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Former FDIC Chair Sheila Bair on the expanding investigation into the manipulation of the Libor rate.
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-- -- -- -- Now investigating groups of trade as the banding together to manipulate Libor rates and this next form -- bank regulator is calling for.
Actions Sheila Bair is the former FDIC chair she joins us now in -- Fox Business exclusive.
Welcome once again -- and you know -- didn't fit this in this day is filled with news on many different fronts but.
The real front is that as this Libor manipulation scandal continues now we've got regulators make it all points.
All kinds of noise about arrests would it's -- -- you.
If we see arrests at some level at some of the banks that helped compile this great.
No it would not surprise me just looking at the emails and content.
In the UC FTC's enforcement orders.
If it clears there was clearly collision -- traders actively working with each others -- strikes you.
To -- the -- so no it would not surprise me at all I would expect that.
-- I mean it.
Look it seems to me that this whole system is set up as a bit of a fall -- -- collusion right throughout all and I like so they inherently.
It was always open to this -- I mean did you have any clues that it was taking place to this extent.
Well I -- -- -- in the papers along with everyone else the Wall Street Journal I had an article on this and 2008 said no I was not aware of but otherwise.
I think that everybody knew it was subjective it was judgment driven.
It was not a good process but nonetheless.
There's a -- street exercising judgmental here factors with a range of options exercising judgment in terms of the rate you would submit.
And -- This missing purposefully misstating at a rate -- to be lower or higher to generate trading profits through later.
To make it look like you're safer -- -- war means less clearly illegal behavior no I like I was never aware of activity along those lines.
And it is really amazing to me that it went on.
That an escape the attention of supervisors apparently we don't know maybe some of the supervisors were involved as well that.
Yeah there's nothing more sacred debt to the integrity of the credit markets and interest rates in if -- You know actively trying to -- the rate I think that's a very very serious matter and I hope they do have prosecuted fully the people who were ball.
And needless to say it sends yet another message to the little guy the retail investor out there.
That the game is -- and so therefore if you had the ear of the administration anybody who battered who could make.
A difference whether it's treasury or the Fed.
What are the one -- two things that you would say we have to do right now to prevent this kind of thing from happening or do you -- -- -- hands and say.
Bad guys will always find a way.
No.
Well there will always be fraud there'll always be bad guys that you could put says systems in place rules in place.
And good managers and management control some place -- to make sure you minimize this kind of activity.
When the fundamental flaw plot Libor was it wasn't didn't -- based on actual transactions.
So whatever rate they decide to use going forward.
Should be based on actual bona -- transactions illiquid markets cannot be subject to manipulation half -- basic common sense principle.
That shouldn't be hard to implement and and I wish -- had been done back in 20080 I'm hoping this this kind of thing ended in 2009 which has won the yet.
The CFTC India -- enforcement actions at that time period that covered.
So it's not -- you can have rules in place that are simple and easy to enforce -- would fix this kind of problem they just didn't do it is there any momentum now that is building to break up the banks.
The peso one X well I you know I think is like heightened my sense says that.
They are too big to -- -- -- that they deliver for shareholder value.
They may well be choose to bid to -- complex -- -- -- problem complexity and size.
To regulate and certainly difficult to resolve -- they get into trouble because of their tremendous size and complexity.
I would like to see this driven from a market perspective I think shareholders are becoming increasingly frustrated.
The -- institutions live report shareholder value.
There are big management inefficiencies and trying to -- -- -- Institutions that these sizes so I think regulators can get more market information now they're forced these banks to develop break up plans that are made public.
That condensed empower the market.
To break them up and unleash a value but I would like to see -- to be driven on it through market.
Market forces if at all possible.
If at all possible you know as weight -- -- as we finish up though the one place that the individual has been -- this is money markets.
They are you worried about them I mean that we did see one break the buck so to speak back during the crisis but what are you working on.
Well I think money markets are not fixed yet they had to get a massive taxpayer bailout in in 2008 that was very unfortunate.
In there have been some reforms and criminal but they've not fix the core problems.
And so money market funds investors should understand.
That notwithstanding.
This ability to maintain a stable value dollars shares -- -- value.
That the actual assets of -- prime money market funds and asked him.
May have different values and really my view is that that the flooding in AP which is like in all of their mutual funds so that they the value -- your.
A cannot fluctuates with the actual value perhaps that's -- that would provide.
Better understanding to money market fund investors and I hope -- that that the government will move in that direction but it's not fixed yet.
She and I think taxpayers should be -- that a two.
Yes they should -- a bad thing is so much for FDIC chair we really appreciate that coming up --
