Libor

I’ve been lazy on the Libor scandal because it made my head spin. It seemed like an obscure financial scandal confined to the UK. But I was wrong not to pay attention. As Matt Yglesias explains, this scandal — involving interbank loan rates — isn’t some obscure financial bullshittery:

Even though the typical American is never going to seek an interbank loan in London, the number is used as a benchmark for a wide range of other financial instruments. Credit instruments with variable interest rates—private student loans, auto loans, adjustable-rate mortgages, credit cards, etc.—need to be indexed to some underlying marker of the overall cost of funds within the financial system. Often that’s something called the “prime rate” set here in the United States, but it’s also frequently the Libor. So growing evidence that Libor numbers have been deliberately manipulated by banks for years means that millions of people have been paying the wrong interest rate on all manner of financial products. Vast sums of money have been wrongly snatched from innocent people and created equally vast undeserved windfalls for others.

Essentially, Libor is an estimate of what it costs for banks to lend each other money. Those interest rates feed … everything. They are based on banks reporting data on borrowing. And it turns out that banks tailored their reports to under- or over-estimate Libor so that their financial arms could make huge profits on the information asymmetry. The banks knew what the real libor was but made sure a bogus libor was put out so that they could make millions. Then, when the financial crisis hit, both the banks and the regulators conspired to keep the rates low so the economy and the banks would seem healthier than they actually were.

A few heads have started rolling — put a pin in that for a second — but I think people are missing the forest for the trees. The corruption of Libor was inevitable. An informal system like this may have worked when all the bankers knew each other and agreed not to manipulate the system. But as Mark Calabria notes, it was never going to be as good as a system based on actual market performance. It was precisely the sort of cosy insider bullshit that has been exploding in our faces for the past five years.

And this is bigger than the billions or maybe trillions these guys ripped out of our pockets. What this really is, when you think about it, is a suicidal attack on the financial system itself. The financial system functions on trust. If we come to believe the game is rigged, we might as well just rename ourselves New Zimbabwe. So far, Barclay’s is the only bank implicated, but that’s because they’re cooperating (sorta). This will spread and spread until banks across the world are engulfed.

Now, returning to the head rolling: I’ve frankly lost patience with these fuckers in the banking industry. When they make me agree with an op-ed by Robert “The Littlest Communist on Slate” Reich, they’ve gone too far. Rolling out the heads of a few mid-level executive is simply not going to cut it this time. Entire boards need to be fired. People need to be jailed. This business of shrugging shoulders and offering a few ritual sacrifices is insufficient for this crisis.

Let’s be clear: we don’t need some new huge slate of regulations and capital restrictions. Stephen Baindbridge points out how often these crises result in bad laws that hurt the economy and do nothing to prevent further scandals. No, what we need to do is enforce the laws we have to the fullest extent. What these guys did was fraudulent. We’ve had laws against that for centuries.

Comments are closed.

  1. georgebalella

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  2. Seattle Outcast

    Amazing – you actually made some small amount of sense with that post. I”m giving it an F for structure, grammar, and ability to communicate ideas clearly. Please try again, and remember your 8th grade composition skills.

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  3. Hal_10000 *

    Don’t assume this was just the banks. As usual, the government and bank of england had their hand to play. At the moment much of the media is trying to make sure “the banks” were purely at fault, as usual, but give it time and the hand of government ministers will be seen.

    Exactly. I should have said it more explicitly, but this is one of the reasons “more regulation” is not the answer. All that creates is more regulatory capture and more ways to hide what they are doing. Yglesis contends that the British government, in 2007, encourage the banks to rig Libor so the economy would seem healthier than it was.

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  4. Poosh

    I think Americans need to understand that whilst the US banks are some of the most regulated entities in the USA, in the UK that’s not quite true. There is a lot of regulation, however, the UK banks were vital in helping the previous government expand government and the welfare state (such as the National Healthcare Service). The flooding of the UK with cheap money meant the government needed the banks to help scale back the threat of toned-down currency etc. Also, because the UK doesn’t produce much in terms of actual goods or resources (when was the last time you bought anything with a “made in the UK” sticker? Dr Who maybe….), we’re mainly a services country and the Banking sector is VITAL to our welfare state. Thus a lessening of the certain quality of regulation from the LEFTIST government under Blair and Brown. That’s how I understand it, anyway. This is a classic example of banks and government with eachother’s fingers up eachother’s arses: everything feels good at first but in the long run that shit’s gonna blow up in everyone’s faces.

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  5. georgebalella

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  6. Mississippi Yankee

    From your link:

    Barclays’ regulator in the United States is the Federal Reserve Bank of New York, which was run at the time by current Treasury Secretary Timothy F. Geithner.

    Diamond said that his bank had alerted the New York Fed to issues with Libor at least 12 times.

    The GOP needs to capitalize (no pun intended) on this scandal.

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  7. tomchamberlain

    Ayn Rand side-note: Was it in the objective, rationalist, self-interest of banks to do this? Nope. As you can see for themselves.

    I’m not a full-on Rand devotee like some but the answer to this question is clearly “Yes”

    The people who did this made tons of money, the great majority of them won’t be punished and the ones that will just lose their job (which is of little consequence if you made millions on the scam you’re being fired for). Oh, and all the banks are still in business.

    Again the problem here traces back to government. The Government guarantees the banks so the people running those banks can try any scam they want and know they won’t suffer the consequences. The Government backs the bank deposits so depositors don’t feel they have to pay attention to what their bank is actually doing or demand transparency from it.

    Again it’s the classic liberal fallacy where you acknowledge your government is bought and paid for but then respond to that by increasing the government’s power and scope.

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  8. Kimpost

    Again the problem here traces back to government. The Government guarantees the banks so the people running those banks can try any scam they want and know they won’t suffer the consequences. The Government backs the bank deposits so depositors don’t feel they have to pay attention to what their bank is actually doing or demand transparency from it.

    I’m not denying that government can play a role in situations like this, but the system is clearly set up so that there’s incentive enough for the banks to do this for themselves. By manipulating the libor, tons of money can be made. I can’t see the practice going away without regulation. That’s not the same as asking for more regulations, but perhaps for smarter and/or better enforced regulations.

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  9. tomchamberlain

    I’m not denying that government can play a role in situations like this, but the system is clearly set up so that there’s incentive enough for the banks to do this for themselves. By manipulating the libor, tons of money can be made. I can’t see the practice going away without regulation. That’s not the same as asking for more regulations, but perhaps for smarter and/or better enforced regulations.

    You want smarter or better regulation but in reality it never works. Because you have people who stand to make millions (the bankers) squaring off against people who have no vested interest whatsoever (the auditors). So unless you can design a perfect system the regulation simply doesn’t work.

    But can you design a perfect system? I think we saw the answer to that in the Obama administration’s financial reform. It started out great but ended up getting watered down because politicians need money to run for office and banks have a lot of money. But that leads to another question, If the politicians are bought and paid for why did these regulations pass at all?

    Because the bankers love regulations!

    Regulations cost money to comply with. Money big banks can easily afford but money that smaller startups could never afford. So the end result of regulation is to drive everyone but the established banks out of the market. Ensuring fewer players is exactly what makes this kind of collusion possible in the first place.

    You said you can’t see the practice going away without regulation. But in truth it’s the regulations that caused the consolidation of power that made this possible. If the guy up the road from you could start a loan and investment firm with a few hundred thousand in seed capital he wouldn’t be pulling these complicated manipulations. He’d just be looking to get customers by providing better service.

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  10. Kimpost

    You said you can’t see the practice going away without regulation. But in truth it’s the regulations that caused the consolidation of power that made this possible. If the guy up the road from you could start a loan and investment firm with a few hundred thousand in seed capital he wouldn’t be pulling these complicated manipulations. He’d just be looking to get customers by providing better service.

    I guess we’ll just have to agree to disagree here. I believe that wealth seeks to accumulate etc…… But that’s besides the point IMO. Under the current financial structure, private institutions can, as evidenced here, use their powers to manipulate interest rates. This wasn’t caused by government regulation. This was caused by private institutions committing fraud, possibly in cooperation with corrupt government officials.

    My guess is that you’re not advocating a market with zero regulations. Assuming you’re not, what kind of balance are you looking for? If “smart” regulations are destined to fail, then what’s the alternative?

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  11. Xetrov
    Ayn Rand side-note: Was it in the objective, rationalist, self-interest of banks to do this? Nope. As you can see for themselves.

    I’m not a full-on Rand devotee like some but the answer to this question is clearly “Yes”

    Based on the larger philosophy of Objectivism, the answer is no. Ayn was very clear that Fraud had no part in it – men must be free to interact without coercion, or falsehoods. Clearly the Banks were not operating under that same philosophy.

    Speaking of Ayn, here’s a fantastic writeup on the Welfare state from Forbes.

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  12. tomchamberlain

    My guess is that you’re not advocating a market with zero regulations. Assuming you’re not, what kind of balance are you looking for? If “smart” regulations are destined to fail, then what’s the alternative?

    You might give me too much credit. I’d reduce all the laws down to two: you must share your (accounting) books and they must be accurate.

    The problem is people trust in Government to prevent fraud and Government has proven it can’t do that. If the government stepped back you’d see people investigating for themselves and private rating agencies popping up to fill that need.

    These agencies, unlike the government regulators, would be as financially motivated to give accurate results as the banks are to commit fraud. More importantly they’d be financially liable if their investigation didn’t turn up fraud. So the consumer would actually get more protection.

    I should point out this isn’t a scenario I dreamed up. Firms like Dunn and Bradstreet exist today and are used by businesses to evaluate potential vendors (D&B charges around $121 for a very basic report). On the higher end there’s no end to the law firms who specialize in investigating companies for a merger or acquisition.

    I mean, think about this situation. How hard would it be for a private agency working for a client to compare the results that client is getting with the Libor and determine something fishy was going on?

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  13. georgebalella

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  14. Xetrov

    So you think that money is the root of all evil? Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?

    When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears not all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor–your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money, Is this what you consider evil?

    Have you ever looked for the root of production? Take a look at an electric generator and dare tell yourself that it was created by the muscular effort of unthinking brutes. Try to grow a seed of wheat without the knowledge left to you by men who had to discover it for the first time. Try to obtain your food by means of nothing but physical motions–and you’ll learn that man’s mind is the root of all the goods produced and of all the wealth that has ever existed on earth.

    But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man’s capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy? Money is made–before it can be looted or mooched–made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can’t consume more than he has produced.’

    To trade by means of money is the code of the men of good will. Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of your effort except the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit by the unforced judgment of the traders. Money demands of you the recognition that men must work for their own benefit, not for their own injury, for their gain, not their loss–the recognition that they are not beasts of burden, born to carry the weight of your misery–that you must offer them values, not wounds–that the common bond among men is not the exchange of suffering, but the exchange of goods. Money demands that you sell, not your weakness to men’s stupidity, but your talent to their reason; it demands that you buy, not the shoddiest they offer, but the best that your money can find. And when men live by trade–with reason, not force, as their final arbiter–it is the best product that wins, the best performance, the man of best judgment and highest ability–and the degree of a man’s productiveness is the degree of his reward. This is the code of existence whose tool and symbol is money. Is this what you consider evil?

    But money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. Money is the scourge of the men who attempt to reverse the law of causality–the men who seek to replace the mind by seizing the products of the mind.

    Money will not purchase happiness for the man who has no concept of what he wants: money will not give him a code of values, if he’s evaded the knowledge of what to value, and it will not provide him with a purpose, if he’s evaded the choice of what to seek. Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent. The man who attempts to purchase the brains of his superiors to serve him, with his money replacing his judgment, ends up by becoming the victim of his inferiors. The men of intelligence desert him, but the cheats and the frauds come flocking to him, drawn by a law which he has not discovered: that no man may be smaller than his money. Is this the reason why you call it evil?

    Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns–or dollars. Take your choice–there is no other–and your time is running out.

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  15. richtaylor365

    George, you strike me as one of those whiny OWS types, you know, those generally dissatisfied with their mediocre none discript existence so they band together with other under achievers to rail against that industry that represents and deals in capital, the very symbol of a free enterprise system. Then, as opposed to gaining stature or satisfaction from any real accomplishment or achievement (like work), they can pride themselves in sticking it to the man, and giving the ordinary folk a voice, how funny.

    I’ve had the same bank for going on 12 years now, not once have they charged me a dime for their services (with Automatic deposit I get everything for free), so I get free checking, free ATM services, and basic banking services, all for free, yet I am the one being taken advantage of, right?

    Another thing to ponder, those nasty banks you are so afraid of, the ones that forced all those college students to take out loans and those home owners to take out mortgages totally against their will (how dare they expect to be paid back, those meanies), they are made up of people just like you and me. Thousands and thousands of hard working employees who have a dog in this fight, who count on paychecks to feed their families, count of stock options for maybe a semi nice retirement, and shareholders who risked their own capital to invest in those banks, hoping for a fair return on that investment.

    Gee, if companies that make money irk you so, why not go after the oil companies, or the drug industry. You are probably typing this nonsense on a pc, companies like Microsoft Intel, and Seagate are profiting from all your fussing, are they next on your hit list?

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  16. Seattle Outcast

    I’ve had the same bank for going on 12 years now, not once have they charged me a dime for their services (with Automatic deposit I get everything for free), so I get free checking, free ATM services, and basic banking services, all for free, yet I am the one being taken advantage of, right?

    I’m sure it’s not free – they pay you interest on your accounts….

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  17. richtaylor365

    I have non interest paying account, this is fine by me since I keep very little cash in there anyway. Besides, bank interest is pennies now days, I’m not losing much. But with all the free services that I get, I hardly think they are manipulating me or treating me like a sef, like some would believe.

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  18. georgebalella

    richtaylor,

    Thanks for a thoughtful post pretty much ad hom free.

    Let me ask you a question and please answer honestly without googling. If you don’t know say so. How much per year in total do merchants pay banks for credit card swipe fees?

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  19. richtaylor365

    No problem George, if you have been around here awhile like you said, you would know that I’m not real big on name calling.

    Regarding your question, no, I don’t know the exact numbers, I admit it. I did read something this morning in the wsj about Visa and MasterCard agreed to settle a class action suit for $6 billion. I’m on holiday so I’m not going to delve too far into it until I get home. I suspect there was some shenanigans going on and some over charging. If you care to share with us a non bias appraisal of the suit, I would be happy to read it.

    Yes, the credit cards were overcharging, but many merchants passed that cost onto the customers. I would like some agreements made so that everyone is happy, but I will admit that I use my credit cards like crazy everyday and appreciate the convenience. If everyone was like me and paid their bills , made good on their promises to the credit card companies, then they, like merchants who charge more to cover the cost of shoplifting, would not have to charge so much.

    When I get back home in a few days and I will look into it further.

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  20. Seattle Outcast

    Moogoo, you can live quite easily without using credit cards (I did it for years), and many places are cash only just because of transaction fees. Also, you’d be amazed at the number of places that give cash discounts if you just bother to ask.

    It is quite apparent however, that you don’t know how the various types of cards work, their history, or why people use them as they do. Short version is this – they make things very convenient (you can easily argue that they make things a bit too convenient), and the overwhelming vast majority of people consider the cost of using them to be worth the convenience.

    Get over yourself and your half-assed tirade about economic enslavement to Visa and MasterCard, you just prove yourself to be even dumber than we first assumed.

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  21. georgebalella

    Rich ,

    Bank swipe fees average about 2% per transaction. These cost paid by merchants are passed on to ALL shoppers even if they are NOT credit cards users. The banks pull in $40 – $50 BILLION a year. That’s huge Rich. That’s just one way they are ripping people off and controlling the market. It’s effectively a tax with all the money going to a few large banks. This is why I laugh at foolish people who brag about the “rewards”, like frequent flyer miles, their banks “give” them for using their cards. And these fees favor large merchants and put at disadvantage smaller merchants.

    There is so much else to comment on your post. I will do so in my next reply.

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  22. Seattle Outcast

    You are going to have to explain a few things in your “logic”

    1) how are transaction fees a “rip off”? Do you think they should be free to use? If so, how will the infrastructure (which is massive) be paid for and maintained?

    2) when you get a cash discount for not using a card, how does the fee still apply to you?

    3) how does this allow a “few banks” to “control the market”? Specify which banks & markets and how they are being controlled

    4) given that most people who have a “reward card” of some type realize that the rewards typically aren’t anything to get worked up over, how is it that these people are foolish? And ones that operate as advertised (not that many) actually make the costs of using them even lower by giving you rebates.

    5) what alternative do you have to replace the existing card system, particularly given current market penetration, ease of use, and acceptance by the public?

    Come back and answer these questions if you actually stop foaming at the mouth on the topic and are willing to engage what feeble mental faculties you may still have.

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  23. georgebalella

    George, you strike me as one of those whiny OWS types…

    Absolutely… put me down as an “OWSer” . I marched with them in Boston. They are well informed people who actually know about things like bank swipe fees… that you did not. Banking reform is an absolute must if you believe in capitalism. Right now the banking system is the epitome of crony capitalism.

    ….that industry that represents and deals in capital, the very symbol of a free enterprise system.

    This is so unthinking on your part. I am going to point out so many ways that they are NOT interested in operating under the basic rules of capitalism.

    you know, those generally dissatisfied with their mediocre none discript existence so they band together with other under achievers

    A bit about me… I am writing to you from my vacation condo in Lake Tahoe. Yesterday I kayaked crystal clear waters , the days before I river rafted, hiked in flowery mountain meadows and mountain biked some sweet single track. I work on average 2 days a week ( 1 a 24 hour shift) and take 10 -12 weeks off a year. I love my wife of 26 years, I love my job and we have 2 dogs, 3 cats and 2 rabbits that make my home as happy a place as could be, we have 2 incredible beautiful daughters,… the reason behind my passion for how we organize civil society. I am in the top 2% maybe top1% of income and I feel like I am in the top 0.001% in happiness. Other then my daughters future the biggest concern I have is that not more people have it as good as me. I think the advances of modern civilization have been great but prosperity has not been shared as near much as it could be. The idea that 1% of the worlds population owns 40% of its wealth is absurd, uncivilized, in large part a result of abuse of power and not even efficient. We can and will do better and it has nothing to do with socialism or statism. This is just about pragmatic rational solutions to organizing civilized society and rebuking the simple minded meme that less government is always better. It is not. It is decidedly nothing but an ideological moniker put forth as propaganda to help those in power to hold onto it. Anyway, sorry but I am not the dissatisfied person you want me to be. If anything it seems many on your side are angry, miserable, misanthropes and like to use the government as the dead horse to beat for all their problems ignoring the subtle ways private interest screw the crap out of you and disregarding the good things that government of , by and for the people has done for you.

    On banks and college loans… the banks were simply acting like middlemen putting in huge fees and passing them onto the government. Obama took that away from them and lent directly to students saving us billions of tax payer dollar and really chapping the hides of some piss ant rip-off the public bankers.

    On home loans. UNBELIEVABLE that you find a way to absolve the banks and put all the blame on the borrowers. It’d be as if you sided with me a doctor who knowingly gave unneeded and even harmful expensive treatment and poor advice to my patients who trusted me. Then when they died or went bankrupt and couldn’t pay their bills the taxpayers gave me lots of money to pay the unmet charges. The lenders NEVER got bailed out Rich. They lost their equity and their homes. The banks got bailed out AGAIN….they got a trillion dollars… they used it to give out bonuses and now we continue to subsidize them by giving them free money from the Fed which they will not loan to people so they invest it in Treasuries effectively taxing us billions of more dollars. Do you not know these things Rich when you refer to the banks as “the very symbols of capitalism”?

    Enough for now…. there’s so much more but my cat needs a chaperoned walk about the condo.

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  24. georgebalella

    1) how are transaction fees a “rip off”?

    Instead of charging them to the card user they cleverly charge the merchant who has no choice but to pass the cost on to ALL customers. Play one merchant against another and the one who doesn’t allow your card goes out of business

    2) when you get a cash discount for not using a card, how does the fee still apply to you?

    You so called cash discount is in effect paid for by everyone else in increased mrechent fees.

    The rest of your questions are addressed here. Pretty much your position would be like a person who gets social security and thinks its a good deal because its free. A least most people understand the cost of taxes and supposed purpose of taxes while the banking industry has these fees that are passed on to ALL consumers yet almost no one understands or knows of them as Rich recently provided evidence of. $40 to $50 billion a year as an effective corporate tax to the general public.

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  25. richtaylor365

    George, I’m cooling my heels at Miami international right now so I got some time to kill. I have to respectfully disagree with just about everything in your post but before I get into the nuts and bolts, a few questions;

    Are you against swipe fees in general or just the percentages that have been charged thus far?

    You do realize, don’t you, that even factoring in the swipe fees, most retailers like their customers to use plastic, in fact they encourage it?

    You do realize, don’t you, that credit card companies assume a risk every time a plastic transaction ensues, ( the expense of processing the card,the risk of fraud and the float)and that many times they are left holding the bag and not getting paid by the customer? Should they, being just accept this risk without recompense?

    You do realize, don’t you, that part of the settlement was that the card issuers agreed to abolish the no surcharge rule?

    and lastly, didn’t the system work exactly the way it was supposed to? That merchants thought they were the victim of collusion and threatened suit, and instead of costly litigation the card issuers relented and offered some solutions?

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  26. Seattle Outcast

    I am writing to you from my vacation condo in Lake Tahoe

    The one which you alluded to previously then shut up about when I targeted it as a shack near expensive property. You do realize we consider most of your talk about yourself to be complete lies, right?

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  27. Seattle Outcast

    Instead of charging them to the card user they cleverly charge the merchant who has no choice but to pass the cost on to ALL customers. Play one merchant against another and the one who doesn’t allow your card goes out of business

    That would be great for the person that doesn’t use cards, and if it was feasible for the merchant to do so, they they would. There are no rules that state any merchant accepting the card has to spread the cost of it around to all customers, they just do it because it’s good business for them in terms of time spent.

    Again, you’re clueless – credit card companies don’t “play one merchant against the other”, they want ALL of them to use their services. It’s how they make money.

    You so called cash discount is in effect paid for by everyone else in increased merchant fees.

    Then I hope you’ve figured out that you don’t have to be that “everyone else”, moron.

    As for your link – they got busted for price collusion. Hardly the first to be penalized for such behavior, and it barely even addresses one of the questions I asked, much less “the rest of them”. I have to wonder, are you even capable of analytical thought?

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  28. Poosh

    No respectable liberal/leftist would claim the OWS vermin were “informed” so I think we can throw Mad George into the bin with the rest of the loonies.

    *This being said, banks, like all people (and businesses are people), can be arseholes. The best defence is an informed, civil society highly attuned to this sort of thing. That is, a society that is first grounded in being rational.

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  29. richtaylor365

    George, we could not be any more diametrically opposed on the issues, on ALL the issues, to wit;
    Where you see the credit card industry and its practices as insipid, coercive, and duplicitous, I see it as a necessary convenience propagated to simplify consumer transactions, a logical progression in buying and selling consumer goods. It is a win/win/win device where everyone benefits. The consumer wins because he gets a method of buying goods where documentation is provided for all transactions, where he gets to organize payment tailored to his needs, and where he gets extra value in the form of cash back (I get 3% on all transactions, and it costs me nothing because I pay the bill in full every month). The merchant wins in that he also gets instant verifiable documentation with all transactions and he gets extra business and sells more items because people are more apt (I’m sure you know this) to buy big ticket items spontaneously with plastic, items they would never purchase with the dollars in their wallets. And the Credit card companies win because not only do they get swipe fees from the merchant but they can charge other fees to the consumer that would prefer (his choice) to stretch out his payments. This is why just about every retail company on the planet offers their own credit card, they want in on the action.

    the reason behind my passion for how we organize civil society.

    Then I suggest you do everything in your power to get that incompetent clueless community organizer out of the WH immediately, otherwise your daughters are looking at a bankrupted America, where this debt will be on their backs and their quality of life will suffer. Obama and the dems are bankrupting this nation, wake up.

    The idea that 1% of the worlds population owns 40% of its wealth is absurd, uncivilized, in large part a result of abuse of power and not even efficient.

    Not efficient to who? I’m sure that 1% would disagree, along with the millions of people that are employed by the 1%. This really is the cavernous divide between you and me (conservatives and liberals), I get the simple concept, practiced and effectuated since the dawn of time, that life is not fair, libs just can’t wrap their brains around that concept. Face it, there will always be someone richer then you,smarter then you, better looking then you, healthier then you, living longer and happier then you, and even (dare I say it) luckier then you. Instead of going through life bitching about how unfair it is and how you are more deserving then the next guy (and how government needs to do something about it), we conservatives work with the hand that we were dealt. Sure, I would like everyone’s station in life to be improved. It would be nice if there were no poor people, or for that matter no lazy or dishonest people, but life is what you make it, something those whinny OWS losers never figured out. There will always be rich and poor people but as Lincoln said ,” You cannot help the poor man by destroying the rich”.

    UNBELIEVABLE that you find a way to absolve the banks and put all the blame on the borrowers.

    Come on George, I know your reading comprehension skills are better then that, please show me where I said any of that. But that is another mime the OWS latched on to and you are parroting, that those evil banks put a gun to the head of all those home owner and made them sign on the dotted line. Do you understand the concept of a legal and binding contract, agreed to and signed by both parties? Those home owners entered that mine field with their eyes wide open, and when their plan for riches did not pan out (homes are supposed to appreciate forever, right?) they walked away, some untouched while the banks got stuck with damaged properties worth far less then what they were sold for.

    Here is two scenarios. Joe buys a house, a much bigger house then he needs and more then he can afford, because he sees all his friends flipping their homes for big bucks. He gets himself an ARM, with no money down, knowing that he will sell in a few years, when the interest rate goes up, and make oodles of money in the process. But sadly, his houses value does not go up, it goes down. And after a few years, when the interest rate goes up, he sees that he can’t make the killing on the sell of that house he thought he would, oops. So he walks away (after about 6 months, of course, without paying his mortgage and squatting on the bank’s property) without losing anything, deciding that it’s just not worth it to honor the original agreement he signed with the lender.

    Fred is in the flipping business. For several years he made his fortune buying and selling homes, half a dozen at a time, and with no money down. Property values keep going up, he keeps making money hand over fist, life is good. Then the real estate bubble pops and he now has several homes that are under water, what is a real estate mogul to do? Simple, just walk away, let the banks foreclose on him, now it is their headache, not his.

    Yes, the banks should share {some} of the blame for not qualifying some of these people properly, but let’s not forget that lenders were staring under the gun of the CRA and were threatened into much of these bad loans.

    They are well informed people

    Obviously you missed the dozen or so posts I wrote last year, when they were at their smelliest and most damaging. Do we really need to repost all those thousands of videos showing what their true colors really are?

    Believe it or not, this blog really does encourage different points of view and diversity of thought. We have a few more centrist even left leaning posters here, but honestly, I can’t think of a single thing you have written, or an idea you have put forth, that has made sense to me. I don’t know whether your whole goal here it to just be disruptive and contrary or you really are interested in a give and take. Until you write something logical (at least to me) then I am forced to go with the former.

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  30. hist_ed

    Hey George, you didn’t answer one of the questions above and I am curious:

    5) what alternative do you have to replace the existing card system, particularly given current market penetration, ease of use, and acceptance by the public?

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  31. Poosh

    The idea that 1% of the worlds population owns 40% of its wealth is absurd, uncivilized, in large part a result of abuse of power and not even efficient.

    *couldn’t let this classic retardence (like sentence, but written by a retard) go without pointing at it and laughing at it.

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  32. richtaylor365

    Thanks for the thoughtful response. I guess the general consensus around here, that you are a total waste of everyone’s time, is correct, too bad.

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  33. Poosh

    Last time I checked, Feudal lords didn’t build me an Ipod; or produce Battlefield 3; or give me a massed range of quality meats for low, low prices; or fry a large quantity of chicken using a secret recipe then throw it in a bucket and offer it all to me for peanuts.

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  34. georgebalella

    Hidden due to low comment rating. Click here to see.

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  35. richtaylor365

    YOU are totally wrong and ignorant of the realities of this issue so don’t tell me I have nothing to offer.

    You have nothing to offer of substance, that has been demonstrated repeatedly by you.

    You didn’t even know of swipe fees for christ sake.

    Again, you demonstrate a total lack of reading comprehension skills, a necessary requirement for any back and forth. You asked me this:

    How much per year in total do merchants pay banks for credit card swipe fees?

    I told you that I did not know the exact number in dollar merchant s pay to banks, and you took that to mean I don’t know what swipe fees were, incredible.

    I and others here asked you legitimate questions, which you could not (would not) answer.

    Since you can not read properly dealing with you in any way would be counter productive and a total waste of time. Stop by and bother people here from time to time if this gives you pleasure but you have zero to offer me. My earlier assessment of you was dead on, you are an embarrassment to real liberals, those I have conversations with every day, they would avoid you like the plague.

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  36. hist_ed

    One quick additional point, the CRA was around since 1977

    In its initial form, it only tracked lenders’ behavior without consequences. In the mid 1990s it was revised to sanction lenders that did not meet its quotas.

    Wanna answer SO’s question that I highlighted above? Since you have such a huge bug i your ass about swipe fees, what would you do to fix the system?

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  37. Seattle Outcast

    Oddly enough, the solution to Moogoo’s “conspiracy” is to go back to using precious metal coins and/or a barter economy.

    Let’s watch for his head to explode.

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  38. hist_ed

    Oddly enough, the solution to Moogoo’s “conspiracy” is to go back to using precious metal coins and/or a barter economy.

    Precious metals? He must be listening to Glenn Beck too much.

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  39. georgebalella

    Hidden due to low comment rating. Click here to see.

    Thumb up 0

  40. georgebalella

    Hidden due to low comment rating. Click here to see.

    Thumb up 0

  41. Seattle Outcast

    . did most banks securitize shitty mortgages because the CRA MADE them or because they had set up a system ( via endless lobbying) to profit from leveraging securitized mortgages sing WALL STREET created financial instraments

    Want to try that again, in English?

    And also we fix them by doing what merchants did…sue them for price fixing and also allow merchants to work together to get swipe fees reduced.

    Then go ahead and start a class-action lawsuit. Absolutely nobody is stopping you, and there is no cause so stupid that you won’t attract followers.

    Also, nobody is disallowing merchants from working together to deal with credit card fees, so your comment is a bit odd.

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  42. Poosh

    This is the total cop-out chick shit excuse I regularly see when people are getting beaten up in the debate.

    How can any one, who isn’t thick, deal with you? If you cannot read and understand sentences and concepts?

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