Though the Libor scandal is just breaking now, some financial insiders claim that Wall Street's been fiddling with the key interest rate for decades.
"Fifteen years ago, the word was that LIBOR was being rigged," a financial industry veteran involved in the Libor process told the Economist. "It was one of those well kept secrets, but the regulator was asleep, the Bank of England didn't care, and...[the banks involved were] happy with the reference prices." (Hat tip: Barry Ritholtz.)
"Going back to the late 1980s, when I was a trader, you saw some pretty odd fixings," another financial industry veteran told the Economist.
Indeed, the Federal Reserve was worried about possible Libor manipulation 14 years ago, according to Business Insider.
Barclays agreed last month to pay $450 million to settle charges that it had rigged Libor, a key interbank lending rate that is used to help set interest rates around the world. If the banks set Libor too high, then that could have raised borrowing costs for businesses, homeowners and other borrowers. Two million U.S. mortgages (largely subprime adjustable-rate mortgages) are indexed to Libor, according to research by the Federal Reserve Bank of Cleveland cited by the Washington Post.
Experts say it is unlikely that Barclays acted alone. Other banks under investigation for allegedly fixing the Libor rate include JPMorgan Chase, Citigroup, Bank of America, and UBS. Roughly 18 banks help set the Libor rate every day.