The Next Big Financial Scandal Now Arriving on Track 12

And let me tell you, it's a doozy.  This is one that Matt Taibbi foreshadowed in a recent piece in Rolling Stone.

More recently, a major international investigation has been launched into the manipulation of Libor, the interbank lending index that is used to calculate global interest rates for products worth more than $3 trillion a year. If and when that case is presented to the public at trial – there are several major civil suits in the works here in the States – we may yet find out that the world's most powerful banks have, for years, been fixing the prices of almost every adjustable-rate vehicle on earth, from mortgages and credit cards to interest-rate swaps and even currencies.

What's at stake is Libor, the inter-bank lending rate and the manipulation of the rate by certain banks.  Why is this important?  Well, first you need to understand what LIBOR is.  From Wikipedia:

The Libor is the average interest rate that leading banks in London charge when lending to other banks. It is an acronym for London Interbank Offered Rate (LIBOR, /ˈlaɪbɔr/). Banks borrow money for one day, one month, two months, six months, one year, etc., and they pay interest to their lenders based on certain rates. The Libor figure is an average of these rates. Many financial institutions, mortgage lenders and credit card agencies track the rate, which is produced daily at 11 a.m. to fix their own interest rates which are typically higher than the Libor rate. As such, it is a benchmark, along with the the Euribor, for finance all around the world.

Now, why is the rate paid by banks so important? Because many (if not most) variable-rate consumer financial instruments derive their rates from Libor. So bank manipulation of that rate impacts a large portion of the borrowing public. And collusion to set the rate to enhance the performance of the derivatives issued and managed by these same institutions? Well, that's just plain and simple corruption.

It appears that the dam has broken and the Libor scandal is flooding the financial valley now.

Despite widespread expectation that it would be UBS, it turned out to be Barclays. You know how in Law and Order Jack McCoy always puts the two murder accomplices in separate rooms and tells them both that whoever talks first wins? Something like that happened here. In any case, the Department of Justice filing on the settlement contained excerpts of emails and other evidence that recall the taped phone conversations in the Carollo case: once again, we have seemingly incontrovertible evidence of wide-scale market manipulation.

Do you know what you get when you deregulate financial markets? Financial markets without regulation. And corruption. And crime.

So tell me again how deregulation of the financial markets is so super awesome?