From WashingtonsBlog-

… But Receive Only a Light Slap on the Wrist

We noted Friday:

Barclays and other large banks – including Citigroup, HSBC, J.P. Morgan Chase, Lloyds,Bank of AmericaUBS, Royal Bank of Scotland– manipulated the world’s primary interest rate (Libor) which virtually every adjustable-rate investment globally is pegged to.

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That means they manipulated a good chunk of the world economy.

We actually understated the impact of the Libor scandal.

Specifically, according to the CIA’s World Factbook, the global economy – as measured by the world’s gross domestic product – is less than $80 trillion.

In contrast, over $800 trillion dollars worth of investments are pegged to the Libor rate.   In other words, a market more than 10 times the size of the entire real world economy is effected by Libor.

As the Wall Street Journal reports today:

More than $800 trillion in securities and loans are linked to the Libor, including $350 trillion in swaps and $10 trillion in loans.

(Click here if you don’t have a subscription to the Journal).

Remember, the derivatives market is approximately $1,200 trillion dollars.  Interest rate derivatives comprise the lion’s share of all derivatives, and could blow up and take down the entire financialsystem.

The largest interest rate derivatives sellers include Barclays, Deutsche Bank, Goldman and JP Morgan … many of which are being exposed for manipulating Libor.

They have been manipulating Libor on virtually a daily basis since 2005.

They are still part of the group of banks which sets Libor every day, and none have been criminally prosecuted.

They have received a light slap on the wrist from regulators, which – as nobel economist Joe Stiglitz points out – is just the cost of doing business when fraud is the business model.