That’s what made his remarks about the Libor interest rate scandal in Britain so telling. Here is one of the most respected financial experts in the world slamming Barclays and other global banks for manipulating rates, not just once or twice or by accident, but by an “active, conscious, repeated manipulation” of the benchmark index.
His counterpart at the Bank of England, Mervyn King, called the scandal a case of “deceitful manipulation,” which seems like an understatement. Perhaps that’s to be expected, since King should have known all along what the boys were up to in the City and on Wall Street.
There’s lots of evidence that the global investment banking culture is rotten to the core and that the insiders knew all about it. For at least a dozen years and probably since the deregulation movement in the 1980s it played by its own rules, taking clients, markets and governments for suckers while enriching its members mightily.
In the Libor matter, it was bankers playing bankers. They were getting rich, but the main victim was the financial system itself. Consumers weren’t taking a direct hit, other than the fact their tax dollars bailed out some of these banks from the disasters that followed their previous greed binges.
The point is that it’s the culture within banking that ignores or encourages the unethical practices. It is the way things are done. If everyone gets rich in the process, pass the champagne.
So far, the foul odours are mainly sticking to the 322-year-
old Barclays. As the central hub for setting the Libor interbank interest rate, Barclays has been outed as a permissive playground where all kinds of unethical practices were tolerated.
Its CEO, Bob Diamond, was forced out and the bank has paid $455 million in penalties. But that’s not the end of the story, nor is Barclays the only financial institution under investigation.
And it’s not just Libor. There’s fresh evidence that another London-based financial behemoth, HSBC, helped Mexican drug cartels launder billions of dollars. And of course, these gross excesses follow the 2008 credit crisis that shook the world financial system and crippled economies around the world.
Carney, who finds the evidence of Libor manipulation “deeply troubling,” called for reform. At a minimum, he suggested bankers should “substantially raise their game to levels of conduct that in any other aspect of life, are expected.”
He sounded like a judge telling some punk that he better straighten out or face time in the house of pain. Yet, Carney could have been far more strident.
He could be more like Simon Johnson, the MIT scholar and New York Times economics blogger. Johnson writes that the Libor matter differs from the other ongoing financial scandals because this time it’s “egregious, flagrant, criminal conduct,” in which traders were “caught red-handed in emails and on tape.” There’s nothing accidental or careless about this rate manipulation, it’s straight-up fraud.
Johnson suggested, rather hopefully, this might turn into “a ‘tobacco moment,’ in which an industry is forced to acknowledge its practices have been harmful,” takes meaningful steps toward lasting reforms and pays compensation to those wronged.
Carney has the option of using his bully pulpit to call for sweeping change in financial regulations. No doubt any attempt at major reform will present enormous political complications because of the global nature of banking. But it must be tackled.
If it isn’t, we’ll just have repeats of the crises now dragging down the world economy.
That’s why this has to go beyond the central bankers and academics and into the political realm. Governments have to put the financiers on account and they have to hit wrongdoers where it hurts, in their fortunes and their freedom.
Beyond that, states that benefit from the global commerce in money, including Canada, must fix what’s wrong. Carney and his peers have that challenge: to lead change that will actually make a difference in the tainted world of global money.
Original Article
Source: the chronicle herald
Author: DAN LEGER
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