Banks are major players in the global capitalist financial system. When banks are not regulated correctly all hell breaks loose, for example the 2012 Libor banking scandal.
What is Libor?
Libor (London Interbank Offered Rate) is a global benchmark interest rate used to set a range of financial deals. It is also a measure of trust in the financial system and the faith banks have in each other’s financial health. The scandal provides a glimpse into the mechanisms by which a handful of giant banks such as Barclays rig the so-called “free market” to boost their profits and the fortunes of their executives and big investors. It is a process of economic plunder whose result is mass unemployment, poverty and ever increasing social inequality.
Libor is a prime example of self-regulation, a way for permitting banks a free hand to rig markets and deceive citizens. It is controlled by the British Bankers’ Association (BBA), a private banking trade and lobby group, presently headed by the chairman of Barclays, Marcus Agius. Every morning eighteen of the world’s biggest banks submit loan data to the Libor board this helps set the global rate to which their own trading bets are tied. These same banks control the BBA. This, like so many other market mechanisms, is intrinsically corrupt and riddled with conflicts of interest.
So who are the winners and loser in this scandal? Libor itself is a product of the deregulation of the banks carried out by capitalist governments of all stripes. The winners at the time were the banks and bankers whose profits increased as did the fortunes of their executives and big investors. The losers were new homeowners or those with variable-rate mortgages, credit card holders, students with college loans, small business borrowers and other consumers as countless billions were effectively stolen from them when the banks priced the Libor rate artificially high. However some borrowers with adjustable rate mortgages were winners as they paid less in interest rate.
Eva Aisha Caley
http://www.youtube.com/watch?v=hviT8VqAUEU (Panorama programme on banking scandal)