[jyl]

Before the financial crisis hit in 2008, Barclays was manipulating LIBOR both ways, both lower and higher, to increase profits on its proprietary trades. Higher LIBOR would have caused hundreds of millions of individuals and companies to pay higher interest rates on LIBOR-linked debt.

During and after 2008, Barclays manipulated LIBOR down, to conceal the extent of its own liquidity crisis. Does lower LIBOR hurt anyone? Yes. Producing artificially low interest rates via manipulation of LIBOR means that lenders are being paid too little for the risk they take, which means that holders of debt are being short-changed. This would include, for ex, pension funds and other institutions holding LIBOR-linked debt and individuals holding funds with LIBOR-linked debt. It also means there is going to be less new lending, since the lenders are being underpaid. Or, the lending will be at rates reset to a higher spread over LIBOR, e.g. not LIBOR + 3% but LIBOR + 4%, so that after the LIBOR manipulation is over, those borrowers will be permanently stuck with the higher rate.

There is no way to excuse this by saying no-one was hurt. Hundreds of millions of people and institutions were harmed.

Why does this happen? As far as I can tell, the banking industry as a whole has lost its moral compass. The game appears to be to make as much money in the short term as possible, and not get caught, or if you do get caught, to have made enough money that the punishment doesn't matter too much. Barclays' CEO Robert Diamond offered to give up one year's bonus, gee. Even if he is ousted, I suspect he has 9 figures of prior bonuses to enjoy his retirement on.

Perhaps this is inherent with corporations. It is all the fashion nowadays to say that corporations are people too, with all the rights of natural persons, including the right to make limitless campaign contributions to the politicians supporting "corporations = people". But there is an obvious difference between corporations and people. Corporations never get actually punished for crimes.

Oh, I know, corporations pay fines in criminal proceedings. That's like you and I paying a speeding ticket. If we commit a real, serious crime, we don't pay a fine. We go to jail.

Corporations don't go to jail. CEOs of corporations don't go to jail, CFOs don't, Presidents don't, Managing Directors don't, maybe eventually some mid-level guy goes to jail for a year, which frankly the corporation could care less about. Joe Who?

The people involved in this at Barclays need to go to jail. Their supervisors too. I don't know if existing law can reach higher up, but the laws need to be changed. When you are CEO of a global bank, and the rewards for incentivizing, allowing, not seeing, and not stopping misconduct are measured in the hundreds of millions, then the risks need to be equally large. If reward and risk are grossly mismatched, you know what happens.