many I guess.

[globaleconomicollaps]

Re: FT's Gillian Tett on LIBOR

If they would put up the TITLE of the article with the link, you can Google the title and read it... *hint* *hint*

The hint no longer works. There is a work around , but it is a little difficult.


Bank lending probe lights up dark financial corners

Gillian Tett By Gillian Tett

Being a financial journalist often feels akin to chasing bars of soap in the bath. On occasion, we hear fascinating rumours, and peer into dark corners of finance, aware that something odd is going on. Yet, all too often the “story” quarry slips away for lack of evidence or of quotable sources – or because powerful financial public relations officials are waving libel laws in our face.

Interbank borrowing rates such as Libor are a case in point. Five long years ago, I first heard tales of strange happenings in the Libor, Tibor and Euribor world. So I duly wrote a column expressing general concerns about the accuracy of Libor, and my FT colleagues peered deeper into Libor, and then the wider swaps world (check out, for example, the 2010 piece co-written by Michael Mackenzie, himself a former broker, on the oddities of “page 19901”). But, wherever we looked, we faced obfuscation; catching anything tangible in that slippery, slimy pond seemed hard.


No longer. This week it has emerged that almost a dozen traders and brokers around the world have been fired, suspended, or put on leave, amid a multinational probe into alleged manipulation of Libor. In particular, there are allegations that financial players have colluded to influence these rates, which serve as a benchmark for some $350tn worth of financial products worldwide, either to trade directly, or influence how other securities are priced.

The full legal process has, of course, yet to play out; no one has yet been charged. But as the probe gathers pace, it is already illustrating at least four key points. Firstly, and most obviously, the story shows that journalists – or any other outsider – should never give up trying to grope around in the murkier bits of finance; society desperately needs outsiders to peer into the financial weeds, asking naive questions, even – or especially – in the face of formidable, well-funded PR teams.

Secondly, the pieces of finance which most badly need probing are probably not the most exciting or visible parts. Five years ago it was widely assumed by regulators, particularly in Europe, that if trouble erupted it would be because high-rolling hedge funds were trading exotic instruments. Assets such as small-cap equities or junk bonds were considered the areas most scandal-prone or bubble-prone, in popular view; pace those Hollywood thrillers.

But what actually sparked the great financial crisis in 2007 was not anything “sexy” – to use media slang – but “boring” triple A-rated mortgage securities traded by dull entities such as bank conduits. Similarly, those boring triple A securities are central to legal probes into what the banks did during that credit boom and bust. And what caused the recent UBS scandal was the equally grey world of exchange traded funds and back office settlement and collateralisation procedures. So too in the scandal at Société Générale.

That highlights a third lesson: if a sector is being ignored, because it looks dull as ditchwater, that can create a fertile breeding ground for quasi-cartels, particularly away from public markets, say in the over-the-counter world. The key issue here is a culture of “clubbiness” and/or practices justified by “tradition”. In retrospect, for example, it seems bizarre that banks were allowed to leave ETF deals unsettled for days, or that banks could deal on both sides of collateralised debt obligations. It looks equally bizarre that banks have been setting Libor according to daily estimates, not actual trades. But this tradition continued because almost nobody inside the system had any incentive to rock the boat; and few outside this clubby world cared.

And that leads to the fourth crucial point: the fact that this Libor probe is now under way is thoroughly good news. As far back as five years ago, the British Bankers’ Association and others first heard calls to overhaul how Libor, Tibor and Euribor are calculated. Initially, the BBA and other banks brushed this pressure off, while making some modest tweaks. But as the current probe gathers pace, pressure for more radical change may grow, not least because there are signs that financial players have been trying to reduce their reliance on Libor in recent years, due to credibility concerns.

That is to be welcomed, in much the same way that it is good news that back office procedures for ETFs are – belatedly – being overhauled, or that people such as Gary Gensler of the Commodity Futures Trading Commission, are now pushing for more transparency in the OTC swaps world. But the sad fact is that there is still much further to go, in terms of injecting sunlight. Do we really know what is happening in, say, the weeds of the “repo” world? In interdealer OTC swaps practices? What about the clubby traditions used to set some commodity benchmarks prices, or other dark financial corners? Tips about where to grope in the next five years, as a journalist, would be heartily welcome; even better, with tangible leads.

[FrankL]

Re: FT's Gillian Tett on LIBOR

it does work (with non-SSL Google without logging into Google). it doesn't work when using SSLed google (encypted connection).