What was the LIBOR scandal about? Here is a quick synopsis from Wikipedia:
The Libor scandal was a series of fraudulent actions connected to the Libor (London Interbank Offered Rate) and also the resulting investigation and reaction. The Libor is an average interest rate calculated through submissions of interest rates by major banks in London. The scandal arose when it was discovered that banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were. Libor underpins approximately $350 trillion in derivatives. It is currently administered by NYSE Euronext, which took over running the Libor in January 2014.The details of this series of crimes are easy to find and have been well documented. The banks involved included UBS, Royal Bank of Scotland and Barclays, to name a few. Internationally, 20 big banks in all were involved.
But what I find interesting in this whole affairs is that a group of men decided, upon their own volition, to collude together to manipulate an interest rate that is used to benchmark around $800 trillion in loans. These are men who still wanted more even though they were making millions every year.
These same men like to talk about free markets, too. Oh, sure, they will wax on and on about how important it is for the market to decide how to allocate resources, openly and transparently. But now we see that if they had their way, their idea of work would be tweaking the market for an hour or two a day at their computers, and then go home thinking that a good job had been done.
The Independent of the UK reports that Tom Hayes earned 1.8 million GBP at UBS to 3.5 million GBP at Citigroup. Yet the man still felt compelled to cheat the system that the rest of us depend on for financing, costing the rest of us billions. He still wanted more, more, more. From what I can see so far, it's all about the numbers with nary a scent of compassion for the people he was hurting with his scheme. Given his talents and incentives, it should be no surprise that Goldman Sachs wanted to hire him, too.
It is also interesting to note how open and casual traders had been about the practice of rate rigging, a practice that has been documented as early as 2005. It is very likely that the rigged rates made a significant contribution to the collapse of the banks in 2008.
So when Bernie Sanders and Elizabeth Warren talk of a rigged system, this is just a part of what they're talking about. Privileged men more concerned about driving up the numbers of their personal net worth than about being of service to others. If wealthy people want to use "socialist" as a pejorative in America, those same people need to look at high finance a bit more closely to see what socialism is intended to fight.
This is what progressive taxation is about. It's not about punishing people for earning more with their talents and skills. It's about curbing greed and preventing people from amassing so much money that they're "untouchable". Hayes made more money in day that most people make in a year, yet wanted more and was willing to cheat to get it. Many of his peers were the same way. They don't see the use of their power to fleece other people as a problem. It's just business.