February 26, 2013
I’m pleased we are discussing the critically important topic of benchmarks. We’ve witnessed blatant and brazen monkeying with the marks. The LIBOR (London Interbank Offered Rate), for instance, impacts virtually anything consumers purchase on credit from a car to a home mortgage to a student loan. When marks are manipulated, it affects us all.
I’ve heard many suggest that lots of banks were submitting false rates, so therefore it was acceptable. That is, in no way, cool or copacetic. It violates the law and can hurt consumers and customers around the globe. Rather, the idea that pervasive manipulation, or attempted manipulation, is so widespread should make us all query the veracity of the other key marks. What about energy, swaps, the gold and silver fixes in London and the whole litany of “bors?” Why would they be any different in the minds of those that may have sought to push or pull rates? For me, this means every single mark needs to be reviewed, and potentially investigated.
Finally, these benchmarks need to be based upon real, transparent trades, and not in the control of any individual or entity which may have a profit motive. That means government; quasi-government or an appropriate not-for-profit entity should oversee the circumstances surrounding how marks are established.
I hope today’s discussion moves us in a direction that restores credibility and confidence to the marks and markets.
Last Updated: February 26, 2013