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.
It isn’t ignorance. It isn’t even malice. It is indifference. They don’t care if it helps, hinders, or destroys the broader economy. The fact is there is money out there that they don’t own, therefore they must do whatever is necessary to acquire it.
The problem is that there no real downside for bankers. If their deals come off, they pocket millions. If they don’t, the bank covers the losses and they still pocket millions, albeit not quite so many. If the losses are more than the bank can cover, the Government covers the losses, and the bankers still pocket millions. And if they should get sacked, or just decided to resign(*), they still pocket millions.
(*) How come ordinary people never get jobs which pays out millions even if they resign in disgrace ?
I think we need to be a little cautious about the possible government “collusion” at this stage. It wouldn’t actually surprise me very much if there had been such collusion, but there is context which might suggest a different scenario.
Barclays have admitted their traders were manipulating the LIBOR from 2005. The alleged government/BoE interference came in 2008 in the wake of the initial credit crunch and at a time when the government had already bailed out other banks (e.g. RBS). So they had a legitimate interest in talking to Barclays about why their LIBOR reports were higher than the average for UK banks as this could have indicated they were seen as weak and potentially the next to fall.
Under those circumstances it might be seen as appropriate for the government/BoE to put pressure on Barclays to get their rate down. There are legitimate ways to do that (e.g. reduce leverage and increase capitalisation), but they all require the bank to either make less money or be better at the business of banking or a combination of both. Much easier just to lie about it, especially if you’re already doing so (and even more so if you think everybody else is also cooking the books -- 19 other banks are still being investigated).
However, I repeat that I wouldn’t exactly be shocked if the truth were that the government/BoE attitude was somewhat less wholesome.
Yes. Most “white collar criminals” face less time (if any) than someone committing a minor theft, regardless as to how many lives they destroy, and what they do to societies and economies. It’s as if they did something wrong in-house only, like they lied to their employer about what happened to the missing pens from the stationery cupboard.
I’ll see your “put banksters in jail”, and raise you one further:
Private banking is the last vestige of feudalism in modern society. It’s time to replace this nepotistic pyramid scheme with a publicly owned and managed system that works for the benefit of all.
Speaking of which, Dr Burger mentioned over at WWJTD that the Vatican had a deficit of €15 million in 2011.
Maybe the banksters should openly start a religion around bfhanking* and then claim freedom of belief to avoid being audited by the ebil prugressives.
*The “bfh” is pronounced “w”, by the rules of Irish grammar. >:)
Get your priorities straight, like the president does!
How can it be time to put banksters in jail when it’s time to raise campaign funds from them?
True. All shameless, every single one of them.
Putting them in jail seems like a good start, but probably seizing their assets will be a much more effective deterrent.
Right On kegerato! The banking “system” is systemic, needs to be REPLACED with a Benefit to ALL!
kagerato says:
July 6, 2012 at 1:30 am
I’ll see your “put banksters in jail”, and raise you one further:
Private banking is the last vestige of feudalism in modern society. It’s time to replace this nepotistic pyramid scheme with a publicly owned and managed system that works for the benefit of all.
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