You're watching...
Rochdale Securities’ Dick Bove on the impact of the Libor scandal on U.S. banks and the financial system as a whole.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Or just said the Justice Department's criminal division is building a case against several US banks and their employees with me now -- -- Obey of rock -- charities.
Get this thing is is just spreading I -- how many banks do you think could get caught up in this what is the latest that your hearing.
Well -- -- this only going to be three banks in the United States that could be involved because they're only three banks in the United States.
They provide their information to the British Bankers' Association.
In setting the Libor price they are of course Citigroup Bank of America and JPMorgan chase.
No other bank you know provides that data.
And therefore if there was any price setting done all of the other banks in the United States would stand to lose.
Because they were -- they did not create the problem.
-- of those three how big do you think -- liability as I mean we're hearing the billions indeed think that it could be something criminal.
What will it clearly the Justice Department and the president is salivating to put somebody in jail -- hates that they keep telling us that -- But they want to do yet but I but I think that you know the some rationality has to come into the picture in that this is this is a very bad situation because number one.
It breaks down confidence in the banking system which is no confidence in the first place.
And that has an impact on the stocks it has an impact -- causing more regulation.
It's a bad situation because.
What are we now gonna use to set as the base rate for -- are always loans.
All over the world it is not just loans it's you know it's it's a whole bunch of other things another issue which people not thinking about is.
Why out of the -- number of banks -- eighteen banks that submit prices to set the base rate the United States loans.
Why that only three banks bidders submitting information.
Another issue of course is.
We we believe what's -- answer to that and it's that should there be -- sounds like what you're saying yeah I hadn't thought about that there should be more.
There should absolutely be many more because you know basically what the United States is doing.
He's giving control over the interest rates in the United States on an effective basis who is what you get charge -- -- mortgage or your credit card.
To foreign banks and that I think is is a trend.
We're seeing it in primary dealers was seeing it in -- in the in the Libor situation.
The United States is simply not stepping up.
-- taking control of the financial system the way it should be all the wants to do is run away -- -- but again is this another issue and that is of course.
You know one of the biggest complaints that the FC IC -- that this was a committee that congress set up -- to do to take a look at that.
2008.
You know financial crisis.
One of the biggest complaints was that the regulators in the united -- had the power.
To do a great deal of things to stop the financial crisis from a curving.
Occurring but they didn't do it.
We have another example of it you know mister Geithner had the information he could have done something about it.
He didn't he simply sent a couple of emails to to London but he didn't step in and say hey he can't do this this is absolutely incorrect.
Although -- certainly are working hard now to try and make it look like me be more wisdom but you're right that is the bottom -- of those emails let me ask you really quick before we run out of time.
Who is damaged by this particular scandal -- -- the victims because as we -- when those rates go up we all pay more but in this case they were fixed lower so who's the victim in this particular case.
Well actually the victim you know is not the American public the victim is banking industry the victim his -- is all over the world.
Because they were not getting the appropriate return on their if you will extensions of credit number one.
That means that the earnings of these companies were lower than they should have been that means the stock prices -- lower.
And that's that's -- -- harm was done in this situation but does this one other thing you have to think about.
And that is maybe this is what the central banks wanted to have happen anyway.
Remember who in 2008 we started cutting interest rates to stimulate the economy out of financial crisis.
It just may -- that this is exactly what the central banks wanted to see happen so Libor.
That's right they were doing some of the work for them because they were trying to keep rates really low to -- keep the system stable at the time.
Interesting conversation -- -- thanks so much for joining us.
