Is this the biggest financial scandal in history?

Readers are probably aware of the LIBOR scandal that's been boiling over for the past week or so.  If you haven't been following it, you should!  It first came to light back in February, and has grown to colossal dimensions.  It looks set fair to become the biggest financial scandal in history in terms of the sums involved.  It affects financial instruments with a total value estimated to range from about $350 trillion (yes, that's 'trillion' with a T) to as high as $800 trillion - the latter sum being more than twelve times larger than the annual gross domestic product of every nation on earth put together!

You can find a brief summary of recent developments in this NPR news item, and a more detailed look in this report from The Economist.  Here's an excerpt from the latter.

The number that the traders were toying with determines the prices that people and corporations around the world pay for loans or receive for their savings. It is used as a benchmark to set payments on about $800 trillion-worth of financial instruments, ranging from complex interest-rate derivatives to simple mortgages. The number determines the global flow of billions of dollars each year. Yet it turns out to have been flawed.

Over the past week damning evidence has emerged, in documents detailing a settlement between Barclays and regulators in America and Britain, that employees at the bank and at several other unnamed banks tried to rig the number time and again over a period of at least five years. And worse is likely to emerge. Investigations by regulators in several countries, including Canada, America, Japan, the EU, Switzerland and Britain, are looking into allegations that LIBOR and similar rates were rigged by large numbers of banks. Corporations and lawyers, too, are examining whether they can sue Barclays or other banks for harm they have suffered. That could cost the banking industry tens of billions of dollars. “This is the banking industry’s tobacco moment,” says the chief executive of a multinational bank, referring to the lawsuits and settlements that cost America’s tobacco industry more than $200 billion in 1998. “It’s that big,” he says.

As many as 20 big banks have been named in various investigations or lawsuits alleging that LIBOR was rigged. The scandal also corrodes further what little remains of public trust in banks and those who run them.

There's more at the link.

It looks like there's been wholesale collusion between bankers, traders and regulators in this scandal.  It may demolish the last vestiges of trust in international banks (not that there's much of that left by now . . . )  The term 'bankster' may yet enter general usage, instead of remaining an 'insider' term. I highly recommend keeping an eye open for developing news about this scandal.  It has the potential to bring ruin to banks all over the world - and that means all of us will be affected by it.

Peter