I don't know if I agree with everything that diagram states. First off it is not really the Libor that matters it's the Libar. Second I don't think it is the biggest bank scam ever. That will be when they collapse and don't pay out on deposits. That has happened before and will happen again. Also I think QE done by the central bank is perhaps worse in terms of confiscating assets through the inflation and tansfer of wealth it creates as a result of who receives the new money. Anyway it is interesting though I think it has over simplified the problem.
I don't see where the scandal is. Anytime institutions and/or individuals are going to "self report" numbers, you'd have to be an idiot to think they don't shade the number to their own advantage. It's always been that way, it will always be that way, LIBOR "accuracy" has been an ongoing discussion for a long, long, long, long time. The real crime here is that 401k plans are forcing people's hard earned savings into the hands of fund managers who don't understand some of the most basic aspects of market structure.
Like anything in finance it is as much the other party to blame. They should be doing their own calculations and estimations into the product they are buying. In any event the LIBAR rate is more important it is the rate of trade not offer rate.
Someone please explain for the real dummies out there and here, what kind of operation skimmed funds where and and how they did it and how much (on each operation or day or whatever) and how they got away with it. The whole fraud operation, please. Thanks, Felix
https://en.wikipedia.org/wiki/Information_asymmetry#Adverse_selection says primary solutions to this problem are signaling and screening.