My wife and I recently applied for a home loan. While reviewing the documents, I noticed that the interest rate is based on LIBOR. If you’ve been paying attention recently, you may have noticed that several big banks rigged LIBOR:
The LIBOR (London Inter-bank Offered Rate) index is the most important set of numbers in the global financial system. Used as a benchmark for interest rates around the world…hundreds of trillions of dollars in derivatives, corporate loans, and mortgages are pegged to these rates. Yet we now know that for years LIBOR rates were rigged. Barclays has agreed to pay nearly half a billion dollars to regulators for its manipulations, and a host of other big banks are under investigation for similar misdeeds.
Yes, another way in which the banking industry has completely f*#%ed us. If you follow these things, you’ll know that half a billion dollars is a serious fine—it signals that this bank did some stuff that was seriously, seriously bad.
Quite frankly, I can’t believe any of the “too big to fail” banks are even in business any more…it would appear that all fundamentally criminal enterprises intent on screwing their customers, not to mention taxpayers and the mainstream populace.
The most striking thing about this scandal is that it was predictable…yet no one did anything to stop it. That’s because, for decades, regulators and people in the financial industry assumed that banks’ desire to protect their reputations would keep them honest.
But, if recent history has taught us anything, it’s that self-regulation doesn’t work in finance, and that worries about reputation are a weak deterrent to corporate malfeasance. To begin with, traders at a bank are typically rewarded according to how much money their trades make, not on whether they enhance the bank’s reputation. Bank C.E.O.s, meanwhile, are now paid so lavishly that even when they wreak havoc on a bank’s good name they can still walk away with immense amounts of money.
Frankly, I’m kind of getting pissed about this and I don’t know why our society continues to put up with it. It disgusts me.