LIBOR Scandal Should be Last Straw
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This latest largest financial scandal...... Wait! Wait! Aren't we completely SICK of this yet! "Latest financial scandal"? Come on!
This nifty infographic from AccountingDegree.net gives non-finance folk an idea of the scope of the scandal:
Manipulating Libor is a big deal because it affects the cost of money for almost everyone. Libor is used to set rates on mortgages, credit cards and all manner of loans, personal and commercial. The amount of money affected by the phony rates is at least $500 trillion, British regulators have estimated.
Last week’s defenestrations of Marcus Agius, the Barclays (LSE: BARC) chairman; Robert E. Diamond Jr., its hard-charging chief executive; and Jerry del Missier, its chief operating officer, apparently occurred at the behest of the Bank of England and the Financial Services Authority, the nation’s top securities regulator. (Mr. del Missier also seems to have lost his post as chairman of the Securities Industry and Financial Markets Association, the big Wall Street lobbying group. His name vanished last week from the list of board members on the group’s Web site.)
"Barclays is not the only bank under investigation for rigging Libor. It was simply the first to own up to the behavior and settle with regulators, paying $450 million. Other banks will almost certainly follow, and the documents bound to bubble up in those cases will surely prove fascinating," writes Gretchen Morgenson in a very forceful NY Times article where she challenges U.S. regulators to be as tough as their U.K. counterparts. So far, Royal Bank of Scotland (LSE: RBS) has already sacked some members of its staff suspected of being involved. RBS is now also under formal investigation, along with Lloyds Banking Group , Citigroup, and Germany's Deutsche Bank.
Matt Taibbi details the LIBOR scandal very well here and gets into it with Eliot Spitzer.
But this goes beyond yet another massive systemic fraudulent failure.
Ultimately, the long-term threat is that people are being so desensitized to these massive scandals that they will become forever apathetic and feel helpless to affect real change. As Taibbi exclaims "Why is Nobody Freaking Out About the LIBOR Banking Scandal?"
Deregulation, like the repeal of Glass-Steagall, has allowed truly insane levels of centralization of global financial power. This centralization has lead us to the edge of the economic cliff. In fact, to borrow a favorite Zizek analogy, we are like the coyote in the road runner cartoons, we are probably already off the cliff, we are simply too afraid to look down and fall.
Decentralization of financial power through new systems like crowdfunding may actually prove one of our last hopes. This is why I support radically revolutionizing the way human aspiration and creativity is funded through crowdfunding sites like www.whenyouwish.com and www.kickstarter.com.
At my company, we champion bringing the power of capital to all people, and applaud progressive advances, like the JOBS Act, which promote the democratizing power of crowdsourcing.
We obviously cannot trust our financial leaders any more, we need to start trusting each other.
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