The World's Most Controversial Interest Rate Is Haunting Us Again
Odd Lots
Bloomberg
4.5 • 2K Ratings
🗓️ 26 March 2018
⏱️ 33 minutes
🧾️ Download transcript
Summary
Remember LIBOR? The London Interbank Offered Rate measures the cost of money when banks borrow from each other. It famously blew out during the financial crisis, but for a long time since then it's been dormant. Only lately it's started to creep higher again. On this week's Odd Lots podcast, we talk to Scott Peng, the founder, CEO and CIO of Advocate Capital Management, who warned in early 2008 that there was something fishy about the way the measure was being priced. In the post-crisis period, it was discovered that the rate -- which helps price trillions of dollars worth of other assets -- was being gamed or manipulated by traders. Peng walks us through the history of the rate, what it's telling us now, and what may ultimately replace it.
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Transcript
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| 1:14.3 | Joe do you remember Laibor? I think I remember that yes I do that's totally what |
| 1:20.9 | was that again A loaded question. |
| 1:22.6 | Libor, the London Interbank Offord Rate, basically the rate at which banks lend money to each other. |
| 1:30.0 | It was a big Libor scandal, right? |
| 1:33.0 | Yeah, I mean, there's so much you could say about Libor. |
| 1:36.0 | So it became a big deal during the financial crisis |
| 1:39.0 | because the rate blew out, |
| 1:41.0 | because basically all these banks didn't want to lend money to each other so they had to offer a higher rate in order to do it and then after the financial crisis we found out that Libor had been rigged in various ways. |
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