About Our Columnist

Jacqueline Hlavenka
Jacqueline Hlavenka, East Coast Editor for GlobeSt.com and Real Estate Forum, is responsible for coverage of news and information pertaining to commercial real estate in New York City. Prior to joining ALM, she served as a municipal beat reporter for Greater Media Newspapers in central New Jersey. Her work has also been published in The Asbury Park Press, The Village Voice, Interior Design Magazine and Condé Nast’s Cookie Magazine. Contact Jacqueline Hlavenka.

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Comments
Perhaps I'm just being cynical so I apologize if that's how it sounds, but I'm having a hard time understanding how this "scandal" has any direct effect on anything.

All right, so a bunch of bankers gave a biased answer when asked to "estimate" their borrowing costs. Okay, and....what? We're going to retroactively look at each day for the last 20 years and adjust all the responses to what some regulator thinks the banks should have said, redo the average of those "correct" estimates, then adjust everyone's contracts? Clearly not.

Much ado about nothing in terms of the past, what's done is done. For the future, it seems to me either they have to continue to search for a less biased methodology, or borrowers just need to be aware that the "market derived" base rate is a biased estimate of the true cost of borrowed funds. In reality everyone should have known that already, this isn't new information. At least that's my take, but what do I know.
Posted by ButWhatDoIKnow | Thursday, July 19 2012 at 7:28PM ET
LIBOR manipulation so far has favored borrowers of LIBOR indexed loans. In my view, the bigger issue has to do with the swap market which is LIBOR based. What will happen to the costs associated with LIBOR indexed swaps if LIBOR is replaced? What implications will this have for early terminations and valuing swaps?

The cure could be worse than the disease.
Posted by Chris_Terlizzi | Friday, July 20 2012 at 9:31AM ET
A quick postscript

I think Bill Hughes may be in error regarding his characterization of the Prime Rate being federally regulated. As I understand it, any bank can set its Prime Rate to any value it wishes. Moreover, most banks have adopted the term "Alternate Base Rate" to avoid confusion between the "WSJ published Prime Rate" and the rate they choose to set.
Posted by Chris_Terlizzi | Friday, July 20 2012 at 9:39AM ET
You are absolutely correct, Chris_Terlizzi. Each bank may set it's own Prime Rate. The sillines in hughes' answer is assuming the Prime rate is regulated. It is not. Prime rates are set as a spread over the Fed Funds Rate.

As far as the larger issue, Hughes also has a dumb quote in saying a borrower is going to question what the LIBOR scandal costs them. In a couple years you may be able to determine with relative accuracy the approximate cost. But nothing will ever happen with that info other than to fine the manipulators who will have long since settled the claims against them from their regulators.

ButWhatDoIKnow is correct. Water under the bridge. Try and mandate a different index from your bank and see if they give you the loan.
Posted by j0sh1130 | Thursday, July 26 2012 at 2:21AM ET