Banking scandals have grown so common that perhaps folks have simply run out of outrage. Or maybe the numbers are just too huge to wrap our mortal heads around.
Whatever it is that's behind the relatively light news coverage and lack of public debate on this incredible LIBOR rate-rigging scandal thus far, the story is not going away. In fact, it's bound to grow substantially in scope, as many of the world's largest banks have already been implicated in manipulating interest rates that are tied to some $800 trillion in loans and securities.
LIBOR -- the London Interbank Offered Rate -- is supposed to reflect the average interest rate at which banks are willing to loan funds to each other. Banks submit their daily estimates of borrowing costs for various loan durations in 10 different currencies, and after tossing out the top 25% and bottom 25% of those estimates, the LIBOR rates are calculated as an average of the remaining 50% of submissions. A separate benchmark called EURIBOR tracks borrowing costs among eurozone banks.
As revelations of widespread misconduct by multiple rate-reporting banks begin to emerge, worldwide confidence in these self-reported rates has been seriously eroded, and the banking establishment as a whole has taken another major leap downward into an abyss of well-deserved public distrust. Read more.......