Many executives on Wall Street and in The City, London’s central business district, have reason to be VERY NERVOUS this morning.
Their sweaty palms have nothing to do with the ongoing crisis in Europe or the this week’s likely weak employment report here in the United States. The nerves have everything to do with the fallout from the Libor-manipulation story that has been centered on Barclays but likely encompasses every major bank in the global markets.
The industry would like to take one large broom and sweep this story back under the rug. The weekend ‘execution’ of Barclays chairman Marcus Agius is an attempt to do just that.
This Libor intrigue is only the latest of the financial industry’s market manipulation schemes. What do people think was going on in the auction-rate securities markets? How about the daily trading within the equity markets?
Manipulating markets has gone on for ages. As a resident member of the Sense on Cents Hall of Fame shared with us a few years back, “markets don’t go up, they’re put up.”
How and why do these manipulative behaviors persist? Very simply. The benefits accrued from the manipulation far outweigh the costs imposed. What are the costs? Simple fines. These fines — even exceptionally large fines — are the real payoff of the captured self-regulatory system that operates on both sides of the pond.
Self-regulation of the financial industry DOES NOT WORK.
When will market manipulation stop? When the penalties imposed fit the crimes.
Instead of Barclays chairman Marcus Agius merely stepping down in very unceremonious fashion, what if he and his sidekick Barclays CEO Bob Diamond and other executives within Barclays privy to the manipulation faced hard time?
The captured regulators do not get this but the public certainly does as highlighted by the Wall Street Journal in writing,
The U.K. government, along with the Financial Services Authority and the Bank of England, has been reviewing the regulation and supervision of Libor since March of this year.
Business Secretary Vince Cable said there should also be a criminal investigation into the Libor-fixing scandal.
“[The public] just can’t understand why people are thrown into jail for petty theft and these guys just walk away having perpetrated what looks like conspiracy,” Mr. Cable told Sky television Sunday.
So how do we stop the market manipulation? Only when the following sound resonates for all to hear: