Sigrún Davíðsdóttir's Icelog

What chance for the free market when banks find out they can just pay to rig it?

with 3 comments

After much talk about a multi-countries investigation into LIBOR rigging, authorities in the US and the UK have fined Barclays for  “attempted manipulation of and false reporting of LIBOR and Euribor Benchmark rates,” in total $360m and £59.5m – the biggest FSA fine ever. In perspective, this isn’t much more than a cup of coffee for ordinary mortals. This lenience – no criminal charges and only minor personal consequences for Barclays managers – is the death knell for free competition.

“I am sorry that some people acted in a manner not consistent with our culture and values,” said Barclays CEO Bob Diamond, in reaction to the fine. No Mr Diamond, this isn’t “some people” – the bank’s email system is flowing with emails from traders who saw nothing wrong with this, for many years. Diamond and three senior managers have agreed to waive potential bonus for this year “to reflect our collective responsibility as leaders”. – Why don’t they pay back their bonuses for the years that this was going on? A year’s bonus for alleged rigging for 5-6 years – and that’s only the time investigated.

For all those who believe in free markets and competiton this is a sad day. It is impossible to have a free market, when those at the heart of that market don’t know any other game than to rig it. Today, they have found out  that they can just pay their way out of an investigation. Why was this matter being investigated? To put an end to this odious and market-destructive practice? Or to collect a bit of money for the authorities?

This practice, in addition to widespread interest rate rigging by banks lending to US public authorities, shows a horrible malaise at the heart of the market. It is devastating if the authorities fining Barclays think this is enough to cure the malaise. How ironic, that bankers, happy to talk about free markets on festive occasions, have shown themselves to be no better than the Mafiosi who shun free competition whenever they can.

The LIBOR manipulation and the rate rigging show that big banks have long ago lost sight of “let the best ideas win.” Their way is the way of dirty dealing. And this way of thinking is what Europe and the US are drowning themselves in debt to save. Yes, this is a sad day for those who believe that growth and wellbeing spring from free competition to stimulate ideas and new solutions to old problems.

*Here are the statements from the relevant authorities, from the UK FSA, the US CFTC and DoJ.

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Written by Sigrún Davídsdóttir

June 27th, 2012 at 4:23 pm

Posted in Iceland

3 Responses to 'What chance for the free market when banks find out they can just pay to rig it?'

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  1. Bankers can buy themselves out of crime with the help of corrupted Governments and colluding Judiciary.
    We are just seeing the can of worms opening.

    These frauds and manipulation of figures has been carefully kept out of public view as the Bankers and their corrupted entourage got more and more arrogant and wreckless.

    The reason for the Financial Crisis in the world can without question be laid with the Banks and the corrupted nations who turn their backs on their crimes and looting.

    At last some of these practices are being exposed.
    However with a corrupt entourage the Bankers remain as protected as the mafia, don’t they?

    Unpunished , unashamed and remorseless, these ammoral beings have to be removed from circulation and punished.
    Surely Britain does not want to have a reputation like that of Luxembourg?

    Alexander Edwards

    28 Jun 12 at 3:54 pm

  2. In a way, a sad day.
    In another way, not so sad:

    There must be people whose determination to stamp out corruption has been strengthened by the obvious spinelessness of the customary authorities.

    No better than the mafiosi…?
    These bankers ARE the mafiosi.


    29 Jun 12 at 12:33 am

  3. Is it not depressing that we now find ourselves in this situation where no one can be trusted. Once upon a time you could trust the advice you received from your friendly bank manager. Now you can take any bank advice (managers have been dispensed with)safe in the knowledge that it will be angled to serve the bank well but not you.

    I have been involved fighting against the dishonesty that emanates from Luxembourg and cannot believe that it is as bad in the UK. Seems you cannot trust anyone these days.

    Our glorious leaders have to get this sorted out.


    30 Jun 12 at 1:15 pm

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