Lies and Libor
posted by Frank Pasquale
It’s fashionable for some finance experts to dismiss reporters like Matt Taibbi as hyperbolic. How dare he compare a muni bond rigging scandal to Mafia tactics? But the more one digs into high finance’s behavior, the clearer a pattern of criminality and recklessness emerges. Taibbi was on a cordial and enlightening panel with Gillian Tett back in 2009, and if any finance reporter’s work is considered impeccable by the establishment, it is hers. Consider her perspective on the latest outrage regarding the setting of Libor:
Five long years ago, I first started trying to expose the darker underbelly of the Libor market. . . .At the time, this sparked furious criticism from the British Bankers’ Association, as well as big banks such as Barclays; the word “scaremongering” was used. But now we know that, amid the blustering from the BBA, the reality was worse than we thought. As emails released by the UK Financial Services Authority show, some Barclays traders were engaged in a constant and pervasive attempt to rig the Libor market from 2006 on, with the encouragement of more senior managers. And the British bank may not have been alone.
As Robert Peston of the BBC says, “It’s quite hard to think of behaviour by a bank as shocking as this.” The actions of these financiers are utterly shocking, and documented in grotesque detail. The sheer pleasure expressed in “pulling a fast one” is palpable in the emails (e.g., “Whos going to put my low fixings in? hehehe”).
The current regulatory debate over finance features a rough balance between progressive incrementalists (who want to try to fix a largely ineffective regulatory structure) and libertarians (who want to get rid of it altogether). Voices like Taibbi’s (and even Tett’s) have been at the margins, as have those of law professors like William K. Black and authors like Charles Ferguson. How many more scandals like the rigging of Libor must come to pass before the voices of the margin are heard at the center?