The British banking authorities have been “cooperative” with the US financial markets over the last decade, buying up countless questionable derivatives. Now it seems they are realizing that it may be “every man for himself.” From Financial Times’ Alphaville blog, this comment on American “dis” of LIBOR:
“They say the only time the British consider themselves European is during the Ryder cup. Also perhaps, when reading the Wall Street Journal:
Libor Hits US Borrowers
The troubles of banks in Europe are pushing up an interest rate widely used in the U.S., prompting the idea of a U.S.-based alternative to that rate, known as the London interbank offered rate, or Libor… That means the financial difficulties of European banks are having an outsized effect on U.S. borrowing costs.
This whole banking crisis. Utterly our fault chaps.
For those who missed it, London is also to blame for SIVs – and the “snarl in global markets”.
But, trying to put patriotism aside there are perhaps, a couple of quick – and perhaps shallow – reasons why it wouldn’t make much sense to bother with a “NYbor”.
Firstly, it’s all relative. As a benchmark, higher Libor might well be costing some American banks money overall, but it will also be earning other American banks money.
Further, if the average American bank is willing to lend at a level lower than the average European bank, there’s nothing to stop them doing so. http://ftalphaville.ft.com/blog/2008/04/23/12530/nybor/