It has been an arduous process to get the financial system to stop relying on the tarnished interest-rate benchmark.
By Joe Rennison, The New York Times, June 30, 2023
The arduous, decade-long process to end the financial system’s reliance on a tarnished interest-rate benchmark, which once underpinned trillions of dollars in contracts across the globe, is almost over. From next week, the rate, known as the London Interbank Offered Rate, or LIBOR for short, will cease to be published…
In 2012, the British bank Barclays became the first of many to be fined by regulators for manipulating LIBOR…
In the United States, LIBOR is being replaced by the Secured Overnight Financing Rate, or SOFR. Unlike LIBOR, SOFR represents the cost of borrowing for a broader variety of market participants and is based on actual transactions in overnight lending markets…
A small number of companies may be forced to use what is called the prime rate, which reflects the cost for consumers to borrow from commercial banks — a much higher rate than what banks charge one another. With some borrowers already buckling under the drastic increase in interest rates by the Federal Reserve over the past year, the hit from moving to the prime rate could have severe consequences…[end quote]
SOFR is 1.08% today. The prime rate is 8.25%.
I don’t know how an investor would learn if a specific company’s borrowings will be forced to use the prime rate. But that would be catastrophic for many, especially zombies that are already threatened by maturation of super-low interest loans from 2020-2021.
If you build a better mousetrap, the mice get smarter. Bet it takes no time at all for the “JCs” to figure out how to game the new system. If the new system was spawned entirely in Shiny-land, I would expect it to be designed to be gamed.
There is a good deal of snark behind use of the term. There are people who run a company that provides a valuable good or service, at a reasonable price, and share the rewards with their employees. Then there are the “JCs”, who over charge for their goods, while underpaying their employees, so they can pocket more loot.
There is a thread at TMF that says that retired people should spend more lavishly instead of hoarding. My reaction is that these advisors should not stick their noses in other people’s lives when not invited to do so. Instead of telling them to have a lavish lunch, invite them to a lavish lunch.
It usually catches up with the company, eventually. Example Radio Shack. But the “JC” that is gouging customers and cheating employees, will have made his stack by then, and the collapse of the company is some successor “JC’s” problem. Problems at GE and Boeing today, had their root in Welchian management twenty years ago.
Yeah I have seen four of my prior employers bankrupt. The owners management were totally to blame. The banks should not be loaning many people any money at all.
As far as putting nose into business? Or the seniors hording? We are talking 90% of American seniors who need more than SS is offering. It is our business. They failed in their business and we will get the bill one way or another. Not only have they failed in their business but they are handing $32 trillion in debt to the next two generations. No hording to show for it. Just stupidity.
Ideology dictates the “JCs” are “entitled to have all the money”. Urging seniors to blow their life savings on what Friedman called “riotous living” is nothing but “JC” propaganda to separate the old phartz from their money.
I’ve interpreted it as “narcissistic sociopsychopaths” who create a “tragedy of the commons” situation.
Whatever the resource is, these JCs overexploit it til the system collapses.
This may work well for the JC, but it is detrimental for the larger society.
