On Monday, the chairman of Barclays, Marcus Agius, resigned after the British bank agreed to pay $450 million to settle findings that it — and other banks — had rigged benchmark interest rates to benefit its own bottom line. Tuesday, Barclays chief executive, Robert Diamond, resigned immediately.
Suddenly, the LIBOR rigging is exploding into a major banking scandal that will have far-reaching implications — both in Europe and in the United States.
The rate in question — the London interbank offered rate, or LIBOR — is used by banks to determine the borrowing rates for consumers and corporations, including $10 trillion in mortgage loans. If these interest rates are rigged, markets are rigged against bank customers, meaning that borrowers seeking loans paid more because of price fixing by the big banking cartels.
The settlement, struck with regulators in Washington and London and with the Department of Justice, shows that Barclays and several banks colluded to make false reports.
The implications of this story should be chilling to American borrowers, many of whom were taken advantage of by unscrupulous sub-prime lenders during the foreclosure crisis, and have watched their wealth evaporate as Washington regulators were asleep at the wheel while bankers secretly manipulated markets. The rate-fixing scandal may have caused people to lose their homes to foreclosure, according to London’s Daily News. Moreover, many people have mortgages linked to LIBOR and fluctuations in its rate can affect the size of their monthly home loan repayments.
This is an explosive story. More heads will roll — both in London and Wall Street. By faking their borrowing costs big banks gave an illusion of stability during the foreclosure crisis, masking the severity of the housing and financial crisis. You’ll be hearing a lot of stories about LIBOR in the coming weeks. And big banks like HSBC, Deutsche, JP Morgan and Citibank could be dragged into this growing scandal.
Readers what do you think? Is this banking scandal confined to London? Or does the LIBOR rigging fiasco have global implications.
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