Traders jailed for Libor weren’t the real crash villains

IN the public mind the traders put inside for rigging Libor are crooks and cheats. The jailings were seen as a rare example of finance titans getting their just deserts for their role in the 2008 financial crash.

In the City, the feeling was rather different. The view was these guys were probably just doing what they were told, and ending up in prison for that is harsh.

A new book* by the BBC’s Andy Verity, Rigged, rather makes it clear this is the scandal that never was.

Libor was an obscure financial instrument before the crash. It is merely the price at which banks lend to each other overnight to square off their liabilities. A matter of routine rather than skulduggery.

Post the crash, the authorities wanted Libor to be lower, to show the banks had faith in each other.

The traders complied. So even if this manipulation affected the cost of your mortgage (it’s a hundred miles removed in truth), all it did was to send that cost down, not up. They did you a favour.

The book has strong evidence central banks not only knew about this rigging, they encouraged it.

That’s both an important revelation and a statement of the obvious. Of course they knew.

In all, 37 traders and brokers were prosecuted by the US Justice Department and the UK’s Serious Fraud Office. Nineteen were convicted and nine jailed.

Some of those convictions have already been overturned. It seems likely, and just, that most of the rest of them will be in time.

The desire to find the villains of the crash is understandable. These aren’t those guys. They never were.

*Rigged: The Incredible True Story of the Whistleblowers Jailed After Exposing the Rotten Heart of the Financial System.