London banking scandal crosses the pond
POSTED: Friday, July 13, 2012 - 4:21pm
UPDATED: Friday, July 13, 2012 - 5:42pm
Most of us have never heard of the LIBOR interest rate, or the scandal that is spreading around it.
But it turns out we should be paying attention because it affects trillions of dollars around the world.
And it affects the entire country.
If you have a credit card, a student loan, are involved in a pension fund or have an adjustable rate mortgage, you have been affected.
Nearly $800-trillion of the world assets have been affected.
LIBOR stands for the London Inter-Bank Overnight Rate, and it’s the interest rate banks charge each other to led and borrow money.
And just like you and me, the more secure and financially healthy a bank is, the lower the rate.
It turns out that from 2006-2009, Barclays, the biggest bank in England was lying, and thus manipulating the LIBOR rate downward.
That meant Adjustable Rate Mortgages in the mid-2000’s that might have been sweet enough to tempt otherwise careful people into sub-prime mortgages.
That leads to foreclosure, and that leads to excess housing on the market, and that leads to a construction crisis, and so on.
The head of Barclays has resigned and testified about the scandal…
And now it is crossing the pond. There are suspicions that J.P. Morgan-chase, Bank of America, and Citibank, the usual suspects, may have been involved.
And in the fall of 2007, Treasury Secretary Timothy Geithner was head of the New York Branch of the Federal Reserve.
Newly released memos from that time indicate, he knew and responded quickly with…more memos.
How much this affected the economy when the bottom fell out the next year is hard to say, but corruption at the world’s largest banks has left a mess to clean up…at taxpayer expense.
One thing you will be happy to know though.
Barclays has announced its executives will get no bonuses this year.