What would happen in America if we found out that as many as 16 major “too big to fail” banks were lying about the average amount banks charge to lend to each other, resulting in trillions of dollars in the pockets of CEOs and people at the very top?
Hopefully, we are outraged. But, because of the little media coverage about it here in the United States, we don't know about it. And, as a result, we are not outraged.
I took an interest when I heard this story because my own bank, or at least its parent company, was brought into the investigation. This scandal reaches the pockets of just about every person on this planet. That’s not an exaggeration.
This coalition (if I can call it that) of banks is known as Libor and this scandal has been making waves in the UK. Libor is the rate at which banks charge to lend to each other, for each other. As Matt Taibbi calls it, “It is the sun or the center of the financial universe.” Libor affects every interest rate in the world, and it is all at the hands -- and greed -- of a few.
The Libor scandal first started coming to light in June of this year. Bob Diamond, chief executive at Barclays, admitted to wrongly submitting lower rates of charging -- than they actually charged to other banks -- to Libor. Barclays is a British multinational banking and financial services company based in London. He said it was to “protect the banks” even though he knew it was wrong. This resulted in Barclays being fined 59 million pounds by the UK FSA and fines equaling 290 million pounds from the U.S. Department of Justice. On July 3, Diamond resigned saying that external pressure on the bank risked “damaging the franchise.” (BBC News)
This has also been a scandal many years in the making. Since bank deregulation in the 1980s, the people running these banks have been tweaking the numbers in their favor. These same people have been running the banks through the 2008 recession and they continue to run these banks today. In late 2011, RBS (Royal Bank of Scotland) sacked four traders over the Libor-scandal.
For a full time-line of events leading up to the scandal read this BBC report.
The issue being discussed here may not have been largely reported by the American media, as it is a hard scandal to fully understand. It is a result of a banking system that has run out of control and it is governed by unsound men who run the bank on unsound principles. It is a system that is thick with laws and rules and regulations that most people are not even aware exist and as a result, people who have fallen into control of these systems have learned to tweak it in their favor.
It is confusing and most of all disheartening. Greed runs these institutions, and these institutions are also the safeguard of our savings; namely mine. Reform is needed more than ever and the rules need to be completely re-written for the new generation. Hopefully, this latest scandal will outrage the house and the senate enough to agree on monumental and unprecedented reform and change.