Barclay's LIBOR manipulation

ILW

kaya64 wrote: »

I am only commenting , my mortgage isn't with Barclays , i did mention this in one of my first replies. Mine is with a horrible horrible company Kensington :eek:

So you are one of them "sub primers" who are to blame for the whole banking collapse. Should be ashamed of yourself.

Thrugelmir

wotsthat wrote: »

You implied that someone may have paid less interest on their mortgage as a result of this than they otherwise should have done.

Paid too little to who?

Some mortgages have their interest rates set in relation to LIBOR. In the same way as some are linked to BOE base rate.

So the borrower would have paid to little to their lender.

ILW

wotsthat wrote: »

You implied that someone may have paid less interest on their mortgage as a result of this than they otherwise should have done.

Paid too little to who?

Barclays traders were buying each other good times and champagne on the back of this manipulation. That money must have come from somewhere - it sounds like a zero sum game - someone's up and someone's down.

The victims would be other derivatives traders. Doubt many will shed too many tears for them.

Debt_Free_Chick

wotsthat wrote: »

OK. If Barclays have gained from this then who has lost?

Potentially any other bank that lent money to Barclays. What the banks are supposed to do is to reveal how much other banks would charge them to borrow money. The higher the rate, the riskier the bank was perceived to be (just like you and me - if I'm a higher risk than you, I will generally pay a higher rate of interest, once the loan application is underwritten).

So let's say that other banks would have charged Barclays 3% to borrow; Barclays - alledgedly - said that they would only have been charged 2.5% (hypothetical figures, just for an example). Only the impact on LIBOR would have been watered down, as it's a median consensus (so the highest and lowest rates are ignored, then the remainder averaged).

There's more to it than this, but I think I understand your point - that is, for every winner there must be a loser. That's so with trades, but the LIBOR submissions are not, themselves, trades. True, that the resulting LIBOR may be used for executing certain subsequent trades.

However, the reason - alledgedly - Barclays did this is that it was perceived to be a higher risk bank than, say, HSBC. Barclays only avoided a bail-out as it was able to secure capital from its Quatari shareholders, rather than the UK taxpayers.

wotsthat

Thrugelmir wrote: »

Some mortgages have their interest rates set in relation to LIBOR. In the same way as some are linked to BOE base rate.

So the borrower would have paid to little to their lender.

That lender has therefore suffered a material loss.

It's likely that Barclays has been stiffing weaker banks such as RBS & Lloyds so it seems, indirectly, that taxpayer funds have been diverted to Bolly and prossies.

Anyone saving or investing against a LIBOR rate is also going to have been shafted.

The power of Barclays is obvious. Politicians demand the resignation of other politicians for walking on the cracks in the pavement and yet neither Cameron nor Milliband quite dare call for Diamond to resign.

ILW

Bet Frankfurt SX are rubbing their hands together.

The_J

With the size that Barclays are, and the traders involved, it may actually have cost them money. The individual traders would have done OK out of it but it doesn't mean that all their traders had the same position. In my experience, and I admit this is going back a few years, the "bad" traders were the mavericks willing to break the rules.

Thrugelmir

ILW wrote: »

Bet Frankfurt SX are rubbing their hands together.

Really? Net is widening.

Other big names believed to be under investigation include Citigroup, JP Morgan, Deutsche Bank, HSBC and Royal Bank of Scotland.

Anyway German regional banks are in serious trouble apparently.

Generali

wotsthat wrote: »

You implied that someone may have paid less interest on their mortgage as a result of this than they otherwise should have done.

Paid too little to who?

Barclays traders were buying each other good times and champagne on the back of this manipulation. That money must have come from somewhere - it sounds like a zero sum game - someone's up and someone's down.

From the reports it sounds like the manipulation issue connected to trading was that Barclays' employees had entered into a 'bet' with another bank which very, very simplistically could be said to be a bet on LIBOR.

Barclays could influence the level of LIBOR so tilt the results in their favour. It's a bit like a soccer ref being in on a betting coup and giving away a last minute penalty.

To continue with the analogy, the unintended consequence of the ref messing with the result of the match is that people in the Football Pools won or lost a different amount to what they would have done had the match been straight.

In the case of LIBOR, millions of borrowers and people that have bought or sold derivatives contracts have won or lost differently as a result of this manipulation.

TBH, I'd stick these jokers in gaol pour encourager les autres. Alternatively, chain them down to the foreshore outside the Captain Kidd as modern pirates and let the next high tide have them.

kaya64

ILW wrote: »

So you are one of them "sub primers" who are to blame for the whole banking collapse. Should be ashamed of yourself.

:rotfl:i find that funny because you have to blame someone for the financial mess the world is in .