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CNBC Reports Financial System Changeover: Theyre Going to Put the Old System In a Coma
Key Excerpts from Article on Website of CNBC
Posted: August 14th, 2012
http://video.cnbc.com/gallery/?video=3000108212
Kevin Ferry: There are Libor subpoenas raining down on the New York branches of these foreign banks today. So I think you really have to watch it. The [British Bankers' Association] is now saying they are going to go into overhaul mode. So as if we dont have enough things going on, youre going to start opening up a Pandoras Box here in the Libor sector of the market. I think what theyre going to do ... is basically put the old system in a coma, and work to devise something thats a little bit better, and its going to be tricky. Doug Dachille: So what are they going to do with the euro/dollar futures and all the outstanding notion of principal of contracts linked to Libor? I mean is everybody going to convert their Libor interest rate swaps to cost of fund funds or Fed fund basis swaps or some other index? KF: Are you asking me? Ive asked that question as high as I could ask it and I get blank stares. DD: Its not clear that every bank has exactly the same Libor exposure, so its not clear that that cartel, in setting Libor and manipulating it, actually is as powerful as the cartel that manages oil prices. Yet I dont hear any outrage of people routinely trading commodity derivatives and commodity futures, as much as I hear the outrage over euro/dollar futures and Libor-based interest rate swaps. Everybody assumes thats what goes on when you trade commodity futures, but nobody ever really thought that was going on when you were trading euro/dollar futures.
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