Reports are now coming in that arrests are imminent for several key bankers involved in the London Interbank Offered Rate* (LIBOR) scandal which brought down the world’s economy in ’08. As reported before, these bankers were in collusion to manipulate the inter-bank exchange rate to manipulate the marketplace.
As said by Andrew Lo, MIT Professor of Finance:
This dwarfs by orders of magnitude any financial scam in the history of markets.
With this change, coming soon after the revelation that the Reserve Bank of New York was aware of the manipulation as far back as ’08, the Department of Justice has notified the lawyers of multiple bankers to expect the filing of criminal charges and to not leave the country. This also gives them the opportunity to coöperate or to issue a plea. Due to the size of this scandal, the ripples will be spreading far and wide in the industry.
This is but the tip of the iceberg. A wide variety of investigations in both the UK and Europe are also targeting the giant banks in their countries, coordinating the US DoJ. And the banks are not sitting idle, hiring large teams of criminal defense lawyers, and the executives at the banking giant Barclay’s have already been shown the door.
One unnamed source familiar with the matter said this on the imminent arrests:
“The individual criminal charges have no impact on the regulatory moves against the banks. But banks are hoping that at least regulators will see that the scandal was mainly due to individual misbehavior of a gang of traders.”
To dismiss it as individual misbehavior demonstrates, however, is that the culture of corruption will be readily eliminated. Without suitable reform then new names will fill the empty spaces, memories will forget, and the cycle will repeat again as it has in ages past.
This is the first major action under the new rules of action put into place under the Dodd-Frank act by the Commodity Futures Trading Commission. How it unfolds will help shape the future policies and regulations being put into place in response to the worst financial crisis since the Great Depression.
*For detail on the importance of this rate, the impact, why it caused the economic crash, Dennis Kucinich has made available a very good video explaining the hows and whys of the LIBOR scandal.