The Libor scandal presents a whole range of questions from the very micro “how much did I lose on my mortgage”* through the micro yet fantastically large “what kind of total damages are floating around in lawsuits” past the pseudo-philosophical “how can I ever trust the financial system again”** all the way up to the metaphysical “what is a price?” Somewhere in the middle realm there is a good set of questions of “what did regulators know and when did they know it and what did they do and why didn’t they do it?” The Times and Reuters get to those questions today and they’re unsurprisingly awkward.

The awkwardness starts with word choice. The verb “fix” is in market usage a bit of a contranym, in that “fixing” something, when that something is a price, can either solve or create a problem with it. No doubt the Fed regrets this meeting title:

In early 2008, questions about whether Libor reflected banks’ true borrowing costs became more public. The Bank for International Settlements published a paper raising the issue in March of that year, and an April 16 story in the Wall Street Journal cast doubts on whether banks were reporting accurate rates. Barclays said it met with Fed officials twice in March-April 2008 to discuss Libor.

According to the calendar of then New York Fed President, Timothy Geithner, who is now U.S. Treasury Secretary, it even held a “Fixing LIBOR” meeting between 2:30-3:00 pm on April 28, 2008. At least eight senior Fed staffers were invited.

“Let’s fix Libor,” said the Fed staffers, and so did a bunch of traders at Barclays, meaning … well, I was about to say meaning different things, but who knows? Reuters goes on: Read more »