Keeping LIBOR in Our Minds

Unless you never watch, read, or listen to the news on some platform, you would be hard pressed to not know something about the London Inter-Bank Offered Rate, also known as LIBOR. If you happen to be unaware of what LIBOR is, or the scandal surrounding it – Matt Taibbi has an excellent infographic explaining how LIBOR affects the consumer over at: Business Insider

This scandal is supposedly the largest financial scam ever; and considering the amount of assets – in total – that have been “adjusted” by the rate fixing sits somewhere between $550 trillion – $800 trillion (based on different reports), it’s hard to believe that LIBOR would not be the largest case of fraud in the history of the world. Still, we’re not talking about it the way we did when the housing market began to tank. Why? My presumption is that we’re not talking about the implications because people have yet to feel the pinch that was caused by the problem, and have yet to feel the costs of the inevitable “correction” of the problem. For those who have taken out any type of loan over the last 5 years, your interest rates have been affected by LIBOR. This means our daily lives had the fraudulent costs built-in to our personal budgets. Very few, perhaps none, of us were aware that we were being had. So how could we feel the pinch.

My point is, that we’ve already felt the pinch; but, we felt it while assuming it was part of our day-to-day. It was not meant to be part of our lives, but most consumers didn’t know this. In the coming months and years, we’re likely to see a correction take place. In September, a meeting will be held to discuss the future of the interest rate benchmark, and whether it can be corrected or should be scrapped entirely.

So – What happens if LIBOR is abandoned? What happens to the loans already made under the manipulated rates? Will people who took out loans ever see a dime from any fines assessed to those found guilty of fraud?

  • I don’t know. I sincerely doubt anyone knows what the implications of losing LIBOR will be. Those who pretend to know are trying to save their own company’s reputation in the market place, and those who claim that LIBOR isn’t as big a deal as it’s being made into – clearly aren’t aware of what life is like in the real world. So, my answer is: It’s up in the air for now. Sadly, we’ll have to wait and see.
  • The loans already made under the manipulation of LIBOR are not likely to be adjusted. If history tells us anything; it’s that even when financial crimes are perpetrated, the end consumer rarely see’s justice in their household. Banks and corporations will continue lobbying hard to keep playing the game by their own rules and receive any lost revenues, but that won’t trickle down to anyone, the money will sit in their coffers until there is less “uncertainty” in the market.
  • Nope. Well, most likely nope. As the second question’s answer shows, consumers are never really repaid. Perhaps an incentive to reapply for new loans under new rates will be made, but the end result is that some of the same banks who commit the crime will be the same banks offering the newly adjusted rates.

Manipulated LIBOR made these banks billions, if not trillions, of dollars over the last 5 years, and they’ll be fined at 0.0000005% of the damage caused. The massive fines, $450 million for Barclays alone, will not “hurt” the banks bottom line. Because, in truth, the fine itself is, essentially, being paid from the extra revenue earned by the manipulated rates. They lose nothing, in the end game. The people gain nothing, other than perhaps a real “ARM” based on current market analysis. In reality, the fines assessed will be looked at as just being part of “the cost of doing business.”

I’d like to hope that, by now, people are wise enough to see through the politics of this fraud. Instead of playing the blame game, shifting our focus on the crooks. Whether legal or not under actual law, the people of this country (and the world) are tired of the games being played by the world’s real super-powers – those in charge of global finance.

There really are quite a few people who are awake now, and it’s frustrating for us to watch those who insist on playing left vs right paradigms against each-other when the entire world is falling apart. Take a moment and really ask yourself; do you want this shell game the banks are playing to continue? If the answer to that question is no, then stop focusing on the blame game and start focusing on the solution – that is coming together long enough to force these banks to scale down their operations, or dissolve entirely. And standing behind those willing to go after criminal charges.

Iceland is in the process of breaking apart their largest banks. They’ve already replaced their government who was deemed as being complicit in the collapse of their country’s economy – by following what Icelandic banks said they should be doing (IE: Investing in Mortgage Backed Securities that were sub-prime but rated AAA). We could learn quite a bit from Iceland’s people. But, once again, we’re not talking about it. And that’s the real problem.

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