Friday, July 28, 2017


LIBOR.  No More.  Banished by 2021.  It's like haven't your girlfriend announce she's leaving.  To be replaced by...well, we're not sure about that.

In one of the greatest cynical,acts of all time since Looie shut down Rick's Cafe Americain, the banking authorities in England has determined that the City could no longer support the touchstone that for the last 50 years has been central to international credit and today supports probably $500 TRILLION of financial transactions about which we have knowledge.  More?  Probably.  The reason?  Sacre Bleu!   There might have been some messing with the rate!  Les Banques Horrible!  Of course the buggers knew nothing of this...why they all thought that LIBOR Was the perfect lending rate.  Of course they were the only ones.

We've gone over this ground a number of times but you really have to stand in amazement and shake your head at the latest attempt on the part of beaurocrats and overseers to reinvent the wheel.  A short recap.

LIBOR came into existence to support the growth of syndicated lending simply because no bank would trust another bank to set a borrowing rate on its own.  NO BOD EE thought it was accurate to any degree as reflecting a universal lending rate among "First Class Banks in the London Market..." as was the definition of LIBOR.   Indeed, in scouting for quotes among syndicate members, upon the entry of Japanese Banks, one ALWAYS asked for a quote from a Japanese syndicate.  No Japanese bank could ever borrow dollars at at level equal to, say, Morgan Guaranty, and you would therefore get a higher quote from the Japanese reflecting it's cost of funds (or a tad higher) meaning that the definition itself was a fraud.

Yeah, in more recent years as other, internal, products developed, bad actors undoubtably did collude to try to enhance internal positions but as of this date I know of no successful suit by a borrower or a holder of any instrument whose return was determined by LIBOR who has successfully recovered either damages or losses as a result of collusion.  Who was hurt?  The institutions and their shareholders who were perhaps duped into paying higher remuneration that deserved to dishonest employees.  And who paid the price?  Well, the institutions and the shareholders of course as a result of regulatory shake-downs measured in the billions which were based on absolutely nothing even remotely resembling actual loss or damage.  Oh yeah, there is some poor guy from Citi doing an 11 year stretch for being the "ringleader;" not another person has been incarcerated.  And now ends LIBOR.  Finito.  WE have done our job.  WE have eliminated the problem.  WE will build a greater system.  WE cannot longer be blamed for whatever happened that got politicians mad and which no one understands to this day.  WE are safe.  Of course there will be no more prosecutions.  We got lucky with one; let's not press our luck.  On top of that it might cause people to remember.  Pity the British Bankers Association had to go.  The dinners were always grand, but that's progress.  Oh Clive, another large Malt piece of ice.

Greatest weekend of the year...have a good one.

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