People complain about a lack of accountability in today’s society — until it comes to their own actions. Politicians, bankers, and even Rush Limbaugh, escape from illegal activities and scandals with no consequences beyond a stint in rehab and a nice book deal.

Things didn’t have to be as messed up as they are now, and it only takes a few jerks to ruin life for the rest of us.

The latest banking scandal involving corruption by the powerful against the powerless: LIBOR scandal.

What Does LIBOR Stand For?

To really appreciate the depth and scope of this scandal, you have to know a little about LIBOR. LIBOR stands for London Interbank Offered Rate. It is the interest rate that banks report to Reuters, who then reports it to the British Bankers Association.

Barclays LIBOR Scandal

Barclays and 16 other major banks engaged in fraudulent price manipulation of the LIBOR rate. In some cases, traders at Barclays lied to Reuters about what the rate was that a loan was made at. Traders lied in both directions, sometimes skimming a basis point, or tacking one on.

These estimates feed into calculation of the London interbank offered rate (LIBOR) which is used to determine payments from a range of derivatives contracts.

The London rate, and the related European interbank offered rate, are the benchmarks for over $500 trillion in global contracts, including loans and mortgages.

Barclays admitted that it had submitted lower than actual figures on its interbank borrowing during the credit crisis in 2007 and 2008. Several other global banks are being investigated in other countries for similar actions.

Why The LIBOR Scandal Is A HUGE Deal

The LIBOR rate is used in everything from credit card payments to adjustable rate mortgages. Unlike the U.S. where the Federal Reserve sets interest rates, in Europe the LIBOR rate is used and it was pitched as a more “free market” solution. As such, millions of people are impacted by even the smallest change in the LIBOR rate. What banks did was that they falsely manipulated the LIBOR rate to benefit their own interests while screwing the little guy like you and me.

In the episode below, I talk in depth about what the LIBOR rate is, and what far reaching implications this scandal has.