FSA's Adair Turner: "Lying bankers' heads should roll"

The Telegraph reports that FSA's Adair Turner is calling for

"heads to roll" and for bankers to be banned from working in the City if found guilty of cheating. 

Speaking in the wake of the rate-fixing allegations that have engulfed Barclays, and other banks, Lord Turner, chairman of the FSA, said the law should be tightened to tackle misbehaviour in banking. He said: "The public are justifiably angry." 

The FSA, the City's watchdog, has come under fire for not being able to bring criminal prosecutions against the bankers accused of cheating over the daily fixing of Libor, the key rate used by banks to set a number of interest rates on loans and mortgages. 

It is believed most of the bankers at the centre of the Barclays scandal, including those boasting of cracking open Bollinger, are still working for the bank, despite the FSA fining the bank £290m. 

"The situation on the law is that we have looked very carefully at what types of cases we are able to bring, and in this particular case of Libor, because it is not a qualifying instrument under the Act, it is not covered by the criminal law," Lord Turner said. 

"We have therefore brought the maximum cases we can bring under our own powers for breaches of our principles."...

"They [the public] just can't understand why people are thrown into jail for petty theft and these guys just walk away having perpetrated what looks like conspiracy," [Vince Cable the Business Secretary] said.

Given their inability to put bad actors in jail, the failure of the regulators to require transparency into all the opaque corners of the financial systems is even more glaring.

Regulators know that opacity provides cover for bankers to engage in bad behavior.

If you don't have any ability to really deter bad behavior, the fines related to manipulating Libor were trivial relative to the benefits, you are inviting bad behavior.

So the regulators not requiring and enforcing transparency throughout the financial system is not just a systemic failure, but it also appears as if the regulators are condoning bad behavior by the bankers.