
By: Amber Przybysz
You may not have heard much about LIBOR (London Interbank
Offered Rate), but that is not because it is a small, insignificant topic; on
the contrary, the LIBOR scandal is one of the largest banking scandals of our
time, but ABC’s World News and NBC’s Nightly News have ignored the scandal
for over one month now. The LIBOR, a critical interest rate calculated by
averaging inter-bank lending rates of the largest London-based banks, is used
as a benchmark for nearly all other short-term interest rates globally. Its manipulation affects payments for more
than $800 trillion of financial instruments,[i]
affecting 99 percent of all commercial products including mortgages, credit cards
and pensions.[ii]
Because of the breadth of the LIBOR’s effects, this scandal
will touch people across all income levels – and will likely affect your daily
life. While the exact extent is not yet known, it is clear that the rigged
LIBOR will affect private student loans, adjustable-rate mortgages,
money-market funds and bank-loan funds.[iii] Banks
are accused of suppressing LIBOR during the U.S. financial crisis of 2008, but
the issue could easily have spread further than that.