ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

Notes on a Scandal

London Interbank Offered Rate

The London Interbank Offered Rate was designed for "wellfunctioning"markets that exist for the vast majority of time, and not for periods of extreme stress where the interbank market disappears or when reporting higher borrowing costs leads to even higher borrowing costs.These are the fundamental problems with Libor that need to be solved. Even if they are solved, Libor has suffered a substantial dent to its credibility.

The public in the United Kingdom is baying for blood. The London Interbank Offered Rate (Libor) scandal has become a lightning rod for the public’s anger against bankers. Not unfairly, bankers are seen as having lobbied for and received light-tax and in­adequate regulatory treatment to support their unsustainable activities, gobbled up a disproportionate amount of the illusion of wealth created in the early boom years, and then, when the Towers of Babel came crashing down, enormous bailouts were financed by ordinary taxpayers and pensioners.

To many, the Libor scandal offers the “smoking gun” evidence of collusion bet­ween bankers and regulators against the wider public. The resignation of Barclays’ chief executive, Bob Diamond, has only increased the public’s appetite for more. Who knew what when? The public demand to know. But pause a little to examine the notes on this scandal. When you do, the sense of a conspiracy becomes clearer; but the crime becomes less so. It is not illegitimate to worry what would have happened were the alleged crime not committed – which is not to let bankers and regulators off the hook.

To read the full text Login

Get instant access

New 3 Month Subscription
to Digital Archives at

₹826for India

$50for overseas users

Comments

(-) Hide

EPW looks forward to your comments. Please note that comments are moderated as per our comments policy. They may take some time to appear. A comment, if suitable, may be selected for publication in the Letters pages of EPW.

Back to Top