Rachel Alexander

Eventually Barclay employees started complaining. A Barclays employee told a representative from the Federal Reserve Bank of New York in April 2008 that Barclays was reporting falsified rates to LIBOR. In October of last year, another Barclays employee told the bank that the LIBOR rate is “absolute rubbish.” In December, a Barclays employee complained to the U.S. Commodities Future Trading Commission that Barclays was underrerporting its rate to LIBOR.

After subpoenaing emails, Barclays admitted it submitted false documents, and was fined $453 million by British and American regulators. Three of its top executives resigned, including CEO Bob Diamond on July 3. Deutsche Bank is already cooperating with regulators. Barclays' outgoing chairman Marcus Agius hinted that other banks may be implicated more than Barclays. Barclays' defense was that it was forced to underreport its own borrowing cost because other banks were. This means Barclays is just the tip of the iceberg, other banks could be in even bigger trouble; a full-fledged global banking scandal. The UK's Serious Fraud Office has launched a criminal investigation. US investigators are preparing lawsuits against the banks and several class actions have already been filed by investors.

15 other banks that submit interest rates to LIBOR, including Citigroup, are also under investigation. Other U.S. banks that participate in LIBOR include Bank of America, JP Morgan Chase, and HSBC.

Barclays received $8.5 billion in bailouts from the U.S. bailout of AIG. Meanwhile, it continued giving generous bonuses to executives. Citigroup received a $45 billion TARP bailout and gave its executives generous bonuses in 2010 despite huge losses.

This latest scandal is more proof that the big banks are greedy and ruthless and will break the law in order to make a profit and huge bonuses. Falsifying their interest rates has affected millions of people around the world, including struggling homeowners whose mortgages rates stayed artificially high due to the manipulation.

It is extraordinarily unfair that dishonest, lying banks received bailouts with taxpayers' money. They should have been forced to go under like many homeowners have through no fault of their own, who simply fell on hard times due to losing a job or becoming sick. These same banks refuse to give many homeowners a break on their interest rates; meanwhile they lie about their interest rates. The penalty assessed against Barclays is just a slap on the wrist, because the bank made that money up on profits from manipulating interest rates. Whereas to a struggling homeowner, not being able to adjust the interest rate on their mortgage could mean losing their house.

On June 29, Bank of England governor Sir Mervyn King said there needs to be a "cultural change", adding: "The idea that one can base the future calculation of LIBOR on the idea that 'my word is my LIBOR' is now dead.” Perhaps that line should be revised to “My lie is my LIBOR.”

Rachel Alexander

Rachel Alexander is the editor of the Intellectual Conservative. She also serves as senior editor of The Stream.