Barclays bank has seen two top managers leave in the past week. More are expected to resign, and there will probably be fines as well. This is not enough to staunch the swamp of deplorable behavior that is seeping out of the bank on a monthly basis. What the UK and world authorities need to do is to break up the bank. Its international assets should be seized by the IMF and it should be dismantled. This would create smaller financial entities that could increase competition. What we have been watching with increasing horror for the past two years is investor attacks on the Eurozone bonds and now we are faced with the collapse of the Eurozone. This is absurd, the credit crisis is the fault of the banks, not the people of the EU, the Eurozone should not be replaced, rather the banks should be split up. Incomes of the average American have been stagnant since the 1970s and household wealth has fallen to 1990s levels. Yet the 1% are richer than ever. Carlo Cipolla demonstrated in his 1976 book, Before the Industrial Revolution that the people of Europe lived in abject poverty during the Middle Ages, it was not until the struggle against Feudalism took hold in the 12 century as G.G. Coulton describes in his 1921 book on feudalism, that joined with the struggle of the towns and the effects of the Black Plague that the foundations for the Renaissance could be built. Inequality results in stagnation and we are headed for it. Opposition to inequality is not a rich vs poor issue, it is one of democracy vs oligarchy. It is the same struggle seen in the Roman Republic of the Optimas vs the Popular party which included rich and poor alike. In the end the popular party won but by then the Republic was a victim of the violence.
Cipolla (1976) has shown that most of the inventions that led to the Industrial Revolution were in existence prior to 1800 and many were borrowed from China and the Arabs. The rest were produced before the creation of the great fortunes of the Gilded Age that were a result of corruption and monopoly. Monopoly, as Adam Smith argued using the East India Company and Corn Laws as a vehicle, stifled not only innovation by small companies but allowed the government to be used by monopolists to protect their companies and reduce competition.
But the entire situation at Barclays demands further notice. Let's look at the evidence, because the history of corruption at Barclays is not only system wide in the industry, but it involves a number of other manipulations including money laundering.
1. Complaints about the Libor were made as far back as 2007 according to an article in the Financial Times by Brooke Masters and Patrick Jenkins (FT July 2, 2012). The article cites sources from bankers, traders and investors to US and UK regulators that false information was supplied for the setting of the London lending rate. Only the American Commodity Futures Trading Commission (CFTC) made any effort to research and verify the manipulation that affected over $360tn (trillion) in loans, credit cards and contracts of a number of different kinds. The basis for this manipulation was profit and it is obvious that there is opportunity for law suits from homeowners to credit card holders to investors of all kinds including pension funds and their retirees.
2. An article in the Financial Times by Braithwaite, Nasiripour and Masters (June 20, 2012) cites Gary Gensler of the CFTC who argues that trading losses in the US can often be traced to London offices of financial institutions. Losses like that of AIG were later covered by the US Treasury.
3. Bob Diamond, the just resigned Barclay's Chief Executive Officer was hired from First Boston (it had been acquired by Credit Suisse in 1989 after it nearly failed with the collapse of the junk bond market) in 1995 (see John Plender's July 7th article in the Financial Times for details on Barclay's history). The bank (under its old name First Bank of Boston, but now CS First Boston) was also charged with money laundering along with Citibank in the 1980s (http://money.cnn.com/...). The culture of our banks, especially the largest, is certainly problematic and deserves a comprehensive investigation by a special RICO team. Their involvement in drug cartels and other illegal organizations needs to be clarified in the light of their own illegal activities.