libor scandal - London interbank offered rate manipulation

[LegendKiller]

So fraud is ok as long as everybody does it and few people get hurt?

There are two sides to every coin. While the fixed->floating interest rate swap buyers have been hurt the worst, borrowers who index to LIBOR have received HUGE benefits from the rate being low, especially during the crisis periods. Had those rates been as high as is suspected, many companies would have been hurting. Same with homeowners who had floating rate mortgages indexed to LIBOR.

The mark-to-market and/or rates on swaps is the single biggest issue. Somebody who locked in an IRS in 2005/6/7 locked in at a rather high fixed rate and are only receiving a small LIBOR back to pay their floating rate debt. This is not only bad for the borrower but also for the bank who wrote the swap, the default exposure on the MtM is massive. It's a double edged sword for the banks.

The fact remains that interest rates during that period were wonky for everybody. Everybody knew it, to claim otherwise is to pretend to be a babe in the woods.

 

[Doppel]

I see this scandal blowing wide open and massive numbers of people in jail: one, maybe even two or three people.

I have zero confidence that there will be much of a house cleaning over this, especially in light of the vast frauds perpetuated over the past several years and the essentially zero jail terms handed out. Particularly if the government did directly collude with these banks, forget it. "Necessary evil", etc.