The scandal you should be paying attention to
July 11, 2012 2 Comments
Seems like the appalling behavior of bankers in the Libor scandal is starting to get some more mainstream news coverage– it deserves a lot more. I don’t think most people have any idea how amazingly corrupt and greedy the entire financial sector is. My guess is that– despite what they tell themselves– most people going into high-end finance and banking have a single primary goal. And it’s not making the world a better place. Anyway, this Libor scandal lays bare the greed and immorality in modern banking and Yglesias has a nice summary. The conclusion:
So far the shock waves haven’t really hit on this side of the Atlantic, but one can only hope they will. The United States enacted a major change in its financial regulatory system in 2010, but it’s not clear that we’ve yet had an adequate change in regulatoryattitude. The lesson of Libor is that regulators need to recognize that bankers have cast aside the clubby values of yore, and they need to respond in kind. Banks will try to abide by the letter of the law, but where loopholes exist, they’ll be ruthlessly exploited—through dishonest means if necessary—and the financial cops need to have a fundamentally suspicious attitude toward the regulated entities. Time and again, when tighter regulation of trading is proposed, the concern is raised that stringency will push activity to foreign centers. In the short run, that’s almost certainly true. Banks will want to move to wherever they’re most likely to be able to get away with more shady dealings. But an economic development strategy based on turning your country into an appealing location for dishonest banking is just going to get you a financial system that’s rotten with dishonesty. It’s time to stop being surprised and start realizing that these are the inevitable fruits of a regulatory system that’s weak by design.