One thing's for sure: Regulators are on the hunt.
The New York Federal Reserve last week confirmed that U.S. Treasury Secretary Timothy Geithner sent a memo to British regulators in 2008 over concerns of banks manipulating Libor.
Geithner maintained that he and the Fed sent a long list of recommendations to the Bank of England and the British Bankers' Association, which oversees the Libor-setting process.
In light of the scandal, U.S. Federal Reserve chairman Ben Bernanke was questioned about the Fed's inaction regarding Libor manipulation at his testimony before Congress on Tuesday.
Bernanke also made clear that the Fed was not aware that Barclays was manipulating the rates for its own profit. Instead the Fed believed the bank was simply manipulating rates to maintain the appearance that everything was fine with the company (which surely wouldn't affect a bank's profit...).
Bernanke insisted the Fed followed up on the disclosures and that in cases like this there is not much more U.S. regulators can do than make suggestions.
You see, Libor rates are incredibly important. They're the benchmark, or "reference," rates for hundreds of trillions of dollars in loans.
They are so important that even a 0.10% error or "manipulation" in calculations could impact billions of dollars.
That's why Gilani has been warning Money Morning readers of the risks of Libor manipulation since 2008.
"Gilani was among the earliest proponents of the theory that the contributing banks may have rigged the calculation of LIBOR," wrote Securities industry lawyer and Wall Street regulation critic Bill Singer in 2011. "Gilani warned that such activities were likely antitrust violations and were exposing major international banks to legal liability."
How Libor Manipulation Began
As Gilani explained in October 2008, how banks manipulate Libor isn't an incredibly complex event. That's because loan rate reporting is based on the honor system.
Or dishonor, in some cases.