It really seems like a big deal, doesn't it?  Traders colluding with the bank's LIBOR reporters to up or lower the rate?  A rate which all of us use every day?  For a market that really could not be more liquid, i.e., unfixable? Three observations:

• Here's the Epicurean Dealmaker arguing that banks didn't have a systematic reason to lie about their LIBOR rate, so that this was an individual trader conspiracy, rather than a bank-wide (and multi-bank) conspiracy. 
• The part where the Bank of England regulated encouraged banks not to reveal in their LIBOR fixes how difficult it was for them to borrow money during the crisis sure does seem like a multibank conspiracy.  Would you want, in an antitrust case, to have the following attrributed to your chief outward facing guy?  "I wanted Diamond to be sure that the senior management of Barclays that was overseeing the day to day money market desk and treasury and funding operations did not inadvertently send distress signals."  That's price-fxing, and it is the B of E's regulator's story now. Emails here.
• During the financial crisis, Vikram Pandit, the CEO of Citigroup, worked for a dollar a year.  Bob Diamond, the first CEO to go for this crisis (he's from Barclays), just forewent as much as $31 million in deferred bonuses.  Why would a bank CEO ever do this?  One posbility is to avoid a really revved up criminal investigation, and maybe this is just a sign that the new era of clawbacks is beginning to get teeth.  But another possibility is that CEO contracts with boards have a understood, "if we need government help, you get nothing" clause.  Which would be fascinating.

Finance, Financial Institutions | Bookmark

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8345157d569e20167685a1464970b

Links to weblogs that reference The LIBOR Scandal: 3 Observations: