CFTC Head Gary Gensler On Libor Scandal: 'We're All Losers'

You may not do any banking in London. You may not have ever been to London. But Gary Gensler is pretty sure the London interbank offering rate affects you -- and not in a good way.

"I think we're all losers when a rate like this is susceptible to manipulation," Gensler, the chairman of the Commodity Futures Trading Commission, told Time magazine's Rana Foroohar on Thursday.

Gensler was talking about the Libor rate-rigging scandal that's lately enveloped Barclays and threatens to rattle the entire financial system. Officials at Barclays have admitted to falsely reporting company data in an attempt to game Libor, the interest rate that forms the basis for trillions of dollars' worth of financial instruments worldwide. More than a dozen other major banks are under investigation now for similar allegations.

On Friday, the Federal Reserve Bank of New York disclosed documents showing that it knew as early as 2007 that Libor could be compromised. Yet aside from then-president Timothy Geithner sending a memo to the Bank of England in 2008, the New York Fed appears to have taken little action based on what it knew.

During an interview with Foroohar this week, Gensler called the rate-rigging scandal "historic" and explained that Libor underpins so many different financial transactions that the effects of tampering with it could be hard to fathom.

The rate is "embedded in so many of your mortgages, your credit card loans, and anything that you borrow against," Gensler said.

The effects could prove to be mixed, according to CNNMoney, with some consumers possibly in a position to take advantage of lower interest payments, and others facing the unpleasant scenario of earning less in their pensions or mutual funds. But Gensler, who's been outspoken in the past about banks and regulators not looking out for the little guy, suggested to Foroohar that the real problem with the Libor scandal is that it erodes public trust in a financial system already regarded with suspicion.

"We all need something that we can have confidence in," Gensler said.