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The Untouchable, Unscrupulous ‘LIBOR Cartel’ (Der Tagesspiegel, Germany)

“Authorities worldwide are investigating 30 more banks, which, like a Mafia-cartel, organized interest rate manipulation across borders. Nevertheless, it is more than likely that executives at the helm of this LIBOR-gang have little to fear but the loss of their reputations.”

By Harald Schumann

Translated By Ulf Behncke

July 6, 2012

Germany - Der Tagesspiegel - Original Article (German)

Of all people, Robert Diamond. Just last year, the former head of banking giant Barclays, when questioned by British parliamentarians, bragged that, "the period of remorse and apology for banks - that period needs to be over." After all, business had finally picked up again. And now this: regulators on both sides of the Atlantic have shown that Diamond's traders were instrumental in manipulating the LIBOR interest rate to their benefit, thereby harming tens of millions of debtors and holders of interest-bearing instruments around the world. The result: a $453 million fine. For that reason, investment banker Diamond, one of the most emphatic leaders in money management, is now history.

But however logical the resignation of one of Europe's most prolific bonus earners (annual salary in 2011: €26 million, or $32 million), it contributes little to resolving the actual problem. Because it is already clear that this bank scandal will turn out just as all previous such events have: not a single executive will have to answer in person to a criminal court. And this - despite the fact that this scandalous practice reaches well beyond Barclays. Authorities worldwide are investigating 30 more banks, which, like a Mafia-cartel, organized interest rate manipulation across borders. Nevertheless, it is more than likely that executives at the helm of this LIBOR-gang have little to fear but the loss of their reputations.

That is what happened when Richard Fuld triggered the biggest economic disaster since World War II with the bankruptcy of his financial house Lehman Brothers. And so it was when the U.S. Senate documented how traders from Goldman Sachs and Deutsche Bank, under its leaders Lloyd Blankfein and Anshu Jain, not only sold billions of dollars of mortgage-backed securities to customers in Germany and elsewhere, knowing in advance that they would quickly become worthless, and so bet on them lapsing. And so it was when wannabes at the helm of Germany's Landesbanken frittered away tens of billions at the expense of the people. And so it was when Hypo Real Estate was gambled away into bankruptcy, with German taxpayers bailing it out to the tune of about €20 billion ($24.5 billion), while the top manager responsible, Georg Funke, complained from his retirement home in Mallorca about being unfairly treated.

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Granted, it is notoriously difficult to prove intent or gross negligence in individual cases, senior executives in high finance cause billions in damage yet again. That is why most prosecutors don’t dare even issue indictments. But that doesn’t justify the inaction of government. Instead of dramatically increasing criminal penalties and tightening up liability provisions, they instead tended to cozy up to the princes of money, not least to keep their wealthy clientele happy.

But undeniably, it is precisely this impunity on the part of the perpetrators - unscrupulous traders and managers seeking personal advantage, even at the expense of customers, shareholders and taxpayers - who facilitate the often-maligned culture of greed. Those who lack the gumption to lift a hand and hold people criminally responsible or at least personally liable should not be startled with the arrival of the next banking scandal.

SEE ALSO ON THIS:

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