It may go down as the biggest banking scandal in history, and yet many Americans have not even heard about it.
The LIBOR (London Interbank Offered Rate) scandal is a big deal, and so far no one knows just how deep the ruse ran. Put simply, the LIBOR rate is the rate at which banks get funds from other banks. The scandal: Barclays—and potentially other banks—allegedly tried to rig the rate. So far, Barclays has paid $455 million in fines to U.S. and U.K. regulators.
The LIBOR rate is a benchmark interest rate used to set an estimated $800 trillion in financial instruments. That’s not a typo--$800 trillion. As Christopher Barker of the Motley Fool financial blog explains:
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"I am afraid that the ordinary citizen will not like to be told that the banks can and do create and destroy money.
And they who control the credit of a nation direct the policy of governments, and hold in the hollow of their hands the destiny of the people."
-- Reginald McKenna
(1863-1943) British Secretary to the Treasury (1903), President of the Board of Education (1907–08) First Lord of the Admiralty (1908–1911), Home Secretary (1911–1915) and Chancellor of the Exchequer (1915–1916), and Chairman of the Midland Bank (1918)
Source: speaking in 1924
So wait a minute. It's perfectly fine if central banks "influence" rates, but it's "the crime of the century" if private banks attempt to do the same?
Come on man. If it's good for the goose, it's good for the gander, right?
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