September 12, 2012
Richard K. Green, director of the University of Southern California Lusk Center for Real Estate, has been attempting to create a model to determine whether banks would be more likely to over- or underreport LIBOR given different market conditions.
"The outcome of gaming is not at all clear," Green says. "Weak banks have an incentive to say a low number, so they can borrow at low rates. Strong banks have an incentive to say a high number, so they can lend at higher values."
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