LIBOR Scandal: Once Again Big Bankers Gone Wild

Just when you thought you had seen the last of “bankers gone wild,” up jumps the LIBOR scandal. LIBOR—the London Interbank Offer Rate—is the mechanism that sets interest rates for everything from credit cards and home mortgages to all sorts of exotic derivative investments. It involves 18 global banks, including JP Morgan Chase, Bank of America and Citigroup in the U.S. Fiddling with the LIBOR in one direction or another triggers a cascade of events, most of which cost Mr. and Mrs. America dearly. As one of the traders who was brought into the process by another conspirator wrote ironically to his colleague: “Dude, I owe you, big time!” Indeed. Teachers, firefighters, police officers and many other public workers—from drivers, janitors, accountants, clerks and zookeepers—lost wages, pension income and jobs, big time, as a result of this secret manipulation in the back office of banks in Europe and the U.S. The losses resulting from this conspiracy are expected reach into the trillions of dollars, according to experts. Among the tangled tentacles of this scheme is what happened to “interest rate swaps” one of those suspicious and largely unregulated “derivative” investments that make speculators wealthy and schmucks out of the rest of us. While the bankers were fiddling with LIBOR, accountants and bookkeepers in scores of taxpayer funded institutions (governments, hospitals, school boards and the like) were confronted with shrinking tax rolls and increasing borrowing costs as they pored over their books to try to figure out how to pay the bills. Along came the brokers and salesmen from the financial industry with portfolios of investment options, including swaps. Simply...

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