The scandal involving Barclays bank and its finagling of the LIBOR rate has been huge news in the UK but not much here. For those interested, Matt Taibbi has been posting frequent updates explaining what is going on. The latest revelation indicates collusion between Barclays and the British government to lie about interest rates. This should not be surprising. What is surprising is that it is coming out in public.
Meanwhile, Nobel prize-winning economist Joseph Stiglitz says that the LIBOR scandal shows that it is time to start putting bankers in jail if we are going to ever put a stop to this kind of financial skullduggery that is ruining people and countries while enriching a few.
He argues that breaking the economic and political power that has been amassed by the financial sector in recent decades, especially in the US and the UK, is essential if we are to build a more just and prosperous society. The first step, he says, is sending some bankers to jail. “That ought to change. That means legislation. Banks and others have engaged in rent seeking, creating inequality, ripping off other people, and none of them have gone to jail.”
Next, politicians need to stop spending so much time listening to the financial lobby, which, according to Stiglitz, demonstrates its spectacular economic ignorance whenever it claims that curbs on banks’ activities will damage the broader economy.
This talk of economic ignorance brings us to the eurozone crisis and the extreme austerity policies being pursued. Stiglitz is depressed. In 2000 he resigned from the World Bank and launched an excoriating attack on the way it and its sister institution, the International Monetary Fund, handled the Asian financial crisis of the late 1990s. He condemned the IMF for imposing brutal and inappropriate adjustment policies on bailed out nations – medicine which, he argued, merely pushed nations further into crisis. “For me there’s some nostalgia here,” he says
I am waiting to see when this scandal will touch US banks.