The banking business, a business most of us know only because we write checks, make deposits, get monthly statements, and have an ATM card attached to the account, has come under fire, again.
A major scandal is on the front page(s) and could blossom into the biggest financial debacle of them all. It has to do with the LIBOR. This acronym for the London Inter Bank Overnight Rate, is an interest rate charged on money loaned between banks, private banks not Federal Reserves or sovereign banks.
Barclays Bank, the venerable British institution, has agreed to pay a serious fine for attempts to manipulate the LIBOR to increase profits at their trading desks. Traders were enlisting the cooperation of bankers to set/change rates that would make instant profits for the traders in various ways, depending on the instruments(contracts, bonds,derivatives,etc) involved. The concept of LIBOR manipulation was not even on the radar of regulators on either side of the Atlantic. However, it came to light about 5 years ago, when Tim Geithner was headof the New York branch of the federal reserve. He sent a letter to the British Exchequer(Treasury) listing 6 steps to correct the methodology. The Brits saw fit to implement only 2 of the 6. Not good. So Barclays pays $453millions, 3 top officials resign, and there is more to come.
Those close to the investigation say there are potentially trillions of dollars involved, in losses due to the manipulation of the LIBOR.
So, brace yourself: more bad news from the banking sector is due to rain on our parade!
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