European Tribune - Comments - Who will trust the banks if they don't?

Who will trust the banks if they don't? | 14 comments (14 topical, editorial, 0 hidden)

It's not a market solution, so it can't work, by definition.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Oct 15th, 2008 at 02:57:21 PM EST
[ Parent ]

I think it's more sinister than that.
Keeping this inflated LIBOR (which was never even truly measured -that's something that is quite shocking since it is the basis of so many loans) up is a way to make insolvent banks more solvent.
Variable rates not only have become a real pain for those who hold such loans, they are a bonanza for banks. An extra 4% on return. Impressive.

"Few can believe that suffering, especially by others, is in vain. - Galbraith"

by Cyrille (cyrillev domain yahoo.fr) on Wed Oct 15th, 2008 at 04:39:43 PM EST
[ Parent ]

Re: Heh (none / 0)

But the complaints so far is that banks have under-quoted LIBOR for fear of admitting that they can't really find funding at that price anymore.

And I tend to agree - when banks have interna lfunding costs that are LIBOR+200 points, somethign is very wrong with LIBOR - ie it's too LOW, not too high.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Oct 15th, 2008 at 05:05:25 PM EST
[ Parent ]

Re: Heh (none / 0)

It's pretty much LIBOR internally here.

"Few can believe that suffering, especially by others, is in vain. - Galbraith"

by Cyrille (cyrillev domain yahoo.fr) on Thu Oct 16th, 2008 at 12:56:11 AM EST
[ Parent ]

Re: Heh (none / 0)

To clarify: regulators may deliberately keep this (temporarily, hopefully) meaningless LIBOR and maybe even encourage its staying high as a way to prop up the financial sector.

"Few can believe that suffering, especially by others, is in vain. - Galbraith"

by Cyrille (cyrillev domain yahoo.fr) on Wed Oct 15th, 2008 at 04:42:10 PM EST
[ Parent ]

Who will trust the banks if they don't? | 14 comments (14 topical, 0 editorial, 0 hidden)

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