Wednesday, 5 September 2012

Libor as a 'public good'? No, thanks...

So here we go...again. Crisis have always been the perfect excuse to step up government control over private affairs. This time it is the Libor crisis and the consequence could be a Libor rate set up by a public organism. The European Union has published today a consultation paper which asks for market participants’ views on the possibility of public control of vital indices and benchmarks such as Libor.

With flamboyant questions like “do you consider some or all indices to be public goods?” the EU mandarins ask for views on “what role should public institutions play in governance and provision of benchmarks?” and “What indices, if any, would be best provided by public bodies?” My answer of course would be: ‘none’.

The European undemocratic apparatus seems to believe that public institutions may have fewer conflicts of interest in the production of these indices and be better position to control them if they arise. Dream on, I say! Truth be said, public bodies have less incentive to knowingly alter the indices for a monetary gain as most banks do. However, money is not the only reason or cause of a conflict of interest. What money is to the private sector votes is to the public. Votes are the lifeblood of governments and public bodies that depend on them. Furthermore, you also have prestige, power, and a long etcetera of other potential incentives for public officials to meddle with the production of indices. Private hands are not perfect and the rotten eggs are always present in all baskets but the same can be said from the public hands.

God save us if the mighty Leviathan is given more control over our private sphere!

http://ec.europa.eu/internal_market/consultations/2012/benchmarks_en.htm

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