I think it's important to know what Libor is and how it's determined. > Each morning, just before 11 a.m. Greenwich Mean Time, a group of major banks are asked

I think it's important to know what Libor is and how it's determined. > Each morning, just before 11 a.m. Greenwich Mean Time, a group of major banks are asked the rate at which they could borrow funds from other banks. The banks confidentially send their results for each of the 15 loan maturities - ranging from overnight to one year - to the market intelligence firm Thomson Reuters. The organization throws out figures in the highest and lowest quartile and averages the remaining half. [0] The rate is used to determine the interest paid on some mortgages (adjustable rate mortgages) as well as some securities (floating rate, pegged to Libor and swaps). You don't need to know too much about finance to suspect that the method of determining Libor (informal polling of banks) is ripe for manipulation. I don't think the manipulation was biased in any one direction but probably biased based on the particular banks opportunities for that day. Anyone investing in these products or with floating rate mortgages should (in theory) understand how their products work and understand the implications of the method that Libor is set. This isn't meant to excuse collusion. Just because something is completely transparent and easily gamed doesn't excuse dishonesty. My comment is just meant to temper the response and perhaps consider a better system for determining benchmarks. [0] http://www.investopedia.com/ask/answers/12/how-is-libor-determined.asp#ixzz3Y8kc1mbR http://www.investopedia.com/ask/answers/12/how-is-libor-dete...