Guess How Much Will the LIBOR Scandal Cost US Banks $35 Billion?

According to Marketplace’s Heidi Moore here's what everyone wants to know: What will be the cost of the LIBOR scandal to big North American banks like JP Morgan, Citigroup, Bank of America, and Royal Bank of Canada? Forbes predicted recently that the financial penalty of the lawsuits could make the $20 billion foreclosure settlement earlier this year "look like child's play."

Sen. Herb Kohl, the Wisconsin Democrat, got a wince out of Bernanke when comparing the Libor scandal to the tobacco lawsuit.  There's a reason Bernanke winced. The tobacco settlement came in at $246 billion over more than 25 years. If something like that hit the banking system, it might undo all the hard work Bernanke, Tim Geithner and Hank Paulson did in 2008 and 2009 to recapitalize the nation's banks. As it stands, banks may be as much as $500 billion short of the money they need to have on hand to survive another financial crisis. So a LIBOR settlement in the hundreds of billions would not only crimp their style; it might seriously tear apart their finances…..

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