Today's New York Times contains a potential blockbuster on the front page.  The Old Grey Lady has learned that the Justice Department has been investigating attempts to rig the London interbank offered rate for the past two years, and is now dotting the i's and crossing the t's on bringing charges of criminal fraud against several people involved in fiddling with that key interest rate.

The department’s criminal division is building cases against several financial institutions and their employees, including traders at Barclays, the British bank, according to government officials close to the case who spoke on the condition of anonymity because the investigation is continuing. The authorities expect to file charges against at least one bank later this year, one of the officials said.

The prospect of criminal cases is expected to rattle the banking world and provide a new impetus for financial institutions to settle with the authorities. The Justice Department investigation comes on top of private investor lawsuits and a sweeping regulatory inquiry led by the Commodity Futures Trading Commission. Collectively, the civil and criminal actions could cost the banking industry tens of billions of dollars.

In addition to Barclays, the DOJ reportedly has at least 10 major American banks, along with employees at those banks, in its crosshairs.  Justice has been working in conjunction with the Commodity Futures Trading Commission in what appears to be a classic slow-motion strangulation.  The CFTC began probing Barclays in 2008, and the DOJ joined it in 2010.

The investigation has dragged on in part because British authorities have been slow to conduct investigations on their end.  In order to get certain documents from overseas firms, the DOJ and CFTC need approval from British authorities--and that approval has been slow in coming.

Still, if I'm reading this story right, prosecutors are salivating at a chance to hold big banks accountable for not only fiddling with interest rates, but other misconduct during the financial crisis.  One official put it bluntly--"It's hard to imagine a bigger case than Libor."

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