Libor

Timothy Geithner was hip-deep in the Libor scandal, and somehow I never heard about it:

At the hearing, Geithner stuck to a defense he expressed last week — that once he learned of the ma­nipu­la­tion, he sounded alarms to British and U.S. regulators. . .

But Republicans hammered Geithner about why he did not inform lawmakers during numerous congressional hearings or in the lengthy debate over Wall Street regulation. . . Other GOP members noted that even though Geithner knew of possible rate-fixing, the Federal Reserve still used Libor in several financial rescue programs.

Geithner defended his actions, saying that Libor was the best number available. That’s nonsense. Even if you set aside the rigging, Libor should never have been used for anything, because it doesn’t measure anything real. It never did. Libor is nothing more than the average of a set of made-up numbers.

In fact, one should have expected that Libor would be rigged. Or, put another way, what does “rigged” even mean in regard to a fictional rate? The “estimates” that make up Libor aren’t real rates that anyone can get. Their sole use is to set Libor, so of course they were chosen in such a way as to favor the estimaters own interests.

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