Michael Pascoe Sydney Morning Herald Business Day July 16, 2012
Here's an outrageous thought: we should let the Libor banksters get away with it.
Not completely, as there was some straight-out fraud for personal gain that deserves retribution and individuals who should be held to account. But we would collectively be better off if the majority involved in the big fiddle are allowed to go financially unpunished.
The path presently being beaten by ambulance-chasing lawyers and tardy-but-newly-vengeful regulators has the potential to damage some still-fragile institutions for little public benefit.
Oh, the lawyers will have a picnic, as the more parasitic members of the class action fraternity always do, but that's about it.
Let's be clear about the two different types of attempted Libor rigging.
The first type, pre-GFC, involved the promises of a bottle of Bolly and cups of coffee, when traders sought to profit on their dubious derivative activities by nudging Libor a hundredth of a point one way or the other.
This form is the common-or-garden variety market rigging/fraud/insider trading/conspiracy/whatever.
The culture that allowed it has to be expunged, various executives sacked without golden handshakes and the wide-boy practitioners drummed out of the service, sent back to flogging time-share resorts and club-crawl parties where they belong.
The second type seems to have been practised by many banks during the worst of the financial crisis and, whatever they might now pretend, the regulators either knew it or wilfully chose not to know it.
This version is when banks under-reported the interest rate at which they could borrow from other banks as they did not want to appear to be in trouble.
Thanks to Barclays' own investigation - prompted by US authorities coming after them - we know that Barclays indulged in both types of rigging and that Barclays is only the first of several banks that will be exposed. The New York Times reports that American authorities are preparing plenty of criminal charge sheets without Barclays' name on them.
(It says plenty about the bad old clubby ways of England that it has taken the Americans to shake up London, with the belated muted outrage of British regulators ringing more than a little hollow.)
The danger beyond the official actions lies is the welter of civil actions now being launched or planned by the ambulance chasers.
It's opportunistic, unnecessary and blindingly lopsided as for every person or institution that might claim to have been disadvantaged by a slightly fiddled rate, there were a roughly equal number that benefited from it.
Unleashing the legal mercenaries has the potential to distract bank management for years to come, never mind the extra burden imposed on balance sheets already facing Basel III challenges.
The whole structure of global finance is simply too complicated to meaningfully unpick where Sue, Grabbit & Run's clients were financially damaged.
Leave revenge to the authorities - and make them also deal with the odium of being asleep at the wheel and not taking action when they were first told about it - but keep the class action gougers out of it.
There are worse things than banksters.