Real estate scam from Barclays! Avoid "Banks" and "interest rates" use Rent to Own to buy your next house

Barclays has been fined £290 million by regulators in the UK and US for misleading markets about the amount it was paying to borrow money.

The scam focused around an interest rate known as the London Interbank Offered Rate, or Libor, which is used as a benchmark to set all kinds of other borrowing rates in Britain and around the world. Some traders at the bank who were aware of the practice used their knowledge to make millions

What happened?

Each day, major banks are asked to reveal what interest rates they are paying to borrow money. This rate is significant for individual banks as if they are having to pay more it suggests they are seen as less financially robust and more risky to lend to. However it is also significant for the wider market because the rates from each bank are combined together to give an indication of how much businesses and even consumers ought to be paying.

At the height of the credit crunch in 2007 and 2008, banks were very worried about their perception in the market and it seems staff at Barclays, and possibly other banks, misled the authorities to make it seem as though they could borrow at lower rates than they actually could.

Who benefitted?

Barclays may have avoided some negative headlines at the time but the biggest gainers were around 20 traders at the bank who seem to have been in the loop about what was happening and were able to use the information to make bets about Libor. This would have netted significant amounts for the banks, much of which would have been poured into the bonuses of the cheating traders. Unable to keep the scam to themselves, the traders also appear to have alerted friends at other banks so they could cash in too.

How did the authorities find out?

It's not clear why the investigation began originally but the guilty parties were revealed by emails and instant messages they sent congratulating each other. One trader wrote to one of the team responsible for calculating the Libor rate: "Coffees will be coming your way either way, just to say thank you for your help in the past few weeks". To which the response was: "Done, for you big boy."
A trader wrote another email to the same team: "When I retire and write a book about this business your name will be written in golden letters."
Evidence also showed that a trader from another bank wrote to a counterpart at Barclays: "If it (Libor rate) comes in unchanged I'm a dead man".
The recipient said he would "have a chat" and the submission was lowered.
The response was: "Dude. I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger."
Another revealing message read: "This is the way you pull off deals like this chicken, don't talk about it too much, two months of preparation... The trick is you must not do this alone...this is between you and me but really don't tell ANYBODY."

Has it affected my borrowing?

Probably not because the percentages involved are tiny, although small margins can multiply into massive amounts because of the sums involved in the City. However if confidence in the system is hit, this could hurt both banks and consumers.

Who has been punished?

The Barclays traders involved are no longer in their jobs, although there is no evidence that they have had to repay any money. Barclays boss Bob Diamond, who was criticised by MPs when he became the emblem of City excess because of a pay packet of up to £20 million, has forgone this year's bonus, expected to be around £3 million. However he is already coming under pressure to go further and resign, especially because in November last year, in the midst of the FSA investigation, he was proclaiming that banks needed to become "better corporate citizens".

Other Barclays directors have done likewise.
The Financial Services Authority is still investigating whether the scam was replicated at other banks.