WSJ: Banks could be lying about libor

Quote from wareco:



John Waite, a mortgage broker in Appleton, Wis., said one of his customers, a house painter, faces a reset on his subprime loan next month and will be affected by the recent Libor gyrations.

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I still don't understand why American debt is indexed against British interbank rates.

Why is there a connection? How on earth does the lending rates in the UK tie into US debt interest?

Why is John Doe's mortgage indexed against a foreign bank rate?

Yet another scam no one has a clue on?
 
Libor is a number that is compiled by the British Bankers Association. It's not a reflection of rates in Britan. For the US dollar, 16 international banks, including JP Morgan, Citi, and B of A all report the rate they pay to borrow at, and it's aggregated and published as the libor rate.

The effect of this story breaking is the equivalent of a fed tightening, at a time when the fed is still easing and almost out of bullets. THAT's why it's a big deal. There is still extreme stress in the credit markets, but GOOG had a good quarter, so party like it's 1999...
 
Quote from arealpissedgoy:

I still don't understand why American debt is indexed against British interbank rates.

Why is there a connection? How on earth does the lending rates in the UK tie into US debt interest?

Why is John Doe's mortgage indexed against a foreign bank rate?

Yet another scam no one has a clue on?
More...


Because the debt was going to be sold overseas. Attaching it to LIBOR ensured that the sub-prime loan could be originated.

If you don't like it, don't sign with a fucking adjustable rate mortgage. I hope LIBOR goes to 10% and all these sub-prime scum get slaughtered.

An adjustable 30 year fixed rate mortgage is the best. Fuck anyone wqho did not lock in their rates.
 
Quote from The Kin:

Because the debt was going to be sold overseas. Attaching it to LIBOR ensured that the sub-prime loan could be originated.

If you don't like it, don't sign with a fucking adjustable rate mortgage. I hope LIBOR goes to 10% and all these sub-prime scum get slaughtered.

An adjustable 30 year fixed rate mortgage is the best. Fuck anyone wqho did not lock in their rates.
More...


I agree....and well said because they are scum!
We have our own scum down here (Australia). Speculating on property and then asking for government bailouts when rates start going up.

Beggars, I hate 'em.
 
Libor Increase May Add Billions to Interest Payments, WSJ Says

By Joseph Galante

April 21 (Bloomberg) -- The London interbank offered rate, or Libor, which rose to its highest in nearly six weeks on Friday, may mean billions of dollars more in interest payments for companies and homeowners around the world, the Wall Street Journal reported.

The Libor rose for a second day after the British Bankers' Association started investigating whether members were understating the rates they pay so as not to spook investors, the Journal said.

If the trend continues, the Libor may add about $18 billion in annual interest costs to the $900 billion in subprime mortgages that adjust to its movements twice a year and the nearly $9 trillion in debt companies have pegged to the benchmark rate, the Journal said, citing data from Dealogic.

A rise in the Libor would be disastrous for companies that borrowed heavily using floating-rate debt, betting the Libor would decline, the newspaper added, citing Peter Fitzgerald, chief financial officer at Radco Cos. in Atlanta.
 
Quote from arealpissedgoy:

I still don't understand why American debt is indexed against British interbank rates.

Why is there a connection? How on earth does the lending rates in the UK tie into US debt interest?

Why is John Doe's mortgage indexed against a foreign bank rate?

Yet another scam no one has a clue on?
More...

That's exactly what it is - a scam. And it should be made illegal in the US.
 
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