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The economy, explained, with stories and surprises. Imagine you could call up a friend and say, "Meet me at the bar and tell me what's going on with the economy." Now imagine that's actually a fun evening. That's what we're going for at <em>Planet Money</em>. People seem to like it.


#384: The Little Lie That Rocked The Banks

July 4th, 2012

Episode 491 of 974 episodes

There's a certain amount of trust underpinning the financial markets. But recent news out of the United Kingdom has shaken the world's faith in a key element of the system. That element is the number banks use to determine how much to charge their customers — think of it as the measuring stick that determines nearly every other other interest rate around: mortgages, credit cards, corporate loans, complex derivatives transactions. It's calledLIBOR, or the London Interbank Offered Rate, and it pretty much underpins everything. For years, the British Bankers' Association has calculated the rate by asking big banks what they are paying to borrow from other banks. The answers were largely taken on faith. Now it turns out that at least one big bank — Barclays — was skewing the numbers, during the financial crisis and before. Emails cited in aregulatory complaintagainst the bank show the casual way the efforts were discussed. Other banks are under investigation as well. The result: Criminal and parliamentary inquiries on two continents, lawsuits, and a lot of mistrust and uncertainty about interest rates across the financial markets. On today's show, we look at how Barclays bankers sought to manipulate Libor, and why the repercussions will be felt throughout the global financial system for years to come.

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