U.S. banks told to make plans for preventing collapse

Re:U.S. banks told to make plans for preventing collapse by twoodfin on Friday August 10, 2012 @11:27AM (#4366540)

How did the LIBOR scandal cause millions or billions to suffer? As I understand it, a big part of the scandal is the rate being set lower than it should have been, because the participating banks were afraid to expose their precarious state.

Regardless, LIBOR, muni bond fixing and all these Taibbi-bait scandals (which of course should be pursued if there's evidence of fraud) are not what caused the credit crunch and subsequent recession and suffering, just as WorldCom's accounting shenanigans didn't cause the dot com crash.

[ Parent | on HN ]

Re:U.S. banks told to make plans for preventing collapse by uptown on Friday August 10, 2012 @11:47AM (#4366638)

"How did the LIBOR scandal cause millions or billions to suffer? As I understand it, a big part of the scandal is the rate being set lower than it should have been..."

Ok, let's assume they were set lower for argument's sake. Then cities, mutual funds, and pension plans would have earned less than they would have had the rate not been manipulated. Let's examine cities from that list - as you look around the the world today, there's not a lot of cities that seem flush with a surplus of cash. They've got a decreasing tax base as a result of a precarious economy and now they've got decreased investment returns as a result of LIBOR being manipulated down. As a result, they either cut services or raise taxes - both of which have a negative impact on the millions and billions living there.

[ Parent | on HN ]

Re:U.S. banks told to make plans for preventing collapse by tomrod on Friday August 10, 2012 @12:15PM (#4366806)

One could argue that if the expected payoff from LIBOR to cities wasn't so high, then the cities would have invested elsewhere--perhaps in more efficient systems to save money, for one.

[ Parent | on HN ]

Re:U.S. banks told to make plans for preventing collapse by twoodfin on Friday August 10, 2012 @12:18PM (#4366820)

Cities are typically net borrowers, not net lenders, so lower interest rates are better for them.

Regardless, a mutual fund growing at a slightly lower rate isn't the "suffering" the original comment was talking about. If the economic crisis had just been about LIBOR fixing, no one would have noticed.

[ Parent | on HN ]