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IHS chief economist Nariman Behravesh and Mendon Capital Advisors President Anton Schutz on whether the rate fixing scandal helped the economy.
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-- now -- derivation is that thank -- -- is an economist that I SI who's also.
I -- sorry is it would joining us is that is well and -- -- what's gonna come on talk.
About the economy more generally at about the fiscal cliff that everybody is is worried about the end of this year but -- let me get your thoughts on this.
The the -- the rate fixing scandal I said earlier has been growing by the day because we keep getting more information about it today.
Maybe you'll get even more about what was done for years ago what -- what are your thoughts billion in terms of god the kind of macro.
Big picture effect of all -- While.
Bottom line is it's not gonna have a huge macro impact it could have a big impact.
Clearly on the banking industry depending as you guys are saying earlier.
What this class action suit -- might look like so.
-- bank stocks bank profits could take another big hit if they their huge penalties but the overall.
Macro impacts are not going to be that big we know that that is a funny irony here and that is that in fact to the extent that the the rate -- saying.
Kept interest rates low saint 20082009.
That might actually help the economy so there's a side on what saying that that's actually might have been beneficial -- -- talk about that as much.
-- decibels can start talk about the cause.
Oh because some of the documents in this this would release.
Relate back to that the Fed contacted Barclays in April of 2008 now is even before the role throes of the Lehman bankruptcy.
And when a basically the entire credit market fell apart that wanna ask you -- did that have basically did this at least prevent.
On the -- the crisis from -- on earlier like was it -- I don't you know what I'm not trying to do glass half full but would that necessarily a bad thing.
That it didn't incite more panic.
It could well be that in retrospect you're absolutely right that.
That it may have delayed it may may postpone that it made it may have made things a little bit better than they otherwise might have been in those crucial months before the collapse of Lehman.
I in all these transactions one thing's clear there winners and they're losers that people who are on the good side of those -- and bad -- on balances.
It's not going to be that big but but I think in the sense that it did presumably keep.
You know these these rates lower than they otherwise might have been it actually might have helped and what.
Is that the good result here that's interesting and had a couple of different ways -- massive.
-- question in the second are you saying that the interest rates going down may have helped the economy and lower interest rates at a time of crisis understand.
May help the economy some of the lawsuits we should point out from some of the local municipalities are saying that these.
Because the investments that they've made -- swap instruments.
They may have been hurt by the way they we -- city like Baltimore or other municipalities around the country may have actually been betting on lower interest rates.
-- and they've they've been hurt with the direction.
Of the rates -- other what I should say they've been betting on higher rates obviously but they've they may have been hurt in other words by the lower rates.
So that's part of it but the thing is think about what you're saying for a second there are -- basically saying -- -- that take all of this week that things were improved because a bunch of guys and or much of men and women engaged in.
Criminal behavior so OK it's fine you know the we got through this and and then let's just look the other way.
Now I'm not I'm not saying it's okay in in a moral sense at all what I am saying that the macro impact source small.
And that ironically that may have actually been positive.
It in in the 20082009.
Period.
Not because these guys intended to benefit the economies to -- -- about funny byproduct of this I agree it's potentially quite criminal behavior enough for the people on the other side of the bets as well -- the point I was making.
Absolutely is always slowly -- they were there are losers the other look definitely are losers quick thought Anton before we let you go.
Actually gonna make -- -- a lot bigger.
Chairman you you're right there may even help -- economy but if you think about.
When Lehman failed yeah if you think about one AIG collapsed.
And Merrill was on the break.
The fact that live or wasn't -- 500%.
And I and I'm not being crazy by saying this because I think that no bank trusted any other bank at that point in time.
So whatever rates were quoted at that point time absolutely could not have been correct.
And if you think about the -- moral economic.
To benefit that we got -- rates not being that I -- to put all the all the loans that are tied to Libor.
It's is really important so I think if you really you may never -- the minutes but if the regulars -- anything to do with this that they would have actually encouraged that.
That's my point Anton is likely would it.
It was almost impossible to price.
And I'm going outlet -- -- was almost impossible to price that risk.
Because there was zero trust in the market ended if it -- -- -- was wrong.
Did it can prevent a greater panic that was my have less -- Absolutely absolutely where you were 100% on the mark here.
-- -- were being wrong for that period of time benefited the entire world.
It's -- -- before we let you -- though one last thing anti -- you're talking about crime rates and how live what had been there.
What rate setting is flawed if you -- even start talking about central banks in the Federal Reserve wolf something end up being put in place that is not flawed do you think.
Well let me -- -- -- central banks around the world manipulate rates as what they -- so that they had there is no perfect system.
But you know the fact that you've got a system where where rates are so more closely than -- Should they are not doing it illegally by -- -- city generates you know.
-- -- is this is.
Doctor Ron Paul I will I.
I don't know but honestly -- that these guys who did this is like this to take accusations are serious criminal behavior.
I'm not I'm not -- think I'm not defending you know -- the criminal side of it I'm not saying this.
Dead -- you know we got a benefit out of it but it was -- Robberies Central Bank might not be doing it -- for the rights -- you might disagree with the policy but it's not a legal thank you Anton great stuff is always.
And -- mr.
with this -- -- will be back near.
