Tuesday, July 3, 2012

The LIBOR scandal grows

Barclays boss Bob Diamond has been forced out this morning, as the LIBOR scandal continues to pick up momentum (at least in the UK).

Every CEO of a major bank is going to be having a queasy feeling this morning. It's probable many other major institutions were doing the same thing. Charles Schwab filed a lawsuit last year accusing JPMorganChase, Citi and Bank of America of doing the same thing, not to mention Credit Suisse, Deutsche, RBS, HSBC, WestLB and UBS.

Expect a blizzard of other lawsuits, including from consumers, US states, and shareholders alleging negligence. The question is whether there will be criminal as well as civil prosecutions in some jurisdictions.

There could also be difficult questions about the role of Paul Tucker of the Bank of England in Parliament today. It just does not seem believable that the Bank would encourage any distortions, however.


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