As we absorb the Libor banking scandal, one of the things that will drive it is a recognition of who this hurt, at whose expense Barclays and a host of other banks made profits by manipulating the benchmark lending rate. Kevin Drum argues that it’s limited to floating-rate interest note investors, traders on futures exchanges who used Libor, or perhaps investors in Libor-linked CDs. This doesn’t have the kind of victims who are completely sympathetic. You can argue that, since Libor was a benchmark rate, anyone who had any adjustable-rate lending instrument was susceptible to being ripped off. But sometimes banks rigged Libor up and sometimes they rigged it down, frustrating efforts to figure out when they screwed people with those attributes and when they actually helped them. But Barry Ritholtz argues for a much broader view:

Bloomberg’s Darrell Preston explained last year how cities and other local governments got scalped when rates were manipulated downward:

In the U.S., municipal borrowers used swaps to guard against the risk of higher interest costs on variable-rate debt by exchanging payments with another entity and tying how much they pay to an underlying value such as an index. The agreements can backfire if rates move in unexpected directions, resulting in issuers making larger payments.The derivatives were often designed to offset the risks of increases in the short-term rates tied to auction-rate securities, fixing borrowers’ costs by trading their debt- service payments with another party. Instead, rates dropped [...]

Ellen Brown adds:

For more than a decade, banks and insurance companies convinced local governments, hospitals, universities and other non-profits that interest rate swaps would lower interest rates on bonds sold for public projects such as roads, bridges and schools. The swaps were entered into to insure against a rise in

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