If you haven’t paid much attention yet to the Libor scandal, this Economist piece will get you caught up quickly.

Long story short, the British bank Barclays paid nearly half a billion dollars to regulators after it was caught manipulating the London Interbank Offered Rate. Libor is supposed to measure what banks are paying to borrow from each other and underpins hundreds of trillions of dollars of loan rates and derivatives. It’s a critical part of the global financial system, and manipulating rates by even one basis point (0.01 percent) can unfairly affect billions of dollars of contracts. Barclays is just the first of the banks on the firing range. Swiss giant UBS has already copped a plea and is ratting out fellow conspirators.

When a center-right publication like The Economist talks about the “rotten heart of finance” in one headline, uses the word “banksters” in another, and says the scandal may be “the biggest securities fraud in history,” you know it’s a very big story.

When it also quotes an unnamed big bank CEO saying that the Libor scandal could be the financial industry’s “tobacco moment,” referring to how that industry’s crimes sparked hundreds of billions of dollars in payouts, it signals that this could be something bigger (emphasis mine):

The extent of the banks’ liability may well depend on whether regulators press them to pay compensation or, conversely, offer banks some protection because of worries that the sums involved may be so large as to need yet more bail-outs, according to one senior London lawyer.

This seems like a bit jumpy based on what we know now, but this “one senior London lawyer” isn’t alone. Here’s an antitrust lawyer quoted in a Bloomberg story:

“This is potentially the mother lode in terms of potential damages,” he said.

While it’s not possible to predict a specific loss amount, damages could be in the tens or hundreds of billions of dollars if the lenders are found liable, Shinder said.

By manipulating a rate like Libor, bankers and traders created both winners and losers on every transaction in hundreds of trillions of dollars in loans and derivatives. To see why people are talking about potentially giant losses, you have to look at who got screwed here.

Say you have an adjustable-rate mortgage that resets every year. If your ARM reset in 2008 when banks were allegedly colluding to cover up their woes by pushing Libor down 30 to 40 bps, you benefited from the illegality by saving 0.3 to 0.4 percent off what you should have paid. But this isn’t free money; it’s a zero-sum game. The investors who own your loan, which were probably the hedge funds, mutual funds, pension funds, and banks (including some of the same banks who employed the manipulators) who buy or hold securitized mortgages lost that 0.3 to 0.4 percent. They’re not going to be happy about that and they’re going to want to recover as much of it as they can. The banks will be on the hook, not the borrower who unknowingly benefited from the manipulation.

But even beyond the unknowable potential damages, the Libor story, which the FT’s Gillian Tett first started raising questions about five years ago and which The Wall Street Journal cracked open in May 2008, matters on a deeper level.

Coming at a time when the global economy is tipping back into recession, a too-big-to-fail bank reveals a multibillion-dollar oopsie, and the eurozone threatens another financial calamity, the Libor scandal adds another couple of big reasons to mistrust the financial system. This alone won’t trigger a panic, but it adds to the atmosphere that fosters one.

Beyond the fact that it, yet again, shows how a banking system that depends on our trust abuses it to enrich itself, the enormous potential liability raises questions about whether the losses will affect the health of at least some banks.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.