[Vision2020] Bank Scandal Deepens

[Art Deco]

  [image: The New York Times] <http://www.nytimes.com/>

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July 5, 2012
Bank Scandal Deepens

The settlement between government authorities and
Barclays<http://dealbook.nytimes.com/2012/06/27/barclays-said-to-settle-regulatory-claims-over-benchmark-manipulation/>over
the bank’s attempts to rig benchmark interest rates drew a picture of
a bank that was negligent and corrupt at various times and to varying
degrees. Unfortunately, as big banks go, that comes as no shock.

It would be a shock if regulators and prosecutors found the resources and
willingness to go wherever the rate-rigging scandal leads, even to the
upper echelons of the world’s biggest banks and powerful central banks,
including the Bank of England and the Federal Reserve.

On Wednesday, the deposed chief executive of Barclays, Robert Diamond
Jr., presented
documents and testimony to a British parliamentary
committee<http://dealbook.nytimes.com/2012/07/04/diamond-defends-barclays-response-to-interest-rate-scandal/>,
saying that it had advised both the Bank of England and the Federal Reserve
Bank of New York about lowballed interest rates by banks across Wall
Street. The disclosures speak to the overly cozy relationships between
authorities and bankers, before, during and since the crisis. To be
thorough, further investigations into rate-manipulation will need to answer
questions about what the authorities knew about rate-rigging and when they
knew it.

We are not minimizing misconduct by Barclays or perhaps other banks. More
than 10 big banks are being investigated for their role in setting
benchmark rates, including JPMorgan Chase, Citigroup and UBS. Authorities
suspect big banks reported false rates during the crisis to squeeze out
profits and mask their true financial health.

That would be a huge fraud, so it is encouraging that the Commodity Futures
Trading Commission <http://www.cftc.gov/index.htm>, which started
investigating Barclays in 2008, is reportedly building its cases against
other banks on a bank-by-bank basis, rather than seeking one global
settlement. That approach can avoid the drawback of previous group
settlements, which have obscured as much as they have revealed. It is the
right approach if other regulators and the Justice Department are serious
about the rate-rigging case, including the question of whether central
bankers looked the other way.


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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