One or two banks couldn't have colluded to fix the LIBOR rate. As Matt Taibbi and Eliot Spitzer point out, because of the way that LIBOR is calculated, either all or almost all of the banks had to have conspired to fix the rates.
And LIBOR is quite literally the center of the financial universe. If LIBOR rates are corrupted, then what in the financial world isn't?
Joe Nocera writes of the scandal today in his column:
Britain and America have reacted to the Libor scandal in completely different ways. Britain is in an utter frenzy over it, with wall-to-wall coverage, and the most respectable, pro-business publications expressing outrage. Yes, Barclays is a British bank, and the first word in Libor is “London.” But still: The Economist ran a headline about the scandal that read, in its entirety, “Banksters.”
Yet, on these shores, the reaction has been mainly a shrug. Perhaps we’re suffering from bank-scandal fatigue, having lived through Bank of America’s various travails, and the Goldman Sachs revelations, and, most recently, the big JPMorgan Chase trading loss. Or maybe Libor is just hard to gets one’s head around.
But the Brits have this one right. They may not understand the intricacies of Libor any better than we do, but they sense, powerfully, that banks have once again made a mockery of the role that society entrusts to them.
“Why has the scandal created outrage in Britain? Because it truly is outrageous,” said Karen Petrou, the managing partner of Federal Financial Analytics. “They weren’t supposed to be fixing that rate — no matter what the reason.”
She continued: “If I give you my money, I need to be able to trust you with it. If you can only be trusted via regulation, then you might as well be a utility. And if banks can’t be trusted to manage their trading desks, then we need to rethink our whole model of banking.” Petrou is not an advocate of returning to the days of Glass-Steagall, the Depression-era law that separated investment banking and commercial banking. But with the Libor scandal, she said, she could certainly understand the growing calls for it.
Barclays, of course, is hardly the only big bank that manipulated Libor for fun and profit. It is simply the first to admit its wrongdoing and settle with the government. The word is that just about every big bank is under investigation for playing games with Libor, including JPMorgan Chase, Citigroup and other American-based financial giants.
Which means there is going to be a lot more opportunities for Americans to become outraged over this scandal. And, maybe, to finally summon the will to change banking once and for all.
Until Katie and Tom are tied to the scandal, it doesn't look much like Americans care about this.
Just as Americans have been rather uninterested in the Murdoch hacking scandal in Britain and refuse to ask a question like "If Murdoch's minions felt safe enough to act in such corrupt and criminal ways over in Britain, is it reasonable to assume that they acted the same way here?", Americans seem uninterested in this LIBOR scandal that quite literally means, as Taibbi said a friend of his put it, "the world is built on quicksand."
So what if the loan and credit card interest rates they pay are tied to a fixed LIBOR rate.
What's going on with Katie and Tom?