In which lambert confesses to being prematurely correct
I have yet to see anyone confront and refute Newberry’s theory that the crisis is caused by greed, not fear. (After all, if you were in a posse of infestment bankers, and you could get the government to hand you a trillion dollars, no strings attached, just because you “freeze” interbank lending and cause other people a lot of pain, what would you do?*)
LIBOR is set by private parties. It is not regulated. The process is opaque. Sources call it "guesswork" now, but for all we know, it's always been "based on" nothing; there's no way to know for sure, because there's no transparency
And it's certainly a reasonable hypothesis that the private parties** who set LIBOR in London don't take the Tube home to a little bit of a garden in the burbs; they like money, a lot; they have money, a lot; and they'd like to have more money. A lot. In fact, one of the things about greed is that there's no limit it to it, so they'll squeeze the lemon 'til the pips squeak.***
In fact, the only reason to trust LIBOR as a measure opposed to a manipulator -- compare Soros on "reflexivity", a "shock" metaphor if ever I heard one -- is a vague feeling that "No! They would never do that!"
Ya know, if a friggin' English major from somewhere way north of Boston can dope this stuff out, what does that say about the smartest guys in the room, and all those assholes from Harvard, Yale, and let us not forget those corpse-grinders at the University of Chicago!