hemet dennis wrote: But from what I read they were keeping the interest rates low. So didn't that help people with loans that were based on those rates ?
And I should be grateful, yes? The `tweaking on the margins' apparently was underway as early as 2001 (the `hey, hold the line and I'll buy you a bottle of champagne when I'm in New York"). A rate set by what amounts to an honor system (not on real borrowing costs from the day before). A 300 Trillion dollar pool to nibble on. Get lucky and maybe you'll save a few points, happen to take a position on the wrong side of the `fix' (cough - manipulation)? Well, Charles Schwab, among others, is none to pleased:
Charles Schwab claims it bought about $660 billion of fixed-rate and floating-rate securities affected by the alleged Libor manipulation. The financial services company does not put an exact figure on damages, but says in court documents that Libor-rigging banks reaped "hundreds of millions, if not billions, of dollars in ill-gotten gains" at Schwab's expense.
http://newsandinsight.thomsonreuter...s_may_shun_big_Libor_lawsuit_and_go_it_alone/
For the more egregious results see the info in the link in my first post.
The overall lowering of the libor was the direct result of most Central Banks trying to pump enough liquidity into the system, back in `08, to make sure GE, et al could make their payrolls come next Monday (home equity lines of credit dried up only a little faster than the Corporate ones). The TARP was near beer. The Fed, alone, backstopped the system to the tune of at least 7.7 trillion (Bloomberg FOIA request info - not the total only the specified `guarantee' offered over a period that the judge in the request agreed to release). TBTF, or be held accountable. Sure, the TARP has pretty much been retired but the underlying rot that made the TARP, etc. necessary has not been addressed in a convincing fashion (S&L crisis - puny - 1000 felony convictions - this time - apologists for the `smartest guys'). Libor had to be kept low enough that the banks would lend to one another (none were sure who was holding the toxic products created for and by them) `what if the other guy blows up? Uncle Sam (you and I) steps in, `don't worry, we'll fill the pool'. So, where is our fee for service (if nothing else)?
So, those municipalities/Counties/States, in particular, that were financing public works by means of swaps tied to the libor, ended up not completing projects, going bankrupt having to raise taxes/cut services in order to buy their way out of what were sold as a safe way to finance projects. Think of it as more indirect bail-out payments from the public (libor dropped - kept low to prevent collapse - swaps only worked if libor floated in a higher range).
I'm having a Yogi Berra moment of deja vu all over again (another matter, but not at all unrelated, bear with me):
The commodity futures act, in addition to allowing unregulated trading of financial derivatives, included language advocated by Enron that largely exempted the company from regulation of its energy trading on electronic commodity markets, like its once-popular Enron Online. The provision came to be known as the Enron Loophole.
Enron was a major contributor to Mr. Gramm’s political campaigns, and Mr. Gramm’s wife, Wendy, served on the Enron board, which she joined after stepping down as chairwoman of the Commodity Futures Trading Commission.
http://www.nytimes.com/2008/11/17/business/17grammside.html?_r=1&pagewanted=all
"The investigation focuses on JPMorgan bidding practices that may have been designed to manipulate the California and Midwest electricity markets," FERC lawyers said in the subpoena.
"Any such improper payments to generators are ultimately borne by the households, businesses, and government entities that are the end consumers of electricity."
The inquiry follows complaints from grid operators in California and the Midwest in 2011 that JPMorgan's traders may have bid up electricity prices by more than $73 million. FERC has not yet found if there was any wrongdoing.
http://www.reuters.com/article/2012/07/03/us-utilities-jpmorgan-ferc-idUSBRE8620LK20120703
Don't get me wrong, I want a `free' market - free of the above and, if it requires a length of hemp over a tree limb, I'll be there to slap the horse away (at no charge).
