[Brilliant]

It’s really just an excuse for greenmail. Borrowers don’t pay LIBOR anyway. What they pay is a negotiated rate that is determined by reference to LIBOR. But you can calculate a negotiated rate relative to anything. It’s still a negotiated rate, and will reflect the market even if you use a completely arbitrary base rate.

[billflax]

Yes, and basically spot on, but the issue is a corrupted price mechanism, not whether one big trader rips off another big trader. When the price signals are corrupted, capital is misallocated, ala the subprime mortgage mess. LIBOR being a corrupted price signal is important, but relative to central bank manipulation, LIBOR is minuscule.

[uncommonsense]

LIBOR is used as a floor to interest rate prices. If LIBOR is manipulated up, that sets the price of interest higher across a broad swath of the global economy.