Regulation won't work without regulating London

[FarCenter]

The key dollar-denominated interest rates are set in London by the British Banker's Association. The Federal Reserve only controls overnight lending rates in the United States. Rates for longer maturities are set in London for longer maturities.

See http://www.bba.org.uk/public/libor/

The US dollar rates are set by the BBA based on inputs from the following 16 banks:

Bank of America 
Bank of Tokyo-Mitsubishi UFJ Ltd
Barclays Bank plc
Citibank NA
Credit Suisse
Deutsche Bank AG
HBOS
HSBC
JP Morgan Chase
Lloyds TSB Bank plc
Rabobank
Royal Bank of Canada
The Norinchukin Bank
The Royal Bank of Scotland Group
UBS AG
West LB AG

This is an unregulated process that produces dubious results based on dubious inputs from the banks.

London is also the major center for hedge fund operations and for trading in the $500 trillion of derivative paper.

Without regulating London, the financial markets cannot be regulated.

We need to join with the Eurozone countries in reigning in London.

[KamaAina]

1. Excellent point

excellent screen name, too, I might add.

When I was in NYC recently, I read a Times article describing, in rather alarmist tones, how London was breathing down NYC's neck as the global financial capital.

[daninthemoon]

2. Are you suggesting that the current mess is London's fault? It seems

to me that most of the current mess is homegrown, and realted to the deepening energy crisis. That's the factor that needs the most work.

[MadrasT]

3. The LIBOR rate is used to set the interest rate for

many adjustable rate mortgages.

[daninthemoon]

4. Is rising interest the cause of the problem, or is it the wall street brokers

who move money around from bank to bank without actually producing anything? To me, this is a very complex problem, and although I don't know how much the interest hikes have done to cause this, I don't think that is the biggest problem. Is it?

[FarCenter]

5. A large fraction, probably over half, is done in London

Note that of the 16 banks listed in the original post, Bank of America, Citibank NA, and JP Morgan Chase are what you would think of as the three largest US banks.

But Barclays Bank plc, Credit Suisse, Deutsche Bank AG, HSBC, The Royal Bank of Scotland Group and UBS AG have major operations in the US.

Plus, the "prime brokers" have extensive operations in London, e.g. Lehman's had a large prime brokerage operation there that served hedge funds organized in the UK or dependencies, but run by people in the US.

The City of London is the center of the swamp that has to be drained.