In the U.K., a political battle erupted during a parliamentary inquiry into Libor rate-rigging by banks after a British MP, excluded from the panel, called it a “whitewash.” He plans to start his own investigation. John Mann, Labour Party MP, said Friday that he and a fellow committee member were omitted from the Libor panel because they were too “outspoken.”

The LIBOR — London Interbank Offered Rate — determines lending rates for trillions of credit dollars, from loans between financial institutions to adjustable-rate mortgages and credit cards. It’s also forms the basis of how the big banks trade an estimated $350 trillion in derivatives worldwide. The manipulations may have cost pension funds and local governments billions of dollars.

In June, Barclays, a British multinational banking and financial services company, agreed to pay $450 million to American and British regulators to settle claims over submitting bogus interest rates to improve profits, as personal favors to some traders and to deflect worries over its fiscal health. The case against Barclays was the first action from a broader investigation into how the big banks set the rates. Globally, authorities launched investigations into more than ten big banks, including JPMorgan, Citigroup and UBS. Politicians in London and Washington now question if officials did enough to avoid this latest financial scandal.

And in the U.S., state attorneys general are jumping into the fray. The attorneys general want to know the parameters of their jurisdiction over the banks, and want to determine what impact the conduct involving the Libor rates may have had in their states.

And reports and a memo published today reveal that when U.S. Treasury Secretary Tim Geithner was president of the New York Federal Reserve, he suggested, as far back as 2008, that the Bank of England strategize to prevent banks from manipulating the Libor rate.

Geithner’s memo, sent directly to the Bank of England’s governor, doesn’t specifically charge that banks gamed the system to make money, as is now reported, but stressed needed improvements in transparency and the integrity of setting rates.

For its part, the New York Fed said it received “occasional anecdotal reports from Barclays of problems with Libor” as far back as late 2007. Barclays maintains it informed regulators about concerns with the rate, but that officials did not address the issue.

Economic analyst Doug Henwood, who edits the Left Business Observer newsletter, maintains:

* Price-fixing occurred in the midst of the financial crisis, at a time when regulators were almost certainly looking the other way. Had Barclay’s come in with a rate way above others, it could have caused a destructive run on the bank.

* It’s hard to specify victims. Yes, municipalities like Baltimore and others claim losses and are looking into legal action against the banks (though exact figures are hard to determine). Their claimed losses are important, but the least of their fiscal troubles. Civil servants in cities like Baltimore didn’t serve their constituencies well by getting involved with borrowing at floating rates and swapping into fixed. These complex maneuvers should be left to the pros, who themselves can’t always guarantee they understand a derivatives contract (see: subprime).

* The political reaction to the Libor scandal is interesting, compared to all the subprime manipulation the bankers seem to have gotten got away with. Perhaps the reaction is a last straw of sorts. Not much has changed in the regulatory realm despite what we know happened during the bubble years.