A presentation from early fall about changes in the Libor and the Fed Funds Rate. We discuss the relationship between the two rates. * Leave a comment if you download, please! *

1. Armando, Arseny, Cory, Joe, Neekunj SPREAD

2. Question Source: Historical data

5. Libor Calculation 16 Banks 10 Currencies Libor FED History Why Libor Matters

6. Federal Funds Rate The interest rate at which a member institution lends immediately available funds to another depository institution overnight. “ 2%” FED (FOMC) Target Rate Open Market Operations Funds Rate Libor FED History Why Libor Matters

8. Commercial Banks Federal Reserve (Central Banks) Market Conditions PREMIUM Libor FED History Why Libor Matters

9. The Credit Crunch Market Conditions Libor FED History Why Libor Matters Washington Mutual Barclays Capital Citigroup Lehman Brothers Merrill Lynch UBS

10. Crisis Cycle ? Libor FED History Why Libor Matters

11. Not US - Exclusive Libor FED History Why Libor Matters LEGEND: CURRENT Sept 2007 Dec 2007

15. Mortgage Rates FED: 47 % Decrease Mortgage Rates: 10% Increase Borrowing Costs Mortgage Rates Bank Profits Counter Fed

16. Bank Profits % banks keep Borrowing Costs Mortgage Rates Bank Profits Counter Fed

28. To the Rescue! Inject Liquidity Creation of NYBor Expand US Libor Tighter Scrutiny of Banks Time?

29. Moral Hazard Inject Liquidity Creation of NYBor Expand US Libor Tighter Scrutiny of Banks Time?

31. 3. Expand US LIBOR Inject Liquidity Creation of NYBor Expand US Libor Tighter Scrutiny of Banks Time?

33. 4. Tighter Scrutiny on Banks “… tighter governance of the rate-setting process. This means broadening the Foreign Exchange and Money Markets committee that oversees Libor and creating a new group that would scrutinize the data submitted by banks.” Inject Liquidity Creation of NYBor Expand US Libor Tighter Scrutiny of Banks Time?

36. This could be you. Inject Liquidity Creation of NYBor Expand US Libor Tighter Scrutiny of Banks Time?

37. Thank you