If that little scenario didn't frighten you, Tucker had another grenade in his pocket. He moved on t

Paul Tucker came down firmly on the side of New Labour today. In his evidence to the Treasury select committee, he denied that Labour ministers were involved in fixing LIBOR. George Osborne thinks otherwise. To which I say "so what". The Osborne versus Balls dingdong is a distraction.
The real story was the rest of Tucker's testimony. mandalay bay hotel and casino It was surreal. mandalay bay hotel and casino No, it was worse than that. It was a financial horror story. He conjured up nightmares and vistas that were unimaginable a month ago.
Tucker told the committee that the FSA is currently working through the implications that LIBOR could "collapse". This would cut the derivatives market adrift from its LIBOR pricing reference point. The notional value of the LIBOR dependent derivatives market mandalay bay hotel and casino is about $360 trillion. For comparision, Global GDP is a trival $70 trillion. Is this a likely event? What would be the consequences? Who knows? But it is the issue currently taxing the UK financial sector regulalator right now.
If that little scenario didn't frighten you, Tucker had another grenade in his pocket. He moved on to the question of LIBOR-related law suits. Again, the FSA is looking mandalay bay hotel and casino into the possibility that British banks would be hit by massive class-action law suits that could potentially ruin the UK financial sector.
Tucker then produced a third cracker. He wasn't confident that LIBOR tampering had stopped. UK banks could still be at it. Despite everything, the Banks may not have cleared things up. The implication must be that other banks could find themselves going through the same upheavals as Barclays.
He then argued that the FSA review into the scandal should be extended to other "self-certifying markets" mandalay bay hotel and casino where banks are fixing and minitoring prices. These markets include the gold and oil markets.
So while the Conservatives and New Labour are thrashing about with a tedious "he said, she said" pantomine, the deputy governor of the Bank of England told us four frightening possiblities about the UK financial mandalay bay hotel and casino system. First, the derivatives market could implode. Second, British banks may be confronted by ruinous legal action that threatens to bankrupt them. Third, Banks could still be meddling with LIBOR. Finally, he hinted that the abuse could extend to other key financial markets.
(Apparently Tory back-benchers mandalay bay hotel and casino are growing mandalay bay hotel and casino very dissatisfied with Osborne. Wonder if anything will come out of that. I find it interesting because politically it seems like a storm that Osborne is going to face alone without dragging Cameron down with him. Until now they have been paired as a strong team but now Osborne is being judged separately.) With regards to Tucker s warnings, I wish this scandal could be used to de-couple derivatives from the real world. They are highly dubious as a class of financial investments, mandalay bay hotel and casino often resembling nothing more than the bets placed with the local bookmaker. But regulation across the world has been steadily letting them mingle with more solid financial mechanism. I m not saying this has to be the time to act, but whenever I hear how derivatives may affect the rest of the economy I jump on my high horse and rant about it. Investment banks were allowed to mingle with savings loans banks, and derivatives of all kinds were inserted mandalay bay hotel and casino into the equation as if they were of the same nature as solid assets, enjoying the same kind of insurance. AIG insured side bets on central bank rates with the same glee as property assets. It was madness, and we re still in it. On the other two points raised by Tucker I have nothing to add. The wave of lawsuits and the fact that LIBOR manipulation may continue ensure mandalay bay hotel and casino a complete mess. But we know the answer we ll get: give money to banks to steady the system and take money from everyone else.