DOJ Reportedly Investigating Banks in Interest Rate-Fixing Scandal
The Department of Justice is reportedly deciding whether to charge banks over growing LIBOR interest rate fixes. The international investment bank Barclays Capital has already paid $450 million in fines for illegally manipulating the rates that banks charge each other to borrow money. That rate affects everything from credit cards to car loans and mortgage rates. Shepard Smith reported that it remains to be seen whether Treasury Secretary Timothy Geithner knew about the rate manipulation when he was head of the Federal Reserve Bank of New York.
Judge Andrew Napolitano explained the importance of the LIBOR interest rate, saying, “Think of it this way, the biggest banks in London each morning announce what they’re going to charge each other for money and that number is averaged … Whatever that rate is, is the baseline for millions of other loans and mortgages around the country.”
The judge said, “We now discover that some of the London banks, many of whom do business in the United States, were intentionally
inaccurately reporting what those numbers were, so as to goose up this rate, so as to be paid a higher interest rate. Now that affects many many banks and many people paying their loans, some of whom have nothing to do with the banks that concocted this.”
When the government decides to prosecute banks and collect hundreds of millions in fines, where does that money go? It goes to the government, Judge Napolitano said, “not to the innocent lenders who overpaid.” He charged, “You’re talking about millions of loans and trillions of dollars. This may very well be one of the largest instances of bank orchestrated fraud in the history of the world.”