George Osborne will this afternoon be going through the motions of setting up an inquiry into the rate rigging scandal that broke over Barclays’ head last week. If you believe this will shed much useful light on the scam, prepare to be disappointed. This has the look of political cover being hastily fabricated so that the Government can be seen to be doing something about these wicked bankers.
The best sense that has been talked since the row broke was by Ken Clarke, the Justice Secretary. Describing the rate rigging as “shocking – they have distorted vital interest rates and sold product that are worthless to some of the people that have bought them”, Clarke reckoned the boys in blue should go in: "We are very bad at prosecuting financial crime in this country. The new National Crime Agency should look at the record of the Serious Fraud Office. I suspect that financial crime is easier to get away with in this country than practically any other crime. If the bankers have committed criminal offences they should be brought to trial."
Quite right, too. The only problem is that fiddling the Libor rate is not, it seems, a criminal offence. Isn’t it time it was made one?Why would manipulating a benchmark interest rate not be a crime?
Your humble blogger's simple answer is that it never occurred to policymakers and regulators that Libor was set in an opaque manner and that behind the veil of opacity bad behavior could and would occur.
At the end of the day, the Libor Scandal is another example of the failure of governments, specifically the financial regulators, to ensure that there is transparency in every corner of the financial system.