Most of us don’t think about the London Inter-bank Offered Rate (LIBOR). After all, why should we, even though it impacts many of us on a daily basis? When it comes to money we don’t give thought to LIBOR because we’re more concerned about, well, getting some money in the first place and, in the second place, paying our bills. Other than how much of our money is sitting in a financial institution earning next to no interest, the numbers we’re likely to be concerned about are the interest rates on our credit cards or home mortgage.
Why are we thinking about LIBOR now? Simply put, because we realise with every passing day just how much ‘the system’ is stacked against us.
For those who don’t know, LIBOR is the rate at which banks borrow from each other. This rate is set somewhat subjectively in that a representative group of banks decide among themselves how risky each bank is and then, based on that assessment, they set the rate at which they’re willing to lend to and borrow from one another. Banks often borrow for the same reason that individuals do: to plug holes in the balance sheet — meaning that if there’s a liability (a bill) that needs to be paid and not enough assets (cash) on hand to pay for it then an outside source of funds is needed. How we fit in is that what we borrow from the banks is tied to the rate that they pay to borrow from each other.
You should care because you’re part of the public that is told the lie about how level the playing field is.
Care because LIBOR has been manipulated to benefit ‘the few’ and, unfortunately, that’s not a new phenomenon in banking.
Care because we, the public, are fed so many lies about how we should trust that the market will police itself that it hearing it has become boring…and because fraud is happening much too frequently.
Care because when bankers and traders toy with the financial system to make gains for themselves, the rest of us get screwed.
And we should care because, no, the latest banking scandal in which a bunch of rogue traders from U.K. and U.S. banks manipulated the rates doesn’t affect just London; the banking system is global and those LIBOR rates end up factoring into how much interest we pay on our mortgage and other debts.
We’ve been spoon-fed the lie that the global financial system is well-regulated — and the lie that, in this country, guilty people are punished. Why are so many who repeatedly upset the entire world’s financial stability still walking around among us? It’s simple: because, technically, when they bring the system to its knees, no crime is committed.
In this country, banks behaving badly isn’t a crime; it simply means there’s a loophole to get around. If lobbyists are permitted to write the regulatory laws alongside a do-nothing congress, there will always be ways to weasel out of punishment.
According to Reuters, arrests are on the way for the LIBOR manipulation scandal. How nice…we’ll see how that goes. Too bad we’re not like Iceland in that they saw fit to punish those who were directly responsible for tanking their economy.
What’s the bottom line?
When things are good for the bankers, they often stink for us.