When I hear about the Barclays Libor scandal, I can't help thinking of some poorly paid clerk sitting there and reporting, at 11a.m. London time, five days a week, for the last 40 years or so, the rate at which the bank he works for could borrow funds, were it to do so by asking for and then accepting interbank offers in reasonable market size.
And so can anyone blame him for tweaking that rate a bit, now and again, in order to make a trader colleague happier, and perhaps be invited out for a pint of beer, or two? Of course the clerk misbehaved, and did a bad thing, no question about it. But who of all those debating this issue can feel so sure about having the moral standing to throw the first stone?
And frankly, what were the losses for society? Some earned less interest, other paid less interest, some made speculative profits and other speculative losses, and it was all, in the long run, most probably a wash anyhow. I add and add and subtract and subtract. And I do not start to get even close to something comparable to the real financial losses the world has suffered from Potemkin triple-A-rated securities … or the losses it is about to suffer from having our banks dangerously overpopulate the remaining safe havens (because that is where the regulators allow them to go without putting up bank capital).
No! As H.L Mencken prescribed in "The Penalty of Death" of 1926, let's have a catharsis of this mess and get it over with. We have much more urgent issues in front of us, such as allowing our banks to lend to small businesses and entrepreneurs.
And following again another of suggestion by Mencken, this time from "The Criminal Law" in 1922, why do we not punish the clerks and about six traders closely associated with the scandals to five years of service? They should be paid a lowly salary for reporting on inflation and unemployment rates, while the regulators, over the same time span, and collecting the same lowly salary, must assume the responsibility of reporting the "real "Libor.
Per Kurowski was an executive director at the World Bank from 2002 to 2004. He writes the Subprime Regulations blog from Rockville, Md.