By Nick Evans
So they shot the right man – but for the wrong
reason. Bob Diamond and his top acolytes at Barclays may have
epitomised the culture of greed, self-satisfaction,
self-interest and arrogance that has been so repellent to the
man in the street ever since the music stopped in 2007.
But the charge of rigging interbank rates seems like the
wrong crime to pin on them, and at the wrong time. The
Libor-fixing (and Euribor-fixing) scandal is, of course,
reprehensible on many levels – and the systematic
manipulation of rates over very many years leading up to the
financial crisis is shameful.
Even though everyone inside the industry (regulators and
supervisors included) must surely have known it was going on,
it is hard to imagine anything that would cause a more
widespread and fundamental loss of faith in such economically
critical institutions – or which would simply confirm
in the minds of everyone outside the industry the suspicion
that, for years if not decades, the banks were rigging the
system for their own benefit.
But the posting of lower funding levels that Barclays and
many other banks were supposed to have been engaging in after
the crisis broke looks like another matter altogether.
Arguably the banks were only doing what they believed that
others were encouraging them to do – and for good
reasons on all sides, given the extreme fears of a systemic
banking meltdown and the ruinous economic effects that would
EuroHedge has been no fan of the odious and venal culture of
investment banking that became so pervasive and corrupting
throughout the financial system over recent years. But revenge
is not the answer, however tempting – and now is
definitely not the moment.
"Tear down the banks" is the cry – with even
central bankers joining the politicians and the public in an
all-out assault on those very institutions whose efficient
functioning, willingness to take risk and self-confidence are
(however undesirable that may appear to be) essential to
getting us out of this ghastly economic mess.
The political point-scoring and playing to the public
gallery that is going on, nearly five years after the crisis
broke, is raising very grave risks for the future of the City
of London and the UK’s economically all-important
London appears besieged. The Americans are on the warpath,
implying that all financial scandals begin in the UK and
conveniently overlooking their own countless contributions to
the hall of shame.
The French and the Germans loathe London’s
free-wheeling financial capitalist culture with a passion
– and are determined to bring it to heel. The Asians
are licking their lips. And almost nobody in the UK is now
prepared to offer any kind of real support to the City, with
short-term gamesmanship completely obscuring any long-term
A cosy relationship between financiers, regulators and
politicians may indeed seem very distasteful when the cycle
turns. But a relationship based on mutual mistrust and contempt
is far more dangerous still.
Of course, taxpayers should not be on the hook for bank
failures and things clearly cannot go on as they were
pre-crisis. Reform, both cultural and structural, is essential.
And there is an urgent need for new, better and more
But this goes further than that. This feels like simple
scapegoating, with bankers carrying the can for the faults and
errors of many. And, given the current levels of political and
public hysteria, the prospects of any sensible or well
thought-through reform seem very remote.
Destroying the self-belief, the creativity and the vast
economic contribution of the financial sector is an insanely
reckless strategy – and all the more so at a time when
policy-makers seem to have no other plan for growth other than
to shower their economies with cash.
What is happening now feels like the beginning of a
no-holds-barred blood-letting against bankers as a breed
– and an almost mob-style vendetta against everything
to do with finance, from which hedge funds are very unlikely to
find themselves excluded.
It may make people feel a bit better in the short term. It
is certainly too late now to halt or reverse it. And who knows
how far it may extend before the thirst for vengeance is sated.
But it is something that we will all have plenty of time and
cause to regret.