The brazenness of the LIBOR scam
The article is light on the description of what actually happened but there is a section about the impact of his action and whether he relised the impact.<p>One thing to understand is that there was not one but two distinct manipulations of Libor.<p>The first is the one this article refers to, which is before the financial crisis, swap traders influencing the libor submitters to move their contribution to the fixing by a tiny amount, often a couple of basis points, to fit the massive future positions they were sitting on. Completely unethical and illegal but unlikely to have any noticable effect on the market, kind of like stealing a penny from a million bank accounts. It’s still stealing, but the impact on the market is limited.<p>The second manipulation was of a different nature. It is at the height of the financial crisis, when banks were failing as a result of bank runs every week, libor submitters, probably under instruction &#x2F; tacit consent from their management and regulators, low balled their contribution to the libor fixing to not appear to be struggling to fund themselves (by having a high cost of borrowing) since these contributions were public and investors were trying to infer what bank was next to fail. These low balling were probably in the 50-300 basis point range, ie with a material impact on the wider maket (borrowers should have paid significantly higher interest rates during that period). And this is the one whistle blowers complained to regulators about, falling into deaf ears.