In fact, many who work in credit and derivatives trading are convinced that there is no way for Libor to be consistently manipulated for trading gains. Every single one of the traders I've talked to thinks the procedure is just too robust, despite the lack of regulatory oversight, for any individual bank or trading group to "move the needle."

But we have the stubborn fact that Barclays traders apparently believed they could move the needle. Were they delusional? Or had they figured out something other traders missed?

Let's start with the basics. Banks do have incentives to typically understate their borrowing costs. In a crisis, for example, a bank might want to conceal from the market and regulators the fact that its borrowing costs are rising. (This is what most of the Libor scandal coverage related to Barclays has focused upon.) But a bank misreporting its borrowing costs for this reason doesn't really care about the ultimate Libor number. It's not really trying to manipulate Libor at all. It's trying to manipulate the perception of its financial health.

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