LIBOR rigging: the wrong people were sent to gaol

 The BBC business news web site explains the background:

What the FTSE 100 is to share prices, Libor is to interest rates – an index that tracks the cost of borrowing cash. For most of the past 35 years, 16 banks have answered a question every morning at 11am: At what interest rate could you borrow money?

They submit their answers (eg RBS estimates 3.14%, Lloyds 3.13% etc) and an average is taken to get Libor, short for "London Interbank Offered Rate".

As I understand it from the evidence of Andy Verity's programmes this last week, it had been accepted practice to put a spin on the actual figures depending on whether the bankers wanted the going rate to appear high or low. When it became a crime was when the bankers conducting the consultation were instructed from on high to tell a downright lie about the rate applicable to their employer ("lowballing"). Directors were concerned that the bank should not be seen to be paying higher interest because the media would seize on this as evidence that they were desperate for money.

Two bankers who went along with this under protest blew the whistle to the US Federal authorities. For their trouble, they were prosecuted and gaoled by the British authorities, the court process itself leaving much to be desired. No action was taken against the initiators of the fraud. Verity's investigation also indicated that the pressure to push LIBOR down came from government and that the FSA were aware of the situation but chose not to be involved. 

Read the web page cited above for the full story, including names, and weep.