So the parliamentary committee has published it's report damming just about all who were involved or should have been (the regulators). It was indeed entertaining to watch the poachers and the gamekeepers deploying weasel words to defend their complicity, nievety, complicity and incompetence against the probing of a panel of self effacing Members of Parliament with no interest but the public interest in mind.
To be fair I ought to be less cynical as these institutions are the only ones we have and we must make the most of them. But is it also not so symptomatic of the cosy relationships that exist between those at the heart of the British establishment. The key to the LIBOR scandal is self-regulation. Parliament which has so ineffectively policed the moral standards of its own, somehow thinks that others at the pinnacle of society will always act in the best interest of the wider community instead of to enrich themselves at eveyone else's expense. The concept can only work in a system where the benefits of compliance clearly outweigh the rewards of noncompliance. This may have been the case in Victorian times when a gentleman could be blackballed from his club for the minutest of misdemeanors, and as a backstop there was God's opprobrium and a promise of hellfire. Neither applies today , at least for the vast majority, so self-regulation clearly will not work.
Every economics student also learns about moral hazard. So when the FSA and the Bank of England are told of "trouble at mill", what went through their minds? Was it that they did not want to cause trouble, and that they wanted to keep options open for their next jobs. After all, non-exec directorships are a nice way to ease into retirement.
Postscript 20 Aug 2012: The war of words between MPs and Bankers (partiuclarly at Barclays) continues. Mr Diamond "categorically refutes..." the suggestion that he was anything but candid and truthful in front of the Treasury Select Committee. We should not doubt him, at least in his own terms and anyway except for the fly on the wall of his office, who is to know? The sad thing is that the corporate ethics at Barclays were probably not considred by any involved to be other than normal behaviour. In all big companies ethics starts with the tone at the top. But tone at the top is not sufficient to embed particular behaviours throughout an orgnisation. It requires a conscious effort at all levels and by all line managers, supported by clear guidance from functional experts. And it requires appropriate consequences for people who step out of line. The kind of draconian fines and imprisonment ofr senior managers with oversight that oversight agencies in the US and elsewhere are beginning to impose on corpora wrongdoers, focus the mind. They are though all too apparently missing in the UK. Time to forget self-regulation and draw up strong laws that make it uneconomic not to comply.
