FORTUNE -- Early on in the Libor scandal, there was a sense that the systematic rigging of a key lending rate was a victimless crime. Wednesday's Justice Department charges against UBS should finally dispel that notion.
It was assumed that if Libor rates had been pushed lower, as appeared to be the case, borrowers would have benefited. Even some municipal finance chiefs who had likely lost money on interest rate swap contracts said they weren't sure they were net Libor losers. Lower rates may have saved them money elsewhere. If you can't identify a victim, is it a crime?
The new government charges show that traders regularly pushed lending rates up as well as down. In an electronic chat with a fellow trader, Thomas Hayes, one of the UBS (UBS) traders charged by the Justice Department with fraud, wrote in early February 2007, "3m [three-month] libor is too high because I have kept it too high."
Some have argued that the Libor scandal had nothing to do with the financial crisis. That now seems less true as well. The housing market crashed in part because people could no long pay their mortgages. If Libor manipulation added to borrowers' hardships, then it was a factor too. The Libor scandal proves once again that banks sold risky products, in this case mortgages tied to Libor, and then gamed the system in order to make sure they would profit. Isn't that precisely what's at the heart of what caused the financial crisis?
The other thing we got from the Justice Department's Libor charges, which has been sorely missed in the financial crisis investigations, were some actual villains. Hayes ran a global rate-rigging crew, driven by bribes and promises of profits. Along with Hayes, the U.S. charged former UBS trader Roger Darin with criminal conspiracy. Hayes was also charged with wire fraud. As with the charges against Barclays (BCS), it's amazing once again just how many people knew Libor was being manipulated and were involved. The U.K.'s Financial Services Authority, which also charged UBS with fraud, said that more than 40 individuals at UBS were involved, including managers and senior managers.
Hayes apparently got traders at other firms to go along, according to the Justice Department. In at least one instance, Hayes apparently got individuals at so-called inter-dealer brokers, which execute transactions between banks, to display fake quotes in order to trick other traders into moving the market in the direction he wanted.
Still, even knowing that borrowing rates were pushed up as well as down and that this was a vast conspiracy, it's hard to determine who was hurt and by how much. But that makes it more commendable that regulators pushed forward with their investigation and brought charges related to Libor manipulation. Financial markets are more diffuse than ever. And market manipulation is all about figuring out how to take as little as possible from as many people as possible in order to not get detected. When we are all equal losers, it's hard to see it.
So regulators were smart to focus on the winners and know that the losers were surely there as well. Hayes wrote to one of the other traders involved in his scheme, "Think of me when you are on your yacht in Monaco." Hopefully, many Wall Streeters are thinking of Hayes right now.
The Libor scandal plays out in an unlikely place - the streets of Charm City.
FORTUNE -- It has been a year since Baltimore sued the big banks -- Bank of America (BAC), Barclays (BCS), Citibank (C), HSBC (HBC), J.P. Morgan (JPM), Lloyds (LYG), UBS (UBS), and WestLB -- the first of many lawsuits to claim that those institutions illegally manipulated the London interbank offer rate, or Libor. It was esoteric MOREKatie Benner - Aug 30, 2012 5:00 AM ET
Caught up in the Libor scandal, the star investment banker and American CEO of the British bank was forced to resign. His departure represents the end of an era for big banks.
FORTUNE -- By the time the call came, Bob Diamond knew his tenure as CEO of Barclays was at an end. It was 9:30 p.m. on Monday, July 2, and Diamond had just gotten home from the office when MOREShawn Tully, senior editor-at-large - Jul 30, 2012 5:00 AM ET
Trade group put Barclays partially in charge of deciding whether Libor was broken.
FORTUNE -- A husband and wife team who have launched a website critical of Wall Street practices have uncovered an ironic, and troubling, tidbit about Libor and Barclays.
Just three months before Barclays admitted that numerous employees at the bank including top executives participated in manipulating Libor, and long after it was widely known to be under investigation, the MOREStephen Gandel, senior editor - Jul 25, 2012 2:30 PM ET
Now that we know what happened with the banks and Libor, what should we do to prevent it from happening again? Four options for reform or regulation, some better than others.
FORTUNE – Investigations and talk of reform are dominating the headlines about the rate-fixing scandal tied to the London Interbank Offered Rate, or Libor. The interest rate influences many aspects of the world we live in, from Spanish and U.S. MORENin-Hai Tseng, Writer - Jul 23, 2012 11:36 AM ET
A trio of studies indicates that Citigroup understated its borrowing costs more than others.
Update 7/20, 10:00 A.M.
FORTUNE -- Earlier this week, Citigroup CEO Vikram Pandit told analysts not to use Barclays' $450 million Libor settlement as a guidepost for what his firm might have to pay. And he could be right. Citigroup (C) might end up paying much more.
A number of studies have shown that when it comes to lying MOREStephen Gandel, senior editor - Jul 19, 2012 12:18 PM ET
Financial pressures have pushed cities and states to look for ways to save a buck, and into the arms of Wall Street hucksters.
FORTUNE -- When it comes to Wall Street scandals these days you can pretty much bet who the biggest loser will be: Your hometown.
The recent Libor fiasco is no different. The banks' alleged manipulation of the key benchmark interest rate may have cost municipalities, hospitals and other large MOREStephen Gandel, senior editor - Jul 11, 2012 3:48 PM ET
The LIBOR trading scandal could turn out to be far worse for Wall Street than its mortgage troubles.
FORTUNE -- Much of the talk about bad behavior on Wall Street since the financial crisis has been about mortgages with a little bit of insider trading sprinkled in. And that makes sense. Everyone immediately understands what a mortgage is. And the housing bust that resulted from all those bad home loans affected MOREStephen Gandel, senior editor - Mar 23, 2012 5:00 PM ET
Everyone's afraid of the banks again -- including the bankers.
Market-based anxiety measures have crept steadily higher over the past month, reflecting a marked shift in investor psychology. Less than two years after governments made promises totaling trillions of dollars to prop up the financial system, fears that Europe's banks will fall ill are pummeling the markets again.
Libor, the rate at which highly rated banks borrow from one another on an MOREColin Barr - May 25, 2010 10:10 AM ET
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