Regulators now under spotlight in Libor Scandal

Having escaped the spotlight for their role in the on-going financial crisis, regulators have now moved front and center in the Libor Scandal.

UK Prime Minister David Cameron's has used his best efforts to shield the financial regulators from a meaningful inquiry and as a result the Bank of England and the FSA now face questions about what they knew about the banks manipulating the Libor interest rate.

The answer to this type of question will be they knew nothing.

By design, the Libor inquiry protects both banks and opacity in the financial system because it protects the regulators.

A far better question to ask the Bank of England is why hasn't it changed its approach to monetary policy given that the current policy amounts to giving massive amounts of free money to individuals who have already shown and confessed that they are willing to lie to enhance their personal net worth.

A far better question to ask the FSA is why hasn't it endorsed requiring the banks to provide ultra transparency given its failure to prevent the financial crisis or the Libor scandal.  The questioner could even use the prop of a black box to highlight how current disclosure to market participants is inadequate.

Mervyn King expressed outrage at the conduct of the banks.  By asking questions like these, an inquiry would highlight that as much or more outrage should be directed at the regulators and that the regulators should be substantially reformed rather than given more powers.

Remember, the key finding of the Nyberg Report on the Irish financial crisis was that the financial regulators were facilitators of the financial crisis.

A well funded independent inquiry into the performance of the Bank of England and the FSA with a focus on why the financial crisis or Libor scandal happened would find that the Bank of England and FSA facilitated the financial crisis and Libor scandal.  In addition, the inquiry would see that the Bank of England and FSA are a major source of the ongoing perpetuation of the financial crisis.

A well funded independent inquiry into the performance of the Federal Reserve would reach the same conclusions.