Jul
16

Banks Behaving Badly

The LIBOR scandal is the result of greedy banks. But banks are no greedier today than they were decades ago. The difference is now banks are so big, and involved in so many activities (investment banking, commercial banking, insurance, underwriting and derivatives), they continually have large conflicts of interest and are unwilling to create meaningful “Chinese walls” between departments. Absent a complete separation of activities, these problems will persist.

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  1. Adina Atwood says:

    If you look at the Wikipedia explanation, it seems that this has been a problem for years, and officials have known of the problem, but not pursued those involved. Our own Secretary of the Treasury, Timothy Geithner, seems to have been an active player in attempting to “fix” the LIBOR rates while president of the New York Fed.

    It makes me wonder, had the banks not been “bailed out” of collapse (and now we know that by fixing the LIBOR rates, they could give the appearance of better financial health for a longer period of time), if the result would have been a banking industry reduced in size and scope, and producing a much stronger, healthier industry.

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