The Biggest Financial Scam In World History

George Washington's picture

There have been numerous big banking scandals recently.

But the Libor scandal is the biggest financial scam in world history.  See this and this.

The former CEO of Barclays said today that banks across the world were fixing interest rates in the run-up to the financial crisis .

Professor of economics and law Bill Black notes:

It is the largest rigging of prices in the history of the world by many orders of magnitude.

Indeed, the scandal effects an $800 trillion dollar market - 10 times the size of the real world economy.

Matt Taibbi explains that this is the "mega scandal of all mega scandals", because Libor is the "sun at the center of the financial universe", and manipulating Libor means that "the whole Earth is built on quicksand."

Local governmentscredit card holders, students, small businesses, small investors, homeowners and virtually everyone else in the entire world has been impacted by the manipulation.

Credit card debt - almost a trillion dollar market - is pegged to Libor. So are student loans - a trillion dollar market.

Mortgages are a bigger market: around $10 trillion dollars in the U.S.  The Washington Post notes today:

60 percent of prime adjustable rate mortgages, and nearly 100 percent of subprime ones, were indexed to LIBOR.




That means that when LIBOR rises, so do the prices ordinary consumers pay to, say, get a mortgage.




So how did the manipulations by Barclay’s affect this rate? First, from 2005 and 2007, the bank allegedly varied the rates it reported to the BBA and Thomson Reuters so as to improve its margins on internal trades. For example, it could have placed bets that the LIBOR rate would increase, and then reported artificially high rates which in turn artificially increased the LIBOR averages, so that the bets were likelier to pay off. This ... bumped up mortgage rates  however infinitesimally  for consumers even when the risk of the loans hadn’t changed at all.

Other loans - like small business loans - are usually based on Libor as well.

But that is all small potatoes compared to the $350 trillion in swaps tied to Libor.  Virtually every single local government in the United States has been scalped by Libor manipulation.

The big banks have robbed the whole world.

Indeed, the scandal is so big that it will further destroy trust in our financial system and drive many people from investing in the capital markets altogether.

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watch2x's picture

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Escapeclaws's picture

George, this may be a big scandal, but the way you have presented it does not make it the least evident. It would be helpful to have conservative estimates of the amount of money that has been illicitly obtained from this by these actors. As it is, you have just adumbrated that large amounts are involved. Thus presented, this scandal has no legs.

fx's picture

I don't understand the hype. Central banks manipulate rates in a way, way bigger manner all day, openly.

And with underreporting Liebor, consumers and mortgage payers were actually getting a nice subsidy. there are much bigger scams going on - the biggest of them all is fiat money.

jonjon831983's picture

The question is... what should people do in response to this.

Kyron95131's picture

you do what you can...

educate yourself (via this site and a plethora of others) and have constructive conversations with poeple about this very topic to facilitate status of an informed public. re establish a sense of community locally where people can actually talk and have dialog as opposed to being scared of being judged by other people whom are afraid of being judged.

but at this point, i dont think it matters.

they own the regulators, our governments, law enforcement agencies, judicial systems, pretty much anything from what ive read and watched.

the math will work its way out of perpetrating the status quo till the wheels fall off or untill your politices have raped the poeple so much that they revolt Tahrir style.

so far i see the perpetrators have a lot going for them still. here in the US poeple are willingly ignorant, easily distracted, and fully vested materialistic whores for the system. they can recite episodes of whatever trash sitcom you ask them about and have no idea wtf is going on in the real world. they wanna see it continue till the wheels fall off too!

because to think otherwise would mean having to pull their heads out of the sand and participate!


The Alarmist's picture

New week, new scandal ... Biloxi Fire Department.

jonjon831983's picture

On the ground... imagine if LIBOR goes up... how fast would it go up and what happens to people stuck with Variable mortgages thinking they can change over to Fixed before rates go up.

CustomersMan's picture


History will show a link between this scandal and what they have been doing to "Options Investors"  for a long time. Utter abuse, and theft, shrewd, calculated theft.  And they justified it as they were working on behalf on retirees and a better return on their portfolios, so the scam should be condoned.  So then they eliminated the retirees from the equation and stole the money for themselves, on behalf of the retirees..


Manipulating stock and then Index options certainly played an important part in this scandal. They are both linked, which came first, I'm not sure.

honestann's picture

Anyone who has any dealings with the "capital markets" at this point is certifiably insane.  Anyone who has any dealings with any "financial institution" is certifiably insane.  That doesn't forgive the predators for their actions, but the level of stupidity exhibited by mankind sure is off the charts.

boogerbently's picture

Oh, come on you guys.

These merry pranksters meant no harm. I, for one, will be glad to pay for their tom-foolery with higher taxes and a reduced pension and Soc. Sec.

Rusty Trombone's picture

Start cutting the balls off of them.

Rusty Trombone's picture

Bring back the fucking Guilottine already and let's have some payback.

cynicalskeptic's picture

Too quick.  

Burning at the stake, drawing and quartering, selling progeny into slavery..........   Give up all ill-gotten gains, severely punish thiose responsible AND end the generational building of fortunes.


 You want REAL disincentives to such behavior because even when marginal punishment is meted out (fines, country club prison (bwahaaaaa - has ANYONE been prosecuted for ANYTHING?!?!),  enough remains safely stashed in off-shore havens  to fund the family fortune for the next generation

disabledvet's picture

Bubbles are the scam not "rigging interest rate markets." Which direction are you rigging the market moron? The banker wants an upward sloping yield curve DUE TO ECONOMIC GROWTH phuck heads--trying to "rig it by drving down rates at the low end" only serves to throw the whole private AND PUBLIC sector into the hooch-gow! (don't worry--there's no prison for the police in Europe either.) In other words "why not drive the short rates higher and get the bankruptcy over sooner?" Because the government would kill us if we did that? Oh, okay! So doing the opposite yields the opposite result? NOOOOOOOO. How's a thought...DOING NOTHING! Or, better yet...DOING YOUR JOB IN AN ETHICAL MANNER! Nobody cares if this is the end of Wall Street. TRULY! Nobody GIVES A RAT'S PHUCKING ASS ABOUT IT ANYMORE. "the bubbles disabledvet has helped create have instead created so much wealth that the real scammers are really starting to get pissed off now." move along, folks. there's too much money being made for us to worry about the folks doing this type of attempted robbery.

hedgehog9999's picture

It is interesting to know that Argentina 's economy collapsed following years of corruption and malfeasance by their leaders and people in charge.......

This might be in store for all those corrupt souls of present day western world, the rule of law can be retroactively applied for crimes committed many years back as these asshole seniles found out......

Go Argentina!!!

BKbroiler's picture

and margin calls.  This is like the equivalent to moving sunrise back and forth.

RichardENixon's picture

The only quibble I have with this column is the statement about further destroying confidence in the system. I don't see how that's possible at this point.

LiquidBrick's picture

Of course its possible.  Imagine high school dropouts working retail lemonade stands and car washes and laughing at the notion that you intend to pay for something in U.S. Dollars.



deerhunter's picture

downtoolong-wife in bed with best friend happened to me=   worse still-  in the divorce she sold my dog to an out of town stranger and never saw the dog again- and no,  I am not a redneck- I don't want to give them a bad name-

dirtbagger's picture

Deerhunter -

Reminds me of the old joke about the hillbilly who played his country/western record in reverse.  

The Pickup truck started,  his dog didn't die, and his wife that ran-off , returned home.

Bunga Bunga's picture

Get over it, it's all scam.

ptolemy_newit's picture

its so easy start at the top of the list or even alphabetical,  what are you waiting for even as small excample say 10% would help.

american pussies watch as your raped!

silverserfer's picture

Usuary is STILL a sin. Screw you Vatican!

gwar5's picture

It's way past time to nationalize the big banks, break them up, refute their odious debts upon the public, throw the bankers in jail, seize their personal assets, and treat them far worse than what Bernie Madoff got. They're getting ready to do it to us.


They've comitted crimes against humanity. We can do without them. I'm sure what we know is still only the tip of the iceberg. Iceland is throwing bankers in jail, showing us the way.

Seer's picture

The System was a crime against humanity (and nature).  The system of interest, which breeds this notion of perpetual growth, is what's responsible.  You're in a casino blaming the odds/payout setters: yeah they're rigging, it's how it's done, it's how it's ALWAYS been done.

Iceland can toss as many crooks in jail as they'd like, but then what?

Iceland experienced one of the most severe recessions in the world when the markets crashed in 2008. Economic output fell by about 12 per cent over two years. But the latest report on Iceland by the International Monetary Fund shows that growth is resuming. GDP is expected to increase by a relatively healthy 2.5 per cent in 2011.

[Yes, it's from 2011]

A "healthy 2.5 percent!"  Healthy for whom?  That 2.5 percent means a doubling in 28 years.  Now we're talking "stability," none of this quick growth that crashes things, they're back on track for the slow crash.  And consider that the bulk of that 2.5% is going to go to the wealthy elite (who managed to toss the bankers under the bus).

SmittyinLA's picture

Destroying confidence is part of "the plan", America is in full blown "socialist laundering" stage of government tyranny, this is where most wealth of the "unconnected" is transferred to the state to be held "in trust" for our "looter benefactor" banker friends, after they purchase as much assets to achieve their goals-private property rights will return to America. 

Seer's picture

How fucking illogical is That?

All fucking hell is going to break loose.  TPTB only stay in power with stability.

According to you it's the govt that own everything and not the banksters...

Ever occur to anyone that this is all a NATURAL outcome of capitalism, of the concentration of capital? and, that w/o growth that only two options exist - ever tighter concentration (hm, banksters or "govt," banksters or "govt"...), OR "anarchy."

Buying up junk assets, is that something that we should be envious/pissed/(whatever) about?  It's all shit that's tied to a dying paradigm, and I ain't talking in [comparatively] shallow economic terms: this is BIGGER than BIG, BIGGER than ideology A or ideology B.

THEIR game, which was always unsustainable, is playing out for them.  It's GAME OVER for THEM and there ain't no other game other than total fascist control OR anarchism.  Those who are not THEM have only one option.

"Property Rights" are propped up from the barrel of a gun.  If it ain't YOUR gun then don't act surprised if the gun that's supposed to protect you gets used on you: if the govt has the ability to kill to protect your property then they have the capacity to kill you (and if you threaten it it'll do so).

seataka's picture

Corporate "personhood" was invented as the carrot to get the Northern industrialists onboard to support the Amendment to end Slavery and keep the "Union" together. Then came the civil war, What they did was replace classic slavery with debt slavery.

We are so far past starting a revolution, that we should be studying the great slave rebellions of history instead, for truely useful historical precedents. Try "Spartacus"

Sidebar: The "official" harbor tour to Ft Sumter, in Charleston S.C. goes silently past an abandoned old decaying fort, Fort Pinkney without any comment. Why? Because Ft Pinkney was the first Union 'asset' siezed by the Confederacy when it was taken by South Carolina Militia.

gatersaw's picture

"What they did was replace slavery with debt slavery." I disagree. Slavery in the antebellum South was an immature reactionary business plan. The cost of slaves and their indigence could have been absolved by paying an acceptable wage. Perhaps there was other means of subsistence I'm not aware of, but Abigail Adams wrote about 7 slaves doing the labor of two Irishmen and at a slower pace to boot. Our present day image of slavery is distorted by political correctness and a lack of critical thinking. Your present perception of servitude is a typical damsel in distress cop out. If you want to avoid inflation; buy land or gold. If you want to end the IRS; get active in your local Republican Liberty Caucus and DO SOMETHING! 

Seer's picture

"Abigail Adams wrote about 7 slaves doing the labor of two Irishmen and at a slower pace to boot."

The REASON why blacks were used was because they weren't as susceptible to diseases spread by mosquitoes.  The Irish may have been able to out-work the blacks, but only up until they'd come down with serious illness.

But, really, anyone suggesting any moral correctness to the mass FORCED "migration" of vast numbers of people is, well, sick in the head.

moneymutt's picture you are saying what was wrong with slavery was it was inefficient economically (that whole lack of liberty, torture, rape, having your children taken from you etc...that was okay, it just sucked for the slaveowners who werent smart enterpeneurs?!?!!?).... and hiring Irish laborers would have been more efficient?...okay...then why didnt anyone in the south start planations by just hiring efficient Irish men or free blacks? Buying slaves was a big upfront investment, why did they do it? And what about breeding, that didnt make them any money. Yep, you get to have your way with your female slave, when they birth your children, you can sell them for good money...but yeah, is was economically stupid.

Not that a plantation economy isnt moribond, way less productive than a diverse economy would be, and not that there might have been in certain situations ways to make more money by hiring people rather than enslaving them, but come on, enourmous wealth was built up in US under slavery, huge, huge money.

Being a debt "slave" or wage "slave" or an expendably low class hire when there is an overpopulation of people compared to what an economy can provide all have many deep problems, but I'd rather be a modern person facing a mountain of student load debt I cant pay than be enslaved, especially if you are a woman.

Gadfly's picture

Yeah, right.  Support the same greedy, selfish pigs, corporations, banks, and politicians that have been ripping us off for years.  What a great idea.  The Republican/Conservative philosophy that "government is the problem" and that "there is too much regulation" is pure bullshit.  Republicans dismantled the regulations and laws that protected us for so many years and look what we got.  Chaos and rampant greed in the financial sector all at our expense.    Your idea of "freedom" is to have a game without rules and referees (the government).  It hasn't worked and it never will because you can't put the fox in charge of the hen house.  Whether you like it or not, a large number of human beings are greedy pigs, and they will stop at nothing to take from you and give to themselves.  They have to be controlled.  They can't be given "free" reign, because if you give them an inch, they'll take a mile, and all your money too.  Free market philosophy suffers from the same defect as Communist philosophy: they both completely ignore the variable of human nature in the equation.  It's that simple. 

scrappy's picture

Has "Beyond Left and Right been given enough critical consideration?

Combined with something like this?

and / or maybe this?

Then of course the living old masters of classical economics have their opinions of what is possible...

PS) This Libor stuff is unreal in scope if true...









cynicalskeptic's picture

'Republican'/'Democrat', right/left, red/blue.... at this point it's all a staged play to give the illusion of 'choice' and 'democracy'.....   divert the proles wirth (ultimately) meaningless social issues like gay marriage, abortion, Jesus et al while looting the copuntry and screwing the masses - and the masses are so easily manipulated that they THINK they somehow matter.......     the future of the 99.9% is as Soylent Green

NeedtoSecede's picture

I would rather freely engage in commerce with a greedy capitolist any day of the week, than be told how to live my life by a statist, communist, centrally-planned, power-hungry, govt. leach. 

Secession anyone?

Seer's picture

Blah, blah blah...

Not only can you NOT spell the fucking word Capitalist, but you're warming up to greedy ones.

I don't deal with fuckheads, capitalist or otherwise.

Fucking ideological midgets...

Gadfly's picture

That's a false choice.  Nice try though.  As if there weren't other options.

moneymutt's picture

So you would rather live in wild west with no organization between you and your neighbors to protect yourself from thugs and criminals? Just because some sherrifs can be corrupt and tyrannical does not mean you are autmatically better with no sherrid.

If your local police is corrupted by the Mob or local drug king pins, is the best solution to just get rid of the cops!?!...yeah, that will stop of the Mob, that will show the drug kingpin, all regular law-abiding citizen will be on their own to provide security, and each as an individual wont stand a chance against much richer, better armed criminal it or not, regular decent folks' only hope is to band together, form a union/govt, and run things by majority rule (with checks and balances) and insist any rules or laws majority agrees to gets enforced evenly on all and any protection he govt provides gets provided evenly for all....equal protection under the law. The response to a corrupted sherriff or local police department is to throw the bums out and clean the department up, not to disband  the police and let everyone decide justice the way it was done by tribes of men 2000 years ago. The answer to corruption is not less power in the hands of the people, it is more power, more democracy for the people. 

If you like no govt, go to a failed state like Somalia...not govt to interfer with your life, no taxes, shitty infrastructure, no min wage , no public schools etc...I prefer a less third world option where we band together to solve a common problem, and one of biggest problems is big banks trashing our economy and then asking us to bail them out.

If a few contractors in your town rigged bids on a local road project, and got caught like these banks have, they'd already be in federal prison. Should we disband laws against bid rigging, laws against fraud, and just people do this stuff without any consequences? That would make for a real efficient, trusting market wouldnt it?

Escapeclaws's picture

Nice post, MM. These points seem to be lost on "true believer" libertarians. Next question, what to do about the rich? I have trouble with the idea that rich people should exist alongside poor people. It is such a scandal, but few see it as a scandal and most see it is a "given", ie, part of the natural order. This probably has to do with social Darwinism which seems to be at the root of right wing thinking, including libertarianism. This implicit approval of social Darwinism is probably the basis for what has enabled the current takeover and demise of our constitutional republic by the rich. It blinds otherwise thoughtful people from seeing its ultimate consequences.

I like your approach of looking at the facts on the ground. Same for Cranky old Geezer below who lays it out nicely, concerning banks.

Seer's picture

"So you would rather live in wild west with no organization between you and your neighbors to protect yourself from thugs and criminals?"

Fuck, people!  There is more than just TWO choices!

For what it's worth (though perhaps people are just too brainwashed to comprehend), anarchism advocates FREE association while admonishing any coercive oppression.  It doesn't' say NO govt, though it generally believes that the concentration of power is bad.

Somalia was a failed State because it was a State.  ALL States are going to FAIL.

Dingleberry's picture

exactly. Even Adam Smith knew you must have referees. Government may be inefficient or evil....but look at the fucking bankers. Their malevolence knows no bounds.  They would destroy the world if it made them a dime.  The unwashed masses cannot fathom the depravity or lack of conscience these scumbags have.  Hence, they cannot comprehend it. No regulations = the dark ages. Go there if you want to. I prefer civilization and a few basic rules to protect us from cabals.

Troy Ounce's picture



Libor manipulation = Bad


Plunge Protection Team = worse


Gold & Silver Suppression Scheme = worst

silverserfer's picture

the PM supression is transatory. take advantage of it while you can.

gatersaw's picture

I kind of agree here. The $800trillion market that's affected by fixing is only; as they say, "affected".
It's not flat, fraudulently created like CDO's were. 
In terms of market manipulation with printed money; yeah that sucks, but it's still only a few trillion at most. 

Herdee's picture

Is it the biggest scam?I thought it was the American politicians selling America out to Communist China.

SmittyinLA's picture

Destroying confidence is part of "the plan", America is in full blown "socialist laundering" stage of government tyranny, this is where most wealth of the "unconnected" is transferred to the state to be held "in trust" for our "looter benefactor" banker friends, after they purchase as much assets to achieve their goals-private property rights will return to America. 

Joke Heros's picture

The fine folks at CNBC </sarc> would have us believe it's a "victimless crime" or "no specific law was actually broken" or "it actually helped investors and homeowners by lowering rates" (all quotes from the past few days.) And in the words of M Caboose Cabrera "it's a non issue making my eyes glaze over"