LIBOR Manipulation by the Banks? This is a BIG ONE

Posted on April 16th, 2008 in Daily Stock Market / Economic News - The Real Story

This could be an ultimate ‘Black Swan Event’ if true. THE PLOT THICKENS… This MEGA NEWS, reported this morning in the Journal, is being blown off for all intents and purposes by the financial press today. Probably because the ramifications are so great they don’t understand how to report it. Entire financial systems and infrastructures are based upon LIBOR! If we find out the reported LIBOR pricing is being jacked-around by banks that are afraid to report how much they are paying for short-term loans and how desperate they are for cash and that LIBOR pricing is deemed unreliable, the consequences could be devastating. It essentially means that everyone with a loan based upon LIBOR is paying artificially lower rates! No puny Fed or ECB cuts or new auction facilities would be able to fix this problem.

The exposure is in the TRILLIONS and this is something that is NOT ON THE RADAR of the financial markets until now. Scott Peng at CITI said "the long-term psychological and economic impacts on the financials markets are incalculable and if banks told the truth about their borrowing costs, the 3-month LIBOR would be as much as 0.3% higher."  Millions of mortgages around the world are based on LIBOR…talk about resets!

Very few knew or even considered that this may have been happening. Banks lying because they are scared to tell how much they have to pay for cash would be a mega-event that would have swift and immediate consequences. If proven true, it could create an event and ripple effect that would make the Bear Stearns event look like just another day…on scond through the Fed made it seem that way anyway. Stay tuned, I have a feeling this story will grow large in the next couple of days. – Best, Mr Mortgage

Or, in this brave world of ‘the Fed will fix everything’,  will they just blow this off as well.

http://online.wsj.com/article/SB120831164167818299.html

10 Responses to “LIBOR Manipulation by the Banks? This is a BIG ONE”

  1. Mr. Mortgage, look at lot loans and home equity loans priced at 7% for the best borrowers…. the banks did not pass thru any of this years FF cuts… because they can’t….

  2. Please keep posting! I have been very impressed with your videos. I am hoping that by keeping abreast of all the macro/mortgage news with actual insights I’ll be able to make better business and personal finance decisions. I really appreciate the time and dedication that you have shown.

  3. Been following you for awhile. Just wanted to say “You Da MAN!!” Seriously, I have learned so much from you. Thanks

  4. This is no story. How will this ever be
    verifiable? And why should banks actually
    give wrong numbers? Doesn’t make any sense
    to me.

  5. I totally agree that this story was under-reported in the wake of the JPM, INTC non-earnings. This is so huge, yet most equity traders are completely oblivious to it. If there ever was an event that came out of left field, this would be it. Never in my wildest dreams would I have imagined that banks were tinkering with htis rate, but it makes perfect sense. Hell, banks couldn’t even get loans from other banks for a little while – Why would they only get 2-3% if there was a huge crisis of confidence? This story is bound to get bigger as the days pass. I am glad that you give this the respect it deserves.

  6. This could be an ultimate ‘Black Swan Event’ if true.

    ahh, since I am aware of what they have done in the past, I truly believe them capable of this too.

  7. Enron and the other energy companies were doing this too, during the energy crisis. Reporting false trade prices and volumes to tweak the indices in their favor.

  8. Changed my mind. LIBOR is moving up maybe based on these
    rumors. So we will see an impact very soon.

  9. Abolish the Federal Reserve, the private bank cartel.

  10. That is probably why they call it the “LIE” BOR. The 2/28 and 3/27 sub-prime loans all adjust to the LIBOR + a huge margin. Do the math, when these loans reset after 2 or 3 years, the monthly payments will increase by 50-100%. Most of these have already gone into foreclosure and the remaining sub-prime survivors will surely succumb in the near future.

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