I’ll admit freely that for a financial-issues naif like me (I took a college-level Finance course in 1975, which is equivalent to studying Physics in 1775), reading about the LIBOR scandal has been a bit like reading screaming headlines in a foreign language newspaper where I grasp just enough words like HORREUR or CATACLISMO to understand something really big is going on. And there is no question the complexity of the issues involved, as much as any suspected MSM effort to protect the Big Boys of Finance, has inhibited broader coverage. Moreover, as Kevin Drum notes:
[E]veryone’s a little vague about just who got ripped off here. On a listserv I subscribe to, a seemingly knowledgeable participant2 said the victims of the scam include investors who owned floating rate notes, LIBOR-linked CDs, or pay-fixed-receive-floating interest rate swaps; or anyone who traded LIBOR contracts on a U.S. futures exchange and lost money. And let’s face it: that doesn’t sound much like widows and pensioners, does it?
But any scandal that involves, well, the entire global banking network and a system used to set rates on 800 trillion smackers worth of financial instruments at a time when said network and said system has recently sucked the life out of most of the world’s economies is by definition a pretty big deal. As with the 2008 financial disaster, however, it’s not clear whether the most appropriate emotional response is anger or fear—the desire to see many Masters of the Universe sent to the slammer or to give them a lifeline lest they drag the rest of us to the bottom of hell.
But it should be clear that this time around, there need to be repercussions beyond the damage these people have inflicted on the innocent. Whether you join with Robert Scheer to call LIBOR the “Crime of the Century” or simply agree with The Economist that it exposes “the rotten heart of finance,” it is obvious these dudes were casually breaking all the rules in a private game that treated the paper wealth of the planet like Monopoly money. If these confidence-destroying activities are not fully exposed, punished, and prevented from recurring, we might as well all admit we are completely helpless to exert any control over our economic life, now and in perpetuity.
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