As the inquiry into Libor-fixing by the Treasury Select Committee rolls on, two things become apparent – one, as the muck spreads across the financial community it actually becomes harder to tell exactly where the buck stops, and two, the toothlessness of such inquiries themselves.
As more bankers and officials are hauled before the TSC, the criss-crossing blame game that’s going on looks like it may serve only to obfuscate, rather than illuminate, matters. Today, Barclays ex-chief operating officer Jerry del Missier said it was his former boss Bob Diamond who told him to submit lower Libor rates, as a counter to Diamond’s testimony last week that del Missier misinterpreted an email. Indeed, according to del Missier, Diamond told him in October 2008 that no other than the august institution of the Bank of England was putting pressure on Barclays to get Libor rates down.
When it was their turn to field questions, the Financial Services Authority’s Lord Adair Turner and Andrew Bailey conjured up a dark picture of Barclays’ business ethos – Lord Turner pointed out that there have been concerns about the bank’s tendency for ‘pushing the limit’, while Bailey muttered about Barclays’ ‘culture of gaming’. As for its own sphere of responsibility the FSA, until now apparently content with its image as a robust watchdog, this afternoon portrayed itself more as a sort of romantic watercolourist: it’s got a ‘light touch’. It was the FSA’s ‘light-touch’ regulation that meant that it didn’t act on Libor rigging sooner. Said Lord Turner:
Part of the story of the FSA at that time is that we did have, we never used the word, a somewhat light-touch regulation in particular in those areas of wholesale conduct.
The FSA also revealed that seven banks are being investigated over Libor, so we can expect the unedifying mud-slinging to continue gaining in magnitude, if not in clarity.
Just how effective are such inquiries in doing what they’re supposed to do, which is arriving at the truth? Is there a better way of doing things? This year we’ve seen inquiry after inquiry, and it’s worth inquiring whether the process itself is up to scratch. Because there are already calls for yet another one – this time into the Olympics G4S security fiasco.