America turned 236 years old this week, but in the financial markets that news was nothing compared to the scandal rocking London financial markets.
It came to light this week that Barclays — and potentially other mega banks — helped prop up or inflate the LIBOR rate over the past several years.
Why is LIBOR important?
It stands for London Interbank Offered Rate. It is the rate that major banks can expect to be charged when they borrow money from another bank. If a bank’s cost of borrowing was artificially higher than it should have been they would then have to charge their customers higher interest rates on loans.
In short, we all may have been paying slightly higher interest rates on every type of lending product because a few banks conspired together to artificially keep rates higher than they needed to be.
That’s big financial news.