LIBOR? The Real Scandal Is The FedSubmitted by Marc Clair on Tue, 07/17/2012 - 16:15
The latest brouhaha in the financial world is the “scandal” that the banks that set the LIBOR (“London Inter Bank Offer Rate”) have been “manipulating” interest rates. The LIBOR is important because it sets the benchmark interest rate for many of the top lending institutions in the world and directly affects the rates at which financial instruments such as student loans, mortgages, and bonds are set throughout the world, including here in the U.S.
As with all such “scandals”, the U.S Justice Department is leaping to the rescue to score some political points. As a recent NY Times articles entails:
The criminal investigations come at a time when the public is still simmering over the dearth of prosecutions of prominent executives involved in the mortgage crisis. The continued trouble in the financial sector, including the multibillion-dollar trading losses at JPMorgan Chase, have only further fueled the anger of consumers and investors.
But the Libor case presents a potential opportunity for prosecutors. Given the scope of the problems and the number of institutions involved, the rate-rigging investigation could provide a signature moment to hold big banks accountable for their activities during the financial crisis.
“It’s hard to imagine a bigger case than Libor,” said one of the government officials involved in the case.”
It would seem that this anonymous “government official involved in the case” doesn’t have much of an imagination, because I can imagine a bigger case in about 2 seconds. While I have no doubt there may be legitimate corruption to investigate in this current case involving LIBOR, it’s nothing compared to the Federal Reserve system and central banking as a whole.