Comment: Bankers have crossed – yet another – Rubicon
THE TIME when the public will trust the banks again looks further away than ever. The Libor-rigging scandal, with Barclays already fined and Royal Bank of Scotland in the cross-hairs of regulators, has taken ethical distaste and contempt for the industry to new depths.
Revelations in court documents that RBS traders boasted in internal messages of what was effectively a “cartel” to rig the Libor deck of cards is a game-changer in public perceptions.
The new ground is that, with a string of previous banking scandals, you could just about persuade yourself that what the banks were about was bonus-driven greed and hubristic incompetence.
Plainly poor behaviour – and deserving of regulatory punishment – but, based on avarice and bad judgment rather than skulduggery. Sub-prime lending, payment protection insurance mis-selling, inappropriate hedging products sold to small businesses, HBOS’s reckless pursuit of commercial loans etc, etc, tended to fall into this morally ambiguous or faulty judgment area.
But manipulation of Libor – the rate at which banks lend to each other and acting as a de facto benchmark for global lending conditions to businesses and consumers – catches bankers going knowingly and premeditatedly into unethical, nay criminal, territory.
Damningly, some of the latest apparently incriminating RBS messages suggest senior management condoned, tacitly or otherwise, the Libor-rigging cartel.
A further indictment is that some of the messages were sent just months before the taxpayer had to intervene with £40 billion to stop an over-extended, financially rickety RBS going belly-up in the 2008 banking crisis.
Many more banks than Barclays and RBS are being investigated by global regulators on the Libor racket. As the likely endemic nature of the practice becomes known, public and political anger will again rise.
Bankers in effect falsifying the rates at which they lend is a Rubicon-crossing moment. If you cannot rely on them for that, what are these guys for?
Just a guess, but I reckon it may make it harder in the court of public opinion come the next banking bonus round in late 2012 and early 2013 for the banks to say the other-worldly largesse is vital to attract, retain and motivate…oh, you know the rest.
Not so much good news as not-quite-so-bad news
WE’LL take any economic good news from wherever we can at the minute. So half a cheer, then, for the data showing the lessening of the second-quarter gross domestic product (GDP) contraction to 0.4 per cent from a previously-reported O.5 per cent, and compared to initial estimates of a 0.7 per cent second-quarter fall.
But unfortunately it changes little. The economy, from manufacturing to the high street, from construction to the pivotal services sector, remains stagnant at best.
Most City economists believe we will see some growth in the second six months of 2012, but it is all but certain to be pale. The person in the street doesn’t feel any tangible difference from a downturn in real terms, from household budget to job security, if GDP is a few basis points in growth.
The economic conditions still look too adverse for any feel-good sense in the run-up to Christmas, with businesses cautious about investing and consumers cautious about opening their wallets.
Meanwhile, the eurozone crisis rumbles on, draining confidence from the business and financial worlds, with Spain now in the eye of the storm following the earlier bailouts of Greece, Ireland and Portugal.
British exports to a depressed single currency zone are unimpressive and are likely to remain so for a substantial time yet.
Even with yesterday’s minor boost, therefore, the British economy remains very weak. One City economist pithily summed up the genuine takeaway from yesterday’s data by saying things are not as bad as we thought but are still abysmal.
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Saturday 25 May 2013
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