Libor Interest Rate Scandal - Dave Leonhardt

  • Aired:  07/19/12
  •  | Views: 6,794

The best way to restore faith in the banking system is with a trust fall over a cliff, and Dave Leonhardt explains why Libor is not like cupcakes. (4:59)

I AM NEVER GETTING DRUNK IN THE STEAM ROOM AGAIN.

I MEAN THE CONSUMERS HAVE BEEN SCREWED.

>> SINCE CONSUMER LOANS ARE BASED UPON THAT RATE, YOU COULD ARGUE THAT THIS

ACTUALLY HELPED CONSUMERS BY GETTING THEM LOWER RATES.

>> Stephen: OH.

OH, SO IT WAS GOOD.

>> THE BANKS DEPRIVED INVESTORS OF HUNDREDS OF MILLIONS IF TO THE BILLIONS

OF DOLLARS BY KEEPING LIBOR RATES LOW.

>> Stephen: SO IT WAS BAD.

>> ANY TIME THERE IS A WINNER IN A TRADE, THERE'S ALSO A LOWERS IT IS

BASICALLY A 0 SUM GAME.

>> Stephen: SO IT IS BOTH GOOD AND BAD AT THE SAME TIME LIKE THE BACHELORETTE.

(LAUGHTER) GOD, I'M SO CONFUSED.

I KNOW THIS LIBOR THING IS IMPORTANT BUT FOR THE LIFE OF ME, I CANNOT FIGURE OUT WHY.

>> HERE TO FIGURE OUT WHY FOR ME LIFE IS COLUMNIST AND "NEW YORK TIMES" WASHINGTON

BUREAU CHIEF DAVE LEONHARDT.

DAVE, THANKS SO MUCH FOR COMING.

(APPLAUSE) DO SU HAVE ONE OF THESE.

>> NO, I'M GOOD.

>> Stephen: ALL RIGHT, NOW DAVE, YOU KNOW ME, YOU'VE BEEN ON THE SHOW MANY TIMES.

YOU KNOW I SEE THE WORLD IN SIMPLE TERMS.

THINGS ARE EITHER GOOD OR THEY'RE BAD, OKAY.

CUPCAKES GOOD, TERRORISTS BAD.

WHAT ARE WE TALKING ABOUT WITH LIBOR S THIS CUPCAKES OR TERRORISTS.

>> CLOSER TO TERRORISTS,

IT'S BAD.

>> Stephen: OKAY.

>> IT'S BAD BECAUSE,

ALTHOUGH AS YOUR TALKING HEADS NOTED THERE ARE SOME WINNERS AND SOME LOSERS.

BASICALLY WHAT IS HAPPENING IF THESE ALLEGATIONS ARE CORRECT, WHICH THEY CERTAINLY SEEM TO BE.

>> Stephen: IT'S WRITTEN DOWN.

>> THEY'VE AGREED TO IT IN SOME CASE.

BASICALLY WHAT THEY ARE DOING IS THE BANKS ARE ACTING AS BOTH REFEREE AND PLAYER.

>> Stephen: ISN'T THERE AN HONOR SYSTEM OUT THERE SOMEPLACE?

DON'T AT SOME POINT SOMEONE SAYS, YOU KNOW, WE WOULD PREFER IF YOU NOT LIE AND

MANIPULATE THE GLOBAL CURRENCY SYSTEM.

>> THERE IS SUPPOSED TO BE,

RIGHT, THEY ARE BASICALLY POLICE.

THEY ARE BANKING REGULATOR WHOSE ARE SUPPOSED TO COME IN AND MAKE THE BANKS FEAR

CHEATING IN THIS WAY.

BUT WE SEEM TO HAVE GONE THROUGH A NUMBER OF YEARS IN WHICH NOT ONLY DID CHEATING

BECOME ACCEPTABLE IN A LOT OF PARTS OF THE FINANCIAL SYSTEM, BUT THE REGULATORS,

THE POLICE WEREN'T LOOKING VERY CLOSELY.

>> Stephen: IS THIS A LOT OF BANKS OR LIKE ONE BANK.

>> WE DON'T KNOW YET.

IT LOOKS LIKE-- .

>> Stephen: SHOULD WE NOT FIND OUT.

MAYBE WE SHOULDN'T FIND OUT.

BECAUSE IF A TREE MANIPULATES THE GLOBAL CURRENCY SYSTEM IN THE WOODS AND NOBODY KNOWS, DO WE LOSE

TRUST IN OUR BANKS.

>> WE DO.

AND THAT'S WHY WE SHOULD FIND OUT.

I MEAN-- .

>> Stephen: SO WE HAVE TO TRUST OUR BANK, RIGHT.

THE CREDIT CRUNCH OF 2008 WAS THAT BANK WOULDN'T TRUST EACH OTHER.

>> SOME PEOPLE THINK BANKS UNDERSTOOD THIS LIBOR CHEATING WAS GONG BECOME

THEN AND THAT EXACERBATED THE 2008 CRISIS.

>> Stephen: IF THE BANKS LOSE TRUST IN EACH OTHER ABOUT WHAT IS THE REALITY OF

INTEREST RATES THEY SHOULD BE PAYING COULD THAT LEAD TO ANOTHER BANKING CRISIS.

>> IT MAY HAVE EXACERBATED THE LAST ONE.

>> Stephen: OKAY WHAT IF WE CLAP OUR HANDS, CAN WE KEEP THE BANKING SYSTEM ALIVE.

>> THE BEST WAY TO RESTORE TRUST IN THE BANKING SYSTEM-- .

>> Stephen: LIKE WITH A RETREAT AND TRUST FALL OR SOMETHING LIKE THAT, MAYBE OVER A CLIFF.

>> IS TO MAKE PEOPLE FEEL LIKE THE BANKING SYSTEM HAS-- AND SO IT'S TO FIGURE

OUT-- DO NOT SAY REGULATIONS.

>> CAN I QUOTRON ALD REAGAN.

>> Stephen: YOU CAN QUOTRON ALT REAGAN.

>> IT'S FIGURING OUT WHAT ACTUALLY HAPPENED LAST TIME AND THEN IT'S ALSO MAKING

SURE THAT GOING FORWARD IF ON SOME OFF CHANCE THERE ARE FUTURE BANKERS WHO CHEAT,

THEY DON'T GET AWAY WITH IT FOR YEARS AND YEARS.

>> Stephen: IS THIS ILLEGAL?

>> SOME OF THIS IS CLEARLY ILLEGAL SSES SO IS THIS GOING TO BE LIKE 2008 WHEN

THE SHERIFFS WENT AND ARRESTED ALL THOSE GUYS IN WALL STREET AND PUT THEM IN JAIL.

>> THERE ARE ALLOTS OF BANKERS IN JAIL.

SOME PEOPLE THINK THIS COULD LEAD TO MORE BANKERS GOING TO JAIL THAN THE LAST CRISIS DID.

MY ATTITUDE IS A LITTLE BIT I'LL BELIEVE BANKERS GOING TO JAIL WHEN I SEE BANKERS

GOING TO JAIL.

>> Stephen: DOES THIS AFFECT ME BECAUSE I FEEL LIKE IN SOME WAYS THIS IS JUST LIKE

PARENTS HAVING AN ARGUMENT WITH EACH OTHER AND WE KIDS CAN'T FIGURE OUT WHETHER IF

AFFECTS OUR LIVES YET.

IT'S JUST MONEY GOING THROUGH A HOOP THROUGH PIPES LIKE WATER RUSHING THROUGH LIKE A TURBINE.

DOES THE ECONOMY, MY PERSONAL ECONOMY CONNECTED TO THAT IN ANY WAY?

>> YES T IS, IF YOU HAVE A MORTGAGE T IF YOU TAKE OUT A LOAN TO BUY A CAR.

IF YOU INTERACT WITH THE FINANCIAL SYSTEM IN ANY WAY,

WHAT YOU SEE HERE IS THAT ITS FINANCIAL SYSTEM IN SOME WAYS HAS BEEN RIGGED SO THAT

THE PEOPLE WHO ARE IN IT ARE BOTH REFEREE AND PLAYER.

>> Stephen: BUT LISTEN.

>> THEY ARE SKIMMING A LITTLE BIT OFF THE TOP FROM YOU AND EVERYBODY ELSE.

>> Stephen: IS THAT NECESSARILY A BAD THING.

PROFESSIONAL WRESTLING IS RIGGED AND PEOPLE LOVE THAT.

WHY CAN'T WE JUST MAKE SURE AMERICA WINS EVERY WEEK IF WE WEAR THE WHITE HAT.

>> IF YOU ARE A RIGOR, A RIGGED SYSTEM IS A GREAT THING.

IF YOU ARE NOT ONE OF THE PEOPLE RIGGING THE FINANCIAL SYSTEM, IT'S PROBABLY NOT SO

GOOD FOR YOU.

>> Stephen: HOW I DO GET INTO THAT WHOLE RIGGING BUSINESS?

>> THANK YOU, DAVE.

>> Stephen: DAVE LEONHARDT.

WE'LL BE RIGHT BACK.

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