Following the most recent scandal about inter-bank lending from London provides both a level of candor and immediacy that is often not found in Washington. Perhaps one of the reasons for this is that London combines centers of political, commercial and media power that are not competing for turf in Washington and therefore not immediately at the ready to defend the reputation of their institutions and deflect responsibility and accountability in the direction of others.
The city of London is again under the microscope about the manipulation of Libor, a key inter-banking lending rate, by traders at Barclays bank, an institution that was incidentally founded by Quakers. This coming on the heels of the disclosure by JPMorganchase CEO Jamie Dimon about $2 billion trading loss, that a recent article in the New York Times reported could climb to as much as $9 billion, in the company's investment unit that is also based in the city.
The theater that was present at the congressional hearings in Washington where Mr. Dimon was the sole witness is expected to be repeated during a Parliamentary committee inquiry where Bob Diamond the Barclays CEO, who retired July 3, will be on the hot seat. This, by the way, is the same Mr. Diamond who last year said that it was time for bankers to stop apologizing and get on with the essential and very important services that societies across the world have come to rely on every day.
Go back four years to the near global financial meltdown of September 2008 that is now estimated to have destroyed $19.2 trillion of wealth, driven millions out of work, caused millions to lose their homes and crushed the retirement dreams of an untold numbers, and the names at the center that crisis are still featured in today's headlines. Many of them have on various occasions tried to assure Main Street and the public that they have learned their lessons and put in place the standards and structures to avoid future calamities. Government officials and political leaders have vowed to get to the bottom of the mess, put in place new laws and regulations to eliminate the practices that caused the near meltdown and to restore confidence in the financial system.
While greed and pride have been batted around frequently as the underlying cause of the decisions and behaviors that have been at the center of this ongoing crisis, most political and financial power brokers have circled the wagons to defend the soundness, safety and effectiveness of the system and their debates and disagreements have been about the amount of regulation and government oversight that will be necessary to contain any future crisis. In spite of numerous attempts to get to the bottom of the causes of the crisis and propose appropriate remedies, many of the recommendations and regulations that have been proposed have been stalled by both political leaders who can't seem to agree on the appropriate level of regulation and the high priests in the industry that are convinced that a few bad apples or misguided traders are responsible for the whole mess.
Recent revelations have put different groups in the dock as we watch the movements of the latest characters in the unfolding scenes of this prolonged crisis. Main Street, the public, the 99% can only see this as yet another call to sustained vigilance and a clear confirmation of their views that the system is gamed against them and that the principal leaders in the sector are in this primarily for themselves and their senior colleagues. Political leaders and regulators are again on notice that the public expects them to follow through on their promises to correct abuses in the system and to remind the industry of its responsibility to all stakeholders. This is magnified in light of the massive infusion of capital that taxpayers had to put up to prevent the implosion of the global system and the bankruptcy of additional prominent institutions in the sector. Leaders in the industry will again be pressed to propose and support rules and regulations that will appropriately protect the safety and soundness of a system upon which so many people across the world depend.
On another level these additional blows to the already bruised confidence of the general public in the financial system have pushed the conversation beyond questions of greed and lies to clear allegations of illegality, corruption and fraud. The emergence of these developments raises anew more fundamental questions about the separation of routine, retail banking that serves the needs of most people from investment banking that has been at the center of so many rogue and illegal activities. This also raises the bar on the due diligence of shareholders and customers who do business with institutions in the rudderless financial services sector.