MANIPULATING A multitrillion-dollar market via Libor seems par for the course after all the scandals and bad behavior by market participants over the past four years. Barclays coughed up $450 million in fines to settle allegations that it and other banks kept the interbank rate artificially low during the credit crisis. But aside from all the fees lawyers are certain to make off the scandal, what are the real consequences of this issue? Our firm has managed primarily Libor-based investments for 20 years, so we’ve had an interesting seat at the table. Libor is supposed to measure what it costs big banks to borrow from one another. The rate is set daily through a system of hypothetical averages rather than actual transactions, and this feature proved vulnerable to manipulation. The stakes involved are vast. More than $500 trillion of the world’s financial assets and liabilities — everything from your neighbor’s mortgage to exotic derivatives traded by hedge funds — are priced off of Libor. When an interest rate is set too....