Now that we have firmly established that major international banks rigged the Libor rates which hundreds of trillions of dollars in mortgages, credit card debt, and loans use as the base for rates, we have a new scandal to look forward to.
CNBC says that the next scandal will involve the equally large “credit-default swap ![[cnbc explains]](https://media.cnbc.com/i/CNBC/Sections/News_And_Analysis/_News/_CNBC_EXPLAINS/_IMAGES/CNBC_explains_icon1.gif)
market—that operates under a similar principle” as Libor – self reporting of rates.
As consumers, we don’t have to worry about either one. The fairy tales that went on with Libor actually reduced many consumers interest and mortgage rates as banks were trying to show they could borrow money cheaply from each other, to give the appearance that they were healthier than they were.
Investors were hurt – including funds that hold your pensions and government agencies that sold debt cheaper than they should have – and of course we were hurt as voters. Politicians in Washington and in London are now blaming the FED and others about the Libor scandal when it turns out that anyone who read the Wall Street Journal in 2008 knew these games were going on.
“The credit-default swaps are insurance-like derivatives, or side bets, that protect investors from bad events like a company going bankrupt or a country failing to pay its debts,” CNBC said in explaining the product that almost melted the whole financial system because no one know how much money was tied up in these instruments. I doubt if anyone knows today.
“Whether a company has defaulted on its debt might seem unambiguous to some naïve souls out there. But that’s hardly the case, especially when there are lawyers involved and billions of dollars at stake. Because credit-default swap contracts can be worthless when they expire, the timing of insolvencies can make the difference between making and losing a great deal of money. Decisions about when a swap pays out are made by a trade group called the determinations committee of the International Swaps and Derivatives Association. The mere fact that a determinations committee exists is evidence that “insolvency” is not simple to define.”
“Give a man a gun and he can rob a bank
give him a bank and he can rob the world”
Who said this? I am quite disturbed that this quote is part of the “Occupy” movement yet no one is crediting the quote. Typical Socialists and Democrats at work – thinking all intellectual capital is a reflection of their work. Would you appreciate someone coming into your home and taking your stuff?? Stealing intellectual capital to pass off as your own is done every day and that’s why ethics in business (which is why these issues even occur) have been compromised because we are teaching people on smaller ethical lapses, that it’s ok.
It won’t matter if there’s a scandal if none of the villains suffer the consequences of their actions.
“The ferry tales that went on with Libor actually reduced many consumers interest and mortgage rates as banks were trying to show they could borrow money cheaply from each other, to give the appearance that they were healthier than they were.”
Shouldn’t that be fairy tales, not ferry tales?
thank you Andy, everyone needs an editor, especially me.