Pollock: Shift from viewpoint of the borrower

Article Highlights

  • The process of setting Libor is showing its age

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  • Libor: should shift from viewpoint of the interbank borrower to that of the lender

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  • Libor is the offered rate, not the bid

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Financial Times: Letters
From Mr. Alex J Pollock

Sir, The process of setting Libor is showing its age, as well as its vulnerability to human weakness in a crisis.

The process might be immediately improved by shifting from the viewpoint of the interbank borrower to that of the lender. Its respondents should be asked: "At what interest rate will you lend in the interbank market to prime banks?" as opposed to asking at what rate they can borrow.

By its very name, Libor is the offered rate, not the bid.

Alex J. Pollock
Resident Fellow
American Enterprise Institute
Washington, DC, USA

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About the Author

 

Alex J.
Pollock
  • Alex J. Pollock is a resident fellow at the American Enterprise Institute (AEI), where he studies and writes about housing finance; government-sponsored enterprises, including Fannie Mae, Freddie Mac, and the Federal Home Loan Banks; retirement finance; and banking and central banks. He also works on corporate governance and accounting standards issues.


    Pollock has had a 35-year career in banking and was president and CEO of the Federal Home Loan Bank of Chicago for more than 12 years immediately before joining AEI. A prolific writer, he has written numerous articles on financial systems and is the author of the book “Boom and Bust: Financial Cycles and Human Prosperity” (AEI Press, 2011). He has also created a one-page mortgage form to help borrowers understand their mortgage obligations.


    The lead director of CME Group, Pollock is also a director of the Great Lakes Higher Education Corporation and the chairman of the board of the Great Books Foundation. He is a past president of the International Union for Housing Finance.


    He has an M.P.A. in international relations from Princeton University, an M.A. in philosophy from the University of Chicago, and a B.A. from Williams College.


  • Phone: 202.862.7190
    Email: apollock@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: (202) 419-5212
    Email: emily.rapp@aei.org

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