The Supreme Court business has really distracted me from this huge scandal over Barclays and other banks manipulating the LIBOR, the key interbank lending rate, to goose their profits. Therefore I thank Yves Smith for bringing me up to speed on it.

First, Libor is the basis for pricing over $10 trillion of loans. As the CTFC noted:

“US dollar Libor is the basis for the settlement of the three-month Eurodollar futures contract traded on the Chicago Mercantile Exchange, which had a traded volume in 2011 with a notional value exceeding $564 trillion.”

The Wall Street Journal puts total in contracts affected at $800 trillion.

Second is that price fixing is a criminal violation under the Sherman antitrust act. The Department of Justice stressed that Barclays had been the first bank to cooperate with the investigation and had been extremely forthcoming, and for that reason it would not be prosecuted if it complied with the settlement terms for two years. The implication is that the DoJ will not be as generous with other banks involved in the price-fixing scheme.

Sixteen other major financial institutions are implicated in the scandal, which covers just about everyone. In the simplest terms, Barclays admitted to manipulate the interest rates to cash in on derivatives and also mask weaknesses in its balance sheet. But the LIBOR (which stands for London Inter Bank Offered Rate) is used as a benchmark lending rate all over the world. Adjustable-rate mortgages were calculated using the LIBOR. The exposure on this could be enormous.

Already, the chairman of Barclays Bank, Marcus Agius, has resigned, in an attempt to take shrapnel for Bob Diamond, the CEO of the company. But that has not stopped the furor in Britain. Prime Minister David Cameron announced a parliamentary inquiry today, not just of Barclays, but the entire British banking sector.

Prime Minister David Cameron has announced a wide-ranging parliamentary review of the banking sector following the Barclays rate-rigging furore.

He told the House of Commons that the manipulation of the Libor interest rates had been a “scandal”.

The review will run alongside an inquiry specifically into the Libor market, also announced on Monday.

The comments follow news that the Serious Fraud Office is considering whether to bring criminal charges.

You just don’t see the words “criminal charges” thrown around in banking inquiries these days. But the UK is leading the way on this one, in sharp contrast to how these sorts of things get handled in the US. Cameron was forced into this investigation, and the Labour Party continues to claim it doesn’t go far enough, seeking an additional independent investigation on executive pay and culture in the financial industry. There’s enough of a separation between the parties on these issues that creates the space for accountability. That’s especially true as the British press has exploded over the scandal, feeding the outrage and bolstering the Labour Party’s resolve. Labour sees the opportunity because the Conservatives may be up to their necks in the scandal themselves.

This dynamic doesn’t exist in the United States. The parties tamp down rather than raise up anger over banking scandals. Years after the foreclosure crisis and documented fraud, we see a new term rise: “foreclosure fatigue.” It’s just all so boring. Who wants to hear about mass fraud in the banking system anymore? Keep in mind that the British financial system is arguably bigger per capita than the US. It’s as much about culture as it is money.

Hopefully Britain will lead the way to shaming the powers that be in this country to act. Because you just know that US banks weren’t standing idly by as foreign counterparts sought to game the LIBOR for their benefit.