The large UK bank Barclays is not a household name here in the United States, but its actions reverberate throughout the global banking community. It only recently was found guilty of colluding with traders at other banks to fix the interest rates over the Libor, the London Interbank Offered Rate, and the Euribor, the Euro Interbank Offered Rate, over a period of 5 years, which coincided with the largest banking collapse in world history. This interest rate fixing is believed to have been the root cause of the lending freeze which caused the Adjustable Rate Mortgage reset. As ARM’s issued by such giants as Washington Mutual, Countrywide and Wachovia were derived in part on these two exchanges, this caused a record number of defaults as interest rates climbed faster than anyone had predicted.
Already the repercussions are reverberating throughout the system. A total of 18 Banks such as Citigroup Inc., Royal Bank of Scotland Group Plc, UBS AG, ICAP Plc, Lloyds Banking Group Plc and Deutsche Bank AG are under investigation for colluding in the interest rate fixing scandal so far. Barclays already has had several lawsuits filed against it after these revelations came to light. Even with the resignation of the company chairman and the nearly half-billion dollar fine, things are looking bleak for these conspirators as calls are coming in rapidly for criminal proceedings against the executives of these banks.
When Barclays was originally fined on June 27th, few realized how deep down the problems were. With banking institutions from around the world now discovered to be involved with the scandal, stock prices are beginning to fall, and heads are rolling. The investigation revealed that the relaxing of banking regulations in both the US and UK, under the argument that the banks would regulate themselves far more efficiently than the governments would, is what enabled these banking giants to manipulate the system. Free of the concerns that regulators would be able to address the problems, they modified their method of operation to allow the control of the market to their benefit. The trillions of dollars which were manipulated in this manner were funneled to a select few, away from the people who had earned it. A gigantic scam, and they felt themselves untouchable. If millions of people lost their jobs or homes, too bad for them. They got theirs, forget the rest of us.
Will this lead to arrest and jail time for these bankers who toppled the world economy, as Iceland has done? Only time will tell.
