How Yglesias sees the Libor scandal:
The real issue is just that international finance has become a ruthlessly competitive game in which firms relentlessly seek newer and bigger profit opportunities. At the same time, important swathes of the system are stuck in the days of the old boys’ club where important measures were handled essentially as gentlemen’s agreements. Setting the Libor through a fairly informal submission system and then using it as the basis for global interest payments created a massive arbitrage opportunity: Anyone who was willing to game the gentlemen’s agreement could arrange vast, riskless profits.
And today’s cutthroat finance is nothing if not brilliant at arbitrage. In particular, it’s gotten frighteningly good at arbitraging away effective regulatory oversight. Time and again problems have arisen when clever bankers have found clever ways of undermining the intention of regulatory systems. The Libor malfeasance lays bare in an unusually clear way the basic fact that a modern bank is perfectly happy to lie when there’s money to be made.
The Dish 