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1
The Vicious Babushka  Aug 27, 2015 • 5:49:32pm

Goldman Sachs also ran the Aluminum Shuffle rent-seeking scan.

2
WhatEVs  Aug 28, 2015 • 6:44:48am

Because I had no idea….

An interest rate swap (IRS) is a liquid financial derivative instrument in which two parties agree to exchange interest rate cash flows, based on a specified notional amount from a fixed rate to a floating rate (or vice versa) or from one floating rate to another.

and…

An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often the LIBOR). A company will typically use interest rate swaps to limit or manage exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap.

Where have I heard about LIBOR before?

Oh right, this scandal:

Q: How is Libor calculated?

A: Once a day, major London banks tell Thomson Reuters the interest rate they would expect to pay on a loan from another bank. Thomson Reuters drops those rates in the highest and lowest 25% and averages the 50% in the middle.

There are actually 150 Libor rates, with maturities from overnight to one year, and in different currencies.

Libor is an important element in many interest rate swaps, a way of insuring floating-rate loans from a surge in interest rates.

Q: Wait, what? The interest rate they would expect to pay? Not the rate they actually pay?

A: Right. It’s kind of an honor system. At the heart of the controversy: Some banks artificially inflated or deflated their rates, depending on what would benefit them most. Some may have deflated their rates to give the impression that they were more creditworthy than they actually were.

3
I Stand With Planned Parenthood  Aug 28, 2015 • 8:12:57am

re: #2 WhatEVs

I did a 3 month intense study of the whole system back in 2012 —I was confused about Dodd Frank and decided to learn.

I was happier not knowing.

4
WhatEVs  Aug 28, 2015 • 8:29:45am

re: #1 The Vicious Babushka

Goldman Sachs also ran the Aluminum Shuffle rent-seeking scan.

I wonder if this is why aluminum foil has become so ungodly expensive.


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