Matt Taibbi on the Biggest Wall Street Scandal of 2012
Rolling Stone‘s Matt Taibbi has skewered his fair share of financial faux pas and corporate bigwigs throughout 2012. Yet his prize for the Biggest Wall Street Story of the Year goes to the massive—but little understood—Libor scandal.
“If it’s true that the 16 biggest banks in the world were fixing global interest rates, then it’s hard not to argue that that’s not the biggest financial corruption case in history,” Taibbi says in a web exclusive for Current TV. “I fully expect that we’ll find out in the end that American banks were involved in this scandal.” (Watch video below)
At the heart of the Libor scandal is the simple, primary function of banks: facilitating the borrowing and lending of money. They do this job and still turn a profit using a nifty little trick called interest rates, which essentially means if I borrow money from a bank, I pay back a little extra for their service. Simple? Sort of, except once again the banks have fixed this simple game so that–as in a casino–the house always wins.
How is this interest rate determined? We trust that the banking system is setting today’s rate based on its best guess about the future worth of the money. And we assume that guess is based, in turn, on the cumulative market predictions of countless lenders and borrowers all over the world about the future supply and demand for the dough.
But suppose our assumption is wrong. Suppose the bankers are manipulating the interest rate so they can place bets with the money you lend or repay them – bets that will pay off big for them because they have inside information on what the market is really predicting, which they’re not sharing with you.
That would be a mammoth violation of public trust. And it would amount to a rip-off of almost cosmic proportion – trillions of dollars that you and I and other average people would otherwise have received or saved on our lending and borrowing that have been going instead to the bankers. It would make the other abuses of trust we’ve witnessed look like child’s play by comparison.
This is insider trading on a gigantic scale. It makes the bankers winners and the rest of us – whose money they’ve used to make their bets – losers and chumps.
Watch Taibbi announce his #1 financial scandal of 2012:
Laura Gottesdiener is a freelance journalist and activist in New York City.