[QUOTE=Fusion_power;304063]Liborgate is gathering steam. Lawsuits are being filed, bank heads are rolling. I find this a bit refreshing since the banks weathered the last 5 years relatively unscathed.[/QUOTE]Huzzah!

[quote]They deliberately manipulated Libor down which means lots of investors received less on their investments than was their due. By knowing in advance that the rate would be kept artificially low,[/quote]I heard a radio news report that the manipulation kept Libor higher than it should have been. Was that a misinterpretation, or were the banks doing it both ways, whichever profited them at the moment?

[quote]Look for more heads to roll at more major banks both in the U.S. and in London. Barclays is just the tip of this iceberg.[/quote]I could enjoy the perp walks.

[QUOTE=cheesehead;304068]I heard a radio news report that the manipulation kept Libor higher than it should have been. Was that a misinterpretation, or were the banks doing it both ways, whichever profited them at the moment?[/QUOTE]Both ways. Down to make the bank appear stronger at the height of the crisis when they were trying to get non-governental financing and up some years earlier in order to make higher profits on commercial transactions.

Paul

[QUOTE=cheesehead;304068]I could enjoy the perp walks.[/QUOTE]
Hoping to be wrong, but I'm not holding my breath for any. Rather, there will be a series of "hefty civil penalties" and empty promises to "reform".

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The Countrywide "VIP loans" (a.k.a. "friends of Angelo [Mozilo] loans") program is [url=http://www.foxnews.com/politics/2012/07/05/countrywide-made-discount-loans-to-buy-influence-with-members-congress-report/?test=latestnews]in the US news[/url] again - not sure why, since this legal-bribery-scam was well-known at least as far back as 2008. How do you think Mozilo got off the hook for all of Countrywide's crimes with only a "hefty civil penalty" which still allowed him to retire with nearly all of his ill-gotten wealth?

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[url=www.reuters.com/article/2012/07/05/us-usa-housing-mediation-idUSBRE86405420120705?feedType=RSS&feedName=domesticNews]Struggling homeowners avert foreclosure via mediation[/url]: [i](Reuters) - Verise Campbell was excited. She could finally help struggling homeowners negotiate deals with their lenders to avoid foreclosure, but the angry response to her first phone call shocked her.[/i]
[quote]"There will be no mediation! There will be no mediation! There will be no mediation!" she recalls the representative of the lender shouting.

"And then he took the phone, and he struck something hard three times," said Campbell, who is deputy director of Nevada's mediation program.

It was 2009, the financial crisis was roiling the world economy and Nevada had just started the program to try to stem the flood of people losing their homes in one of the states hardest hit by the housing collapse.

The program was a big change in the way the state handled foreclosures, and critics slammed it as a tactic to postpone them while giving homeowners a free ride in the meantime. But advocates now cite Nevada as a model, and mediation is used in more than 20 states.

The aim: to put borrowers, lenders and an impartial third party in the same room to negotiate a way to help owners keep their homes - or get out of them as painlessly as possible.

"Of all the legislation that I've seen pass, it seems to be the most effective in actually reducing foreclosures for a longer period of time," said Daren Blomquist, vice president of online foreclosure property marketplace RealtyTrac.

The U.S. housing market is showing signs of stabilization six years after home prices peaked, but the foreclosure crisis could be only halfway through.[/quote]

But this next Reuters piece tells me housing will not be re-bubblizing any time soon:

[url=www.reuters.com/article/2012/07/05/us-usa-apartmentmarket-idUSBRE86404B20120705?feedType=RSS&feedName=domesticNews]Apartment rents rise at highest rate since 2007[/url]: [i]Renting an apartment in the U.S. became even more expensive during the second quarter, as vacancies set a new 10-year low and rents rose at a pace not seen since before the financial crisis, according to real estate research firm Reis Inc.[/i]

The nasty part about liborgate is that it is technically not a criminal offense to manipulate this key interest rate. The only penalty that can be levied is to "fine" the offending bank(s). Fortunately, this has become such an eyesore that high level bank managers are being forced out. You can look forward to an effort to finally put Libor under some kind of regulatory body that is not bankster controlled and an effort by the banksters to prevent it from happening.

By the way, if they penalize the offending bank, do you know who in the end bears the burden of the fine? It certainly won't be the banksters who orchestrated the fraud.

Liborgate is contributing to the precipitous fall in mortgate interest rates! Suffice to say that mortgage interest rates derive in part from the underlying Libor rate. Since the banksters are under a magnifying glass, they are letting Libor fall to where it should have settled a couple of years ago. The result is 30 year fixed mortgage rates at 3.62% and 15 year fixed rates of 2.89%

DarJones

Chris Whalen of [i]Institutional Risk Analytics[/i] has an interesting take on the Libor tempest. He asks essentially the same rhetorical question I've been mulling in this regard, "Why not rebase Libor to be reflective of actual trades (i.e. daily interbank loan flow) and be done with it?" Underlines mine:

[url=www.zerohedge.com/contributed/2012-07-05/barclays-libor-scandal-lions-and-tigers-and-bears-oh-my]Barclays LIBOR Scandal: Lions and Tigers and Bears, Oh My![/url]
[quote]But the other thing that needs to be examined in this banking industry fire storm is the question of market manipulation. Bob Eisenbeis of Cumberland Advisors ([url]www.cumber.com[/url]) notes: “[T]here is the implication that the falsification of LIBOR rates was not only being practiced by Barclays but also by other institutions. “ He also notes the reports in the media that there was pressure from certain institutional investors for months to “adjust” LIBOR lower.

The first point to make about LIBOR is that this has never been a particularly transparent, market rate. The LIBOR rate has always reflected the consensus [i]indications[/i] of the participating banks. Over the decades, many investors and parties in business agreements have used the LIBOR rate as a means of pricing risk. This does not excuse the actions of Barclays and others, but it needs to be said that LIBOR is not a free market rate set via competitive price discovery. Investors with long exposure to LIBOR surprised by all of this ought to wake up and smell the coffee.

The second, related point is the market environment for LIBOR. [u]Given the degree of market manipulation by global central banks and finance agencies over the past two decades, getting into a heated argument about private banks manipulating market rates seems a little surreal[/u]. Commercial banks are also used by governments as mechanisms for official market manipulation, thus begging the question again as to whether the actions of Barclays in manipulating LIBOR are really so remarkable.

In a market where the fact of government manipulation is the rule rather than the exception, how can we get overly worked up about Barclays manipulating LIBOR or JPMorgan manipulating the entire market for credit derivatives? Reading the Big Media you might think that the world is about to end...

...But what has really happened in the Barclays mess is that the tawdry reality of the banking world has run smack dab into the nasty political environment in the UK. While professionals in the financial markets have for decades known that LIBOR was at best an indication of where the London clearing banks [i]might[/i] be willing to lend money, politicians have jumped on the opportunity to berate the bankers in a loud voice.

But so what?

[u]The real proof of whether the Barclays scandal causes real change will be if we move to a LIBOR rate that is a function of actual trades[/u]. The UK clearing banks could aggregate all LIBOR transactions and report a public high, low and average for each trading day. That simple solution could turn LIBOR from an opinion into an indicator of market rates.

But the key question is whether the politicians yelling at the banks today will take steps tomorrow to affect real change in the collusive behavior of the same large banks.[/quote]
Given the size of the market tied to Libor, I am not so willing to let the TBTF banks off the hook here. OTOH I agree that the manipulators-in-chief in all these things are the central banks themselves. You didn't think the Bernankes of the world can just say some words about "interest rates must remain low" while waggling their magical ZIRP wands and have it be so, did you?

[b]Friday Humor:[/b]

A little black humor worthy of the Foreign-Language-Musings thread in the Hobbies subforum ... While catching up on the latest headlines out of Europe, I ran across this [i]Die Welt[/i] piece on the Swiss National Bank's latest machinations to try to keep its currency from appreciating "too much" against the Euro. I have translated the headline, but not the subhead, because the joke requires the original German. Suggest our non-german-speaking readership use Google Translate on the link to get the gist of the piece:

[url=www.welt.de/finanzen/article107922191/Die-Schweiz-bereitet-sich-auf-den-Euro-Crash-vor.html]Sitzerland prepares for the Euro-crash[/url]
[quote]Die Schweizer Notenbank hat im Juni erneut mit Milliardenbeträgen im Devisenmarkt interveniert, um eine Aufwertung der eigenen Währung zu verhindern.[/quote]
When I first glanced at the story heading, I saw "Milliardenbetrügen" (billion-Euro swindles) rather than "Milliardenbeträgen" (billion-Euro amounts/purchases/trades). The joke being, since such intervention is nothing more than attempted currency manipulation using taxpayer funds, [i]Betrug[/i] is in fact a fitting term for it.

You say 'attempted currency manipulation using taxpayer funds' as if it were a bad thing.

That's what central banks are [b]for[/b]; if their currency is trading so high that exporters are uncompetitive, as was demonstrably happening in Switzerland - citizens were driving to France to go shopping, but manufacturers of precision lathes don't have that option - then they use taxpayer funds to buy the currency and bring it down.

Would you rather have the levels of national currencies as a toy [i]only[/i] for speculators?

[QUOTE=fivemack;304227]Would you rather have the levels of national currencies as a toy [i]only[/i] for speculators?[/QUOTE]

I would prefer to let freely-functioning global markets set such things, as should also be the case things such as interest rates. Once central banks get involved in such manipulations, the only guaranteed result is market distortion and the attendant capital misallocation. The intervention by the SNB you describe as "necessary" is more than anything else an effort to counteract the manipulations by other European governments, e.g. France with its agricultural subsidies and the ECB with its insolvent-bank-bailouts. Here in the US we have a similarly circular justification for the existence and every-increasing-powers of the Federal Reserve, which first helped create the biggest speculative housing-and-credit bubble in history, and now that that has collapsed, is "needed" to provide the "necessary" measures to get the economy back on track.

Note that "freely-functioning" I do *not* mean "entirely unregulated" - but the necessary regulations should only be the common-sense ones mandating transparency (e.g. all derivatives traded on open exchanges) and punishing attempts at manipulation, whether they be by private or public-sector speculators. Bailing out busted speculators, as the world's central banks have been doing nonstop for the past 4 years, is exactly the opposite of what needs to happen.

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[b]Friday Funnies, Saturday Midday Edition:[/b]

Was amusedly watching Obama and Romney pull out all the stops today to spin the latest mediocre monthly-jobs numbers to their best advantage. I'll summarize-via-paraphrase:

Obama: "The numbers show that our policies are working, but that we still need to borrow and spend many more trillions to get ourselves out of the economic hole I inherited from that total douchebag who ran the joint before me..."

Romney: "These dismal jobs numbers - which totally suck, man - confrm the failed policies of the President. Now when I worked on Wall Street, my form created at least one good-paying financial-sector job for every ten thousand middle-class-manufacturing jobs we shipped overseas. As president, I intend to create millions of imaginary jobs in the hot new high-tech sector of FOSSIL FUEL ENERGY PRODUCTION..."

Anyway, all this phony talk of "job creation" caused the following epithet to pop into my mind, which seems quite apt in its reference to a different phony pursuit:

"Jobs Creationists"

Both Romney and Obama are JCs par excellence.

[QUOTE=ewmayer;304239]I would prefer to let freely-functioning global markets set such things, as should also be the case things such as interest rates. [/QUOTE]

Bwa ha ha ha ha! Are you f***ing kidding me? Have you been living under a rock for the last four years? There is no such thing as "freely-functioning global markets". And what is worse it is hard to see any paradigm that does not involve a huge amount of intervention that allows them to function efficiently and fairly. Would you like markets where FX rates go up and down 5% every day? If so, who wins? And who loses? Think about this a bit.

Global markets these days are driven by twenty-something traders who care for nothing more than their next bonus. And if that causes their company or even the economy of their country to go tits up they don't care.

A few more comments:

Regarding LIBOR it is not obvious to me that the banks were manipulating these rates only for financial gain. Think about it. Banks have contracts for both borrowing and lending money at rates tied to LIBOR. It is not at all obvious that lower LIBOR would help a bank as a whole. It may help a specific desk but the entire bank, not so sure. Chris Whalen's article is a good one on this.

NYT has a nice piece on Iceland today, which challenges many of the beliefs held by economic pundits of both the "Krugmanian" and "Mishian" ilk, including some of my own (relief for private debtors, capital controls, etc). Worth a read:

[url=www.nytimes.com/2012/07/08/world/europe/icelands-economy-is-mending-amid-europes-malaise.html?_r=1&src=me&ref=world]A Bruised Iceland Heals Amid Europe’s Malaise[/url]

Returning to the topic of currency manipulation, as viewed through the lens of the SNB, I would like to hear some further thoughts on the following issues which I think are the core ones:

1. Why has the Swiss Franc been persistently wanting to appreciate against the Euro? (There are some reasons which are obvious, but also some less-obvious one).

2. What would be the result of letting the SF appreciate, i.e. the SNB taking a hands-off approach? The obvious answer one often hears is "exports of Swiss goods and services would be hurt", tourism will drop, consumers will cross the nearby borders to buy cheaper Euro-denominated goods, etc. That seems simplistic, however. A strong Franc means Swiss citizens and companies can buy more things from outside the country - is that all bad? Could Swiss companies which *are* hurt by a high SF choose to pay their workers in Euros? That sort of thing.

Discuss!

I'm really not sure what they mean by 'heals' - the article says that Iceland has serious capital controls in both directions. Iceland's export industry is aluminium smelting, and the smelters are owned by US-listed Alcoa and UK-listed Rio Tinto. Because of the capital controls, those foreign companies have truly enormous amounts of money (remember that Iceland is tiny, a billion dollars is $3000 per Icelander!) tied up there; this will have to be released at some point and will destroy the ISK.

This feels like an economy in a medically-induced coma rather than an economy that's healing; there are two really serious things wrong with it which are being pushed indefinitely down the road.

/ot/
Ewmayer, I just want a reality check. Have you been checked for dementia lately?

1. You think there is such a thing as a freely-functioning global market.
2. You read a glow job about Iceland and actually believe that things have improved immensely.

For the first, a belief in Santa Claus, the Tooth Fairy, or Super Man would be symptomatic. I'm still scratching my head over #2.

Where is the normal cynical pessimistic pitb we are all used to?
/end ot/

It is time for Euro banking to hit the news again. Spain is desperately maneuvering to avoid having to request a national bailout. Greece is snuffling again about hardship and loss of entitlements. London is spinning over the impact of liborgate. Iceland and Ireland are not on the radar screen. The likely fallout this week is from France. I suspect the new social order will be nonplussed on a few of their social agenda items.

Long term "cloud on the horizon" embedded economic problems include the U.S. with need to increase public debt by another trillion dollars and the battle over the automatic tax increase set to take place at the end of the year. The republicrats and democans have taken positions guaranteed to generate lots of heat with little or no motion. Sometimes I think we should hold a nationwide plebiscite and toss the entire congress out on its ear.

DarJones