“It’s that big”
by digby
If you’re still wondering about the scope of the LIBOR scandal, this piece in the Economist will fill you in:
Over the past week damning evidence has emerged, in documents detailing a settlement between Barclays and regulators in America and Britain, that employees at the bank and at several other unnamed banks tried to rig the number time and again over a period of at least five years. And worse is likely to emerge. Investigations by regulators in several countries, including Canada, America, Japan, the EU, Switzerland and Britain, are looking into allegations that LIBOR and similar rates were rigged by large numbers of banks. Corporations and lawyers, too, are examining whether they can sue Barclays or other banks for harm they have suffered. That could cost the banking industry tens of billions of dollars. “This is the banking industry’s tobacco moment,” says the chief executive of a multinational bank, referring to the lawsuits and settlements that cost America’s tobacco industry more than $200 billion in 1998. “It’s that big,” he says.
The New York Times reports that the chairman of Barclays, Robert Diamond was stunned that he could possibly be held responsible for such a thing — because he’s one of the exceptional ones:
MR. DIAMOND seemed shocked to be pushed out. An American by birth, he probably thought he’d be subject to American rules of engagement when confronted with evidence of wrongdoing at his bank. You know how it works on this side of the Atlantic: faced with a scandal, most chief executives jettison low-level employees, maybe give up a bonus or two — and then ride out the storm. Regulators, if they act, just extract fines from the shareholders.
Indeed. But this story about JP Morgan via dday this morning makes me wonder about our overarching theory that sending these guys to jail is the magic bullet:
A U.S. judge has ordered JPMorgan Chase & Co to explain why the court should not force the bank to turn over 25 internal emails demanded as part of an investigation into whether it manipulated electricity markets in California and the Midwest.
The Federal Energy Regulatory Commission (FERC) filed a petition in federal court in Washington on Monday asking the court to order the bank to show cause as to why it would not comply with a subpoena issued by the commission as part of its investigation into the bank’s power trading.
On Thursday, U.S. District Judge Colleen Kollar-Kotelly gave the bank until July 13 to submit an explanation as to why the court should not enforce FERC’s subpoenas. JPMorgan has asserted the emails are protected by the attorney-client privilege.
So JPMorgan allegedly manipulated the electricity market? Well,apparently they weren’t deterred by the fact that the big boys in Enron really did get nailed. Former president Jeff Skilling is doing 24 years in federal prison.CEO Ken Lay was convicted too but died before he could be sentenced.
These guys were hugely powerful, and close personal friends and supporters of the president of the United States and they lost it all. Somehow, that apparently didn’t deter JPMorgan from manipulating the energy market in its own way just a few years later. The example of Ken Lay and Jeff Skilling didn’t stop them. I don’t know what will.
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