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http://www.bankrate.com/financing/mortgages/the-libor-scandal-and-you/#ixzz20LgzXqMe
Picture a couple of people in a fancy London office. Each day, they collect rate information from a panel of 16 banks and use the numbers to calculate the Libor for 10 currencies, for borrowing periods ranging from overnight to one year.
Now, picture the bank representatives on the other end of the line providing the rate information.
"For you ... anything. I am going to go 78 and 92.5 … if you did not want a low one I would have gone 93 at least." This is an email reply by a Barclays rate submitter to a trader who had asked the submitter to provide an artificially lower rate in 2006.
"Done ... for you big boy," another reply by a Barclays submitter to a similar request in 2007, shows the Commodities Futures Trading Commission, or CFTC, order against Barclays.
Barclays wasn't alone. Several other banks are under investigation.
Did the manipulation affect the rate on ARM loans?
It's unlikely Barclays' attempt to manipulate the Libor affected U.S. mortgage borrowers, McBride says.
That's because of the way the Libor is calculated.
Each day, the 16 banks surveyed provide the rate they would need to pay to borrow money on that particular day. Of the rates provided, the top and bottom four are discarded. The final numbers are based on the average of the eight remaining figures.