Will the LIBOR banking scandal manage to finally force banking reform in the US?

I know this is not getting much attention in the US media (some but so far, as some pundits have noted, headline news seems more concerned about Tom and Katie getting divorced).

However, this distinctly qualifies as a Big Deal[sup]tm[/sup].

Here is one take on it by Matt Taibbi at Rolling Stone:

For those unaware LIBOR is the London Interbank Offered Rate and, according to the Wall Street Journal, $800 trillion (yes you read that right…trillions) in securities and loans are linked to the LIBOR rate.

Sixteen banks are involved with setting this rate each day and it is being claimed that Barclays bank was involved in manipulating this rate for their own profit. Their CEO, Bob Diamond, has just resigned over it as has its chairman Marcus Agius.

Now, it may seem that this is just a Barclays thing but it can’t be. The way the LIBOR is set is the top four and lowest four reported rates are tossed out each day and the rate is set by the middle eight banks. In order to manipulate the rate you need the cooperation of most of the banks to make it happen.

Citibank, JP Morgan Chase and Bank of America participate in this (so basically the three biggest banks in the US).

This is yet one more example among many that the banks are making up their own rules and everyone else be damned. Will this one be big enough for us to finally force some change or will they piously claim it was just some rogue traders and they will be sure to clean up their own mess…again?

Scandal? There was a scandal? It was in, like, England, or someplace, right?

What elucidator said. Reform is off the table. Americans are too busy watching trash TV and self-medicating with booze and processed foods. Panem et circenses keep us docile.

And no, that is not an allusion to Hunger Games. :stuck_out_tongue:

Yeah but as noted there is a good chance American banks are involved.

Certainly some traders in New York, at the least, were involved:

What is it about people with the last name “Diamond”?

Thanks for starting this thread, because there was something I wondered about regarding this scandal : So far there has only been a massive fine, but coud companies (especially other banks) or maybe even individuals sue the involved banks for losses incured as a result of the manipulation of the LIBOR and IBOR rates? If so, how massive could be the damages claimed? Could fines and damages be a threat for the very survival of the guilty banks?

Also, could individuals who provided the falsified figures to authorities be criminally liable? What about the traders who told them what rates they should declare?

My understanding was there was already ample evidences of involvment of other banks, like in email exchanges “WTF, your guys aren’t declaring the correct fake rate we had agreed upon! Rectify ASAP, pretty please” (paraphrased)
Maybe I’m too naive but I’m quite surprised that there hasn’t been a single whistleblower given the number of individuals involved in the manipulation.

The news story I heard yesterday indicated there could be rather large class action suits since LIBOR is used to set mortgage rates.

Yeah, that Neil Diamond, not bringing anyone flowers anymore. Or, did you mean Jamie Dimon, from JP Morgan?

LIBOR is definitely used for credit card rates in the US, but I thought LIBOR mortgages were more of an English thing. Maybe ARMs use LIBOR?

Only heard the names on the radio-- haven’t seen them written.

Yes, ARMs. Not all, but lots.

Why would it? Simply because some US banks are part of the system, and might (I’ve seen no actual evidence) have been fixing their own rates? I don’t see how or why that would cause a major reform of the US banking system…I see that as possibly causing those US banks who might have fixed their rates to also have to pay a penalty.

I found this quick and dirty explanation of the scandal for anyone interested:


Here’s a bit more detailed article on the scandal, if anyone is interested.


Because I think this is bigger than most people are aware of. Partly because this is obscure and complex finance shit that doesn’t lend itself to our short attention span and partly because the MSM is not really jumping on it*.

I doubt I need to remind people here (but I will anyway) that the financial systems of the world are deeply intertwined. It is a gigantic house of cards and poking at one corner may seem remote to some but have the potential to have far flung knock-on effects.

Further, it is hard to imagine this as a UK-only scandal. As mentioned the way the LIBOR is set up it is almost impossible to imagine how RBS and Barclays alone could manipulate rates (remember the top four and bottom four reported rates are tossed and the rate is pegged from the middle eight reporting). So, Barclays could fudge numbers but alone would have little to no effect on this. It almost certainly requires the collusion of many more banks.

More broadly is faith in the financial system. It is becoming increasingly apparent that the game is rigged against retail investors. Institutional investors are running the game and stacking the deck against everyone else. This is no small thing and if retail investors lose faith and decide it is not in their interest to play the game because it is rigged that would also have profound impacts on global finance.

How many body blows can the system take before people stop wanting to participate?
*As for the MSM not reporting it seems some did try and were bullied into backing off the story:

ETA: I will also note the fines they are forced to pay are laughable in the scheme of things. It’d be like you robbing a bank and if caught your penalty is having to return some of the money.

Some more info that this may be broader than a UK thing:

But this (Barclays fixing its figures to look better) is only the tip of the iceberg (and the reason why Barclays was fined).

What is now alleged is that a number of banks colluded to fix the LIBOR and IBOR rates so that they could make money on related instruments, knowing in advance what the rates would be. Some of the emails published read something like “we put Y money into this, so it would be nice if you made the rate to be X”. It is alleged that traders would routinely call whoever was in charge of the official declaration to tell them what fake rate should be declared, and that representatives of the involved banks would negotiate about the future fixed rates.

This is an entirely different level of manipulation, and vastly more infuriating.

But where Brits like to drag their shit into the open and deal with it, American’s somewhat prefer the ‘head in the sand’ approach.

In Britain some CEO recipients of mega bonuses, were actually shamed into returning them. That could not happen in the US. There is no shame. And besides, whatever it is, they’d rather remain ignorant than deal with it. Not a single wall street reform has been put into place since Obama took office. Not one change.

The time when I hoped that the vast banking frauds and scandals that have caused ruin and havoc in the US economy would be corrected and those responsible brought to justice and new regulation and oversight be instituted has long since passed.

The US political system is constructed such that all politicians must grovel to the corrupt banks in order to stay in power. Can you say Timothy Geitner? I have despaired.

Generally I agree but I am hoping (a tiny hope) this may be different.

Nothing happens as long as those with the money are riding on the gravy train. However, shit moves fast when you start taking money from those people. Witness Madoff. Not like he was the only crook on Wall Street but instead of ripping off grandma he ripped off other rich people. He went to jail so fast it was head spinning as these things go.

In this case the banks are making money but they are ripping off other huge investors who are having the game rigged against them. This is why people on Wall Street are actually pretty appalled by this one.

I dunno, maybe it will be another smoke-and-mirror show with nothing happening but it certainly is yet another sign of profound problems with the financial markets and sooner or later something will give and the house of cards will come tumbling down and it will not be pretty.

It is important to restore some faith in the markets and I hope someone who can do something about this recognizes that.

I believe the public in the US is becoming burned out at wall street rage, justified or not.

I doubt the story will stir much public interest.

I think public outrage over Tom and Katie’s divorce will finally force banking reform.