14 Comments

• Liberal Eye 28th Jul '12 - 5:29pm

  I disagree that new rules are necessary; existing laws have been broken and we should demand that enforcement actions are started, however belatedly. If the Uk is still “struggling” to launch an investigation that is because a number of powerful and well connected people don’t want one – this is much bigger and nearer to the real seat of power than even the News International hacking scandal.

  http://liberaleye.wordpress.com/2012/06/29/potemkin-regulation/

  Moreover it is clear that Libor was the target of fraudulent activity for far longer than most believe – for decades in fact. The FT has a report that takes it back to 1991 and others say “more than 30 [years]” (see comments)

  http://www.nakedcapitalism.com/2012/07/libor-manipulation-well-known-in-london-by-1991.html

• Stephen Hesketh 29th Jul '12 - 7:56am

  @Liberal Eye – the fact that this already-illegal activity has been going on for years and that existing British laws have not been used (for whatever reason) demonstrates perfectly why this Commission initiative is required. If the UK government and financial sector wish to keep European authorities from regulating, all I can say is they’d better get their act together pretty sharpish.

  If the banking crisis, various mis-selling scams and ongoing excessive personal pension charges teach us anything it is surely that the entire culture has been totally perverted in pursuit of personal gain.

• Simonsez 29th Jul '12 - 9:59am

  LiberalEye –
  With you on the powerful figures angle. Also no chance via the dead duck SFO.
  The only real action we are likely to see in this country is when the US starts it’s quickie extraditions of Bankers to face their courts. Suddenly you are going to see the gov get very concerned about the Extradition treaty being unfair.

  The malaise in banking is much more far reaching in the rest of the economy though. Why bother investing in industry when you can turn a much quicker profit by dealing in complex financial instruments or one way bets on rates indexes etc With a word in the ear of your mates in the Libor back room .

  It’s no coincidence that as the City has grown here in the UK that manufacturing has been decimated.

• Psi 29th Jul '12 - 10:21am

  @ Liberal Eye

  I agree the existing law is adequate, it looks like there was clear intent to make gains by misrepresenting information.

  @ Stephen Hesketh

  As law enforcement is local you solution does not fix the problem. As liberals we should avoid the temptation that Labour fell in to of legislative diarrhea, creating new laws because they couldn’t be bothered to enforce the existing laws. There are serious questions over the SFO’s ability to do their job as they have left this until it hit the headlines (along with historical questions about their capability).

  If your solution is that Europe should create a criminal justice system that will have the British citizens handed over for crimes committed in the UK under UK Law to be tried outside the UK you are suggesting the European equivalent of the current arrangements with the US. That is another sure-fire way to trash the credibility of the EU among the UK population.

• Peter Chivall 29th Jul '12 - 10:33am

  It’s often been heard from neoliberals and other Conservatives in recent years that “the public sector is crowding out private sector growth”, presumably in the skilled labour market, access to finance and other resources.
  Could we not now say that the scale of poorly regulated City activity is crowding out real productive activity in our economy. It is certainly cornering the market in high quality numerate graduates. A young man I know was the only one of 5 Firsts in his Materials Science group at Cambridge not to go into the City a few years ago.
  He spent the last 18months of his Doctoral studies at UCL trying in vain to find a research/teaching post which could offer him an income and security to repay his necessary debts of a 4year doctorate in London only financed for 3 years. He was ‘headhunted’ by a Mayfair asset management firm to join their ‘blue skies’ research and risk analysis section – he now works in a room full of other t-shirted Physics PhDs playing with computer programmes predicting future market movements many years ahead. A bit like long-range weather forecasting and a long way from ‘boys in red braces’.
  However, just as his eventual destination is partly a result of the £1billion+ panic cut in Science research by Darling in 2008/9, so the Coalition needs to improve on the ‘no cuts’ stance of Vince – welcome though that is.
  And if the Banksters do end up in manacles in orange boiler suits ‘rendered’ to the USA, can we see some big number Proceeds of Crime orders going to University Research – I wish?

• Liberal Eye 29th Jul '12 - 8:00pm

  Some good points.

  It clearly is the case that the City is crowding out industry and we won’t get any meaningful recovery until a sensible balance is restored.

  The scale of the frauds that have gone on in recent years are so breathtaking and involves the complicity of so many at the highest levels that normal law enforcement is overfaced. Yet without law enforcement democracy is reduced to an ornamental sham so this is a battle we must win.

  My sense is that the way to do this is to take it to the people – make it a political issue and force the issue in the court of public opinion in the first instance. It’s already moving that way even without a clear lead from any party. Apart from doing the right thing for its own sake we should be taking this battle to the Conservatives – I think most of their ordinary members would actually support such a view even if their leadership is largely compromised. so it would be a very winnable battle.

  Incidentally, I would not hold my breath for any useful initiative from the USA. In Office Obama has ratted out his campaign promises and proved to be a complete tool of Wall Street. No significant figure has been charged despite abundant evidence of mega-fraud; to say that the US financial blogosphere is scandalised would be an understatement! If action is taken against British bank or bankers it will be either to use foreigners to create a show for the public ahead of the elections and/or because someone better connected hopes to gain some competitive advantage.

• Stephen Hesketh 29th Jul '12 - 8:30pm

  @ SimonSez. Completely agree with your summary regarding the decimation of our manufacturing industry etc.
  @ Liberal Eye and Peter Chival – some excellent points/observations.

  @PSI I do basically agree with your points but also repeat mine: “If the UK government and financial sector wish to keep European authorities from regulating, all I can say is they’d better get their act together pretty sharpish.”

  I’d particularly like Nick Clegg and Vince Cable to lead the response on this as Liberal Democrats – not only as a matter of simple justice but to clearly demonstrate that having Liberal Democrats in Government does make a difference.

  If the UK authorities don’t/won’t act, rather than backfiring on the Commission, I could foresee calling time on this sort of behaviour as being something of a coup for them. The average Briton has surely had a belly full of banksters and their ilk and particularly their unrestrained self serving greed. Now is the time for us to see some action!

• Giles Goodall 30th Jul '12 - 2:02pm

  Thanks to all for the comments, many good points.

  @Liberal Eye
  There are no doubt plenty of powerful people with an interest in this not coming to prosecution, but the Serious Fraud Office has itself said publicly that they need to “assess whether the available offences are there for us to prosecute in a criminal court.” This means there is unfortunately not yet a clear cut case under existing UK legislation, unlike the US. Resources and mandate of the SFO and Financial Services Authority are another issue.

  @Psi
  The EC proposal is a big step forward because it would make sure every EU country has dissuasive minimum penalties in place to deter criminal behaviour in the first place. This is about cooperation between justice systems to deter and tackle crime.

  @SimonSez, Stephen Hesketh
  Lib Dems should certainly be leading on this issue, just as we have on need to reform the sector more generally. Agree once again with the point about redressing the economy and fact that the UK has for far too long been under in thrall to a powerful and well-resourced financial lobby to the cost of the economy and taxpayer as a whole.

• Liberal Eye 31st Jul '12 - 11:10am

  Giles,

  With respect this is nonsense. Of course the SFO has formally to assess the case but they are using that as an excuse for inaction because at a certain level crime become political. That is why blue collar property crime is prosecuted vigorously but white collar crime is subject to endless prevarication when the suspects are sufficiently well connected. This is no different than the early stages of hacking scandal where the police pretended they found nothing much going on when the evidence was actually in plain sight. Only when the stink become inescapable did they reluctantly act.

  You make the comparison with the US where you suggest there is a clear cut case. But no senior banker has yet been jailed although the crimes there are indeed breathtaking. Just take one instance – that of MF Global. It went bust with $1.6 billion missing from client accounts (like the account where a solicitor keeps YOUR money when you buy a house) that apparently “vapourised”. In ordinary English it has been stolen by person or persons unknown – except that there are some very obvious suspects. Also the ‘Sarbox’ legislation passed in the wake of the Enron scandal makes it a criminal offence for a CEO not to ensure that proper records and control systems exist. So, I think this is exactly like the case over this side of the Atlantic; several different bits of legislation apply and there is a very strong prima facie case under each but stunning inaction.

• Liberal Eye 31st Jul '12 - 12:31pm

  Update: it is being reported that the SFO thinks that existing legislation can be used against banks implicated in the Libor scandal.

  http://www.telegraph.co.uk/finance/financial-crime/9439478/Bankers-found-to-have-rigged-Libor-rate-could-face-jail.html

  It’s somewhat belated but still welcome for all that. Now we need to ensure that the SFO understands that the nation expects them to root out the rot and not just throw a few token traders into jail.

• Psi 31st Jul '12 - 8:19pm

  @ Giles

  This is a stupid proposal from the EC and would further damage the image of the EU’s reputation in the UK.

  If you follow your argument to it’s logical conclusion we shouldn’t have any laws set in any of the UK ligislators and the European parliment should set all criminal law.

  I firmly believe the activity identified in relation to LIBOR manipulation at Barclays (and probably at other banks) falls foul of the 2006 Fraud Act.

  You don’t need a law to say it is illegal to rob a person in Birmingham if you have a law that simply says it is illegal to rob someone. We should resist the tempation to engage in legislative diarrhea.

  Europe has no need to create laws for crimes that are domestic, this looks exactly like fraud commited in the UK by institutions operating in the UK. The authorities in the UK should get on with their jobs and procecute. What you suggest is not cooperation it is creating laws over the UK laws which are already adequate to deal with the problem and simply need to be enforced properly.

  @ Peter and Liberal Eye

  There is almost certainly some crounding out by the finance sector but I think this is long term rather than short term so we can still have a recovery with out the need for a readjustment. The readjustment could be carried out more carefully rather than in a great rush.

  The short term problem is the fear and the lack of available credit. The first from the concersn about the Euro, hte second from the excessively quick introduction of higher capital requirements on banks. The first requires Europe to decide one way or the other about what it will do (organised dismantle or full fiscal union with democratic legitimacy)
  the second requires a longer implementation of capital requirements.

• Paul R 1st Aug '12 - 10:17am

  Given the global role of “the City”, the fixing on interest rates isn’t just a domestic issue as such actions inevitably have a knock-on effect in the rest of Europe. Hence, the rationale for a minimum EU wide standard being proposed. Obviously, though the adoption of such a standard would need to be accompanied by a willingness to investigate and prosecute such potentially criminal behaviour.

  The other member states will probably prefer the UK regulator to do this but if, as in this case, the UK regulator appears either unwilling to do so and/or asleep at the wheel, then inevitably questions will be asked as to whether they are the right people for the job.

• Psi 2nd Aug '12 - 6:26pm

  @ Paul R

  By logic Europe isn’t enough to regulate the city. LIBOR is used Globally by your logic there should be a global body to set laws.

  LIBOR is the LONDON Inter-Bank Offered Rate it is a UK index if others choose to use it they are choosing to transact using the UK index. “The City” will suffer as a result of the scandal but that is the fault of the banks involved.

  But the point that has been missed is this behaviour was illegal and therefore has a mechanism to resolve this it is called the criminal law. Creating new laws or regulations is pointless and just politicians trying to justify their existence.

  The solution is to enforce the existing law, no further action needed.

• Psi 2nd Aug '12 - 6:31pm

  @ Paul R

  One other thing, the UK regulator has acted, the FSA fined the bank (level of fine is debatable). The lack of action is the agency responsible for enforing the criminal law, in this case the SFO.

  As they have been so reluctant to act you have to question if there needs to be reform of their model, for example ofsetting enforcement costs against sucessful cases to change the enforcement appetite and sacking the heaqd of teh organisation for failing to take action when the evidence was first presented.

  Those two actions would have an effecet on behavior of the SFO.