So for those of you who follow global economics you are probably aware of the recent Libor scandal. Put simply, Libor (London interbank offered rate) is the rate at which banks lend each other money. It's relevance is that all other loans in society... students loans, housing loans, car loans, derivatives, etc. - are all predicated on the Libor rate.
So Barclay's was recently caught manipulating the Libor rate. You can see a portion of their CEO's testimony below:
It's too complicated to bother going in to in detail, but basically when you manipulate interest rates you manipulate what people invest in. The obvious issue here is that if you are invested in X, and X goes UP when Libor rates go DOWN, and Barclays manipulates Libor down on a given day, then anyone who was invested in X makes out like a bandit.
Now, this is just another example in a string of banking misconduct - from JP Morgan's whale trade to MF Global stealing customer funds.
What takes this up a notch in my opinion is that a new dialogue is emerging in the media.
The call to 'hang' bankers has always been used by those who are prone to hyperbole. Not to long ago one of the candidates running for the Mayor of London was saying he would hang the bankers. Max Keiser regularly says the bankers are committing atrocities and they should be hung like they are in China when they break the law.
But outside of those flavourful personalities, mainstream pundits do not use the 'hang the bankers' line ever. It's fairly obvious why they don't as media outlets are obviously skittish about calling for the death of anyone (and rightly so, that's a bad sign for society if we become tolerant of television personalities arguing certain folks should be killed).
So that has always been a big 'no no' in mainstream television. Even Max Keiser when he's on a top tier media outlet refrains from saying the bankers should be hung.
But today we've seen a first of sorts.
Nouriel Roubini was on Bloomberg today discussing what the Libor scandal means and he didn't pull any punches (you can watch the video above).
He says:
"Nobody has gone to jail since the financial crisis. The banks, they do things that are illegal and at best they slap on them a fine. If some people end up in jail, maybe that will teach a lesson to somebody. Or somebody hanging in the streets."
While Roubini is in the doom and gloom camp, one thing he's never been is a headline chaser. He doesn't say things merely to shock people.
And to be fair, he's not directly calling for bankers to be hung. Merely implying that we are reaching the point where one has to ask is that the only kind of action that will curtail criminal banking activity?
What we are seeing is the escalation of the banking sector's PR crisis. Their behavior is so corrupt, so in your face illegal, that even pundits who refrain from hyperbole are now dropping the 'hang the bankers' line with a serious face.
Can the banking sector keep muddling by with this level of disgust bubbling up among pundits and the public?
I'd argue they can only because they have such a tight grip on the market. Who can you really go bank with other than the big banks? They have their fingers in every financial transaction that goes on in the world.
The ones who will take the hit however will be the politicians. And from that perspective, no, the bankers will not be able to muddle through. In time, sooner rather than later, the politicians will have no choice but turn on the bankers if they want to stay in office.
The great irony in all this though is that it's the bankers who fund the politicians campaigns through donations.
So bringing down the bankers will also bring down the entire political system (or at least the funding behind it).
Anyway, who knows what the future holds, but one thing is for sure, as Greece, Spain and Italy start to fall, as the recession continues, as people suffer, it's entirely possible we will reach a point where the shared common ideology towards this mess is simply... hang the bankers.
You cannot have a PR crisis any larger than the public calling for your head, that much we can say for certain.
So Barclay's was recently caught manipulating the Libor rate. You can see a portion of their CEO's testimony below:
It's too complicated to bother going in to in detail, but basically when you manipulate interest rates you manipulate what people invest in. The obvious issue here is that if you are invested in X, and X goes UP when Libor rates go DOWN, and Barclays manipulates Libor down on a given day, then anyone who was invested in X makes out like a bandit.
Now, this is just another example in a string of banking misconduct - from JP Morgan's whale trade to MF Global stealing customer funds.
What takes this up a notch in my opinion is that a new dialogue is emerging in the media.
The call to 'hang' bankers has always been used by those who are prone to hyperbole. Not to long ago one of the candidates running for the Mayor of London was saying he would hang the bankers. Max Keiser regularly says the bankers are committing atrocities and they should be hung like they are in China when they break the law.
But outside of those flavourful personalities, mainstream pundits do not use the 'hang the bankers' line ever. It's fairly obvious why they don't as media outlets are obviously skittish about calling for the death of anyone (and rightly so, that's a bad sign for society if we become tolerant of television personalities arguing certain folks should be killed).
So that has always been a big 'no no' in mainstream television. Even Max Keiser when he's on a top tier media outlet refrains from saying the bankers should be hung.
But today we've seen a first of sorts.
Nouriel Roubini was on Bloomberg today discussing what the Libor scandal means and he didn't pull any punches (you can watch the video above).
He says:
"Nobody has gone to jail since the financial crisis. The banks, they do things that are illegal and at best they slap on them a fine. If some people end up in jail, maybe that will teach a lesson to somebody. Or somebody hanging in the streets."
While Roubini is in the doom and gloom camp, one thing he's never been is a headline chaser. He doesn't say things merely to shock people.
And to be fair, he's not directly calling for bankers to be hung. Merely implying that we are reaching the point where one has to ask is that the only kind of action that will curtail criminal banking activity?
Can the banking sector keep muddling by with this level of disgust bubbling up among pundits and the public?
I'd argue they can only because they have such a tight grip on the market. Who can you really go bank with other than the big banks? They have their fingers in every financial transaction that goes on in the world.
The ones who will take the hit however will be the politicians. And from that perspective, no, the bankers will not be able to muddle through. In time, sooner rather than later, the politicians will have no choice but turn on the bankers if they want to stay in office.
The great irony in all this though is that it's the bankers who fund the politicians campaigns through donations.
So bringing down the bankers will also bring down the entire political system (or at least the funding behind it).
Anyway, who knows what the future holds, but one thing is for sure, as Greece, Spain and Italy start to fall, as the recession continues, as people suffer, it's entirely possible we will reach a point where the shared common ideology towards this mess is simply... hang the bankers.
You cannot have a PR crisis any larger than the public calling for your head, that much we can say for certain.
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