Back when I was first learning about the stock market (in Mrs. Sherman's fifth grade math class, where we each had to pick five stocks, follow their prices in the newspaper and plot the changes on graph paper) there was one aspect of it all that didn't make sense to me: If investors were happier when stocks went up, why didn't everyone just agree to keep pushing prices higher?

Ah, childhood. There is knowledge to be gained but also a certain amount of innocence lost when you learn about things like shorting, speculative bubbles and the vulture mentality of buy low, sell high. Once I grasped those concepts, I understood why it was that stocks sometimes had to fall, and I came to appreciate the checks built into the system.

But apparently I could have skipped all that intellectual growth and done very well for myself on a rates desk at one of the major U.S. or European banks, where it seems people were happier when Libor was low and accordingly agreed to try to keep it that way.

I know I shouldn't be shocked that the world of high finance would yield a scandal like the one unfolding this summer around the London interbank offered rate. Yet I feel stunned that such a significant benchmark for the global financial system would be manipulated, and apparently allowed to be manipulated, in this way. My astonishment now has me rethinking all kinds of ideas I previously held about how big banks should be regulated.

As I write this, the investigation into what the regulators knew, and when, is just beginning. If it's true that the regulators were in on the game, then what was their reasoning?

The conspiracy theorists might argue a simple case of regulatory capture-that being complicit now would yield a high-paying private sector job later on. But what if the reason was more guileless than that? What if regulators were afraid that unless the banks were allowed to lie about Libor to a jittery market, then the safety and soundness of banks-one of their most sacred responsibilities-would be compromised? What would that say then about the most basic principles underpinning our complex regulatory structure?

Congress already is knocking on the New York Fed's door seeking information about its discussions with banks regarding Libor. We don't have all the answers yet, but I'm almost afraid to know.

Maximum employment and stable prices are the dual mandate of the Federal Reserve. But if the broad desire for stable prices (and by extension a stable financial system) is at odds with the broad desire for trust in things like Libor, maybe the folks who'd been calling for the Fed to be stripped of its regulatory powers weren't so far off the mark after all.

On the other hand, there had been a defined split in the duties of the Bank of England and the U.K.'s Financial Services Authority, and that didn't stop Barclays (and possibly many other institutions) from putting the "lie" in Libor.

There's little point in solidifying a position here until all the facts are in. But the lesson of scandals like this one is that sometimes it takes years for the truth to come out, and even then you can't be too certain that what you're hearing is actually the truth.

Having said that, I can promise you at least one thing this month: our cover story will leave little doubt in your mind that the Southeast is going from one of the country's most decimated banking markets to one of its most dynamic. That's because a bevy of mid-cap banks like Iberiabank of Louisiana, Home BancShares in Arkansas and Hancock Holding Co. in Mississippi are pushing east, and altering the competitive landscape in an ultra-competitive region.

There's more inside to enjoy, and as always, I invite your feedback. We value it deeply here. And that's the truth.


Heather Landy

Editor in Chief

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