Odd Lots Meet the Man Who Blew the Whistle on LIBOR
Jun 1, 2020
Richard Robb, a former interest rate trader and current CEO of Christofferson Robb & Company, warns about the manipulation of LIBOR, a key financial benchmark. He reflects on his early warnings in the 1990s and his front-row seat to the fallout post-2008 financial crisis. The conversation delves into how banks adjusted their rate submissions, exploring the motivations and implications of these decisions. Robb emphasizes the importance of transitioning to more reliable reference rates and learning from the LIBOR scandal to ensure financial stability.
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90s Rates Trading
- Richard Robb, a former trader at DKB (then the world's largest bank), reminisces about the exciting 90s interest rate market.
- Rates moved significantly, and financial engineering was viewed positively.
LIBOR's Purpose
- LIBOR, created in 1984, aimed to benchmark short-term borrowing costs for banks, later expanding to other entities.
- It represented offshore borrowing costs, excluding tax and insurance implications, surveyed daily in London.
LIBOR's Uniqueness
- Unlike prime rates or T-bills, LIBOR offered a standardized, market-reflective index for various financial instruments.
- It addressed specific borrowing needs not captured by existing rates, allowing for adjustments based on market conditions.