No One's Clean‐Clean

Rising defaults on mortgages in the US had spooked markets, drying up the easy flow of credit between financial institutions and exposing the shaky foundations upon which years of easy profits had rested. Banks were forced to write down the value of their assets by billions of dollars and were left perilously close to insolvency. BNP Paribas, France's biggest lender, created panic the previous August when it froze redemptions from its funds, refusing to give investors their money back. Angela Knight was equally recalcitrant when asked to comment on the issue by members of parliament at a hearing on financial stability in Westminster. ‘Libor has stood the test of two decades’, she said, sounding mildly irritated. Everyone could see that Libor rates had shot up, but questions began to be asked about whether they had climbed enough to reflect the severity of the credit squeeze.