Another week, another banking scandal. The global economic meltdown of 2008 left most of us deeply cynical about the financial industry, but unless you’re into gold or stuffing your savings into mattresses, what choice do you have as to where to save and invest money? That’s why it’s genuinely alarming to read the breezy exchanges between traders and bank officials who were manipulating Libor, one of the world’s most important benchmark interest rates (see Business: Issue of the week). Libor determines rates on $800 trillion in contracts—including mortgages, car loans, and credit cards—but for four years insiders engaged in a mutual back-scratching exercise to rig it for their own benefit. “For you...anything,” one wrote in gratitude for that day’s “fixings,” as they’re aptly called. “Dude. I owe you big time!” The former CEO of Barclays said he was so shocked by these practices that he felt “physically ill,” but in his protestation I hear echoes of Captain Renault from Casablanca.
Only one in five Americans still has confidence in banks, and that number will undoubtedly shrink. Even Joe Nocera, a veteran financial columnist for The New York Times, who’s reported on fraud, foreclosures, and toxic tranches, found himself brought up short this week. “With all the seedy bank behavior that has been exposed since the financial crisis, it’s stunning that there’s still dirty laundry left to be aired,” Nocera said. But the Libor scandal is still unfolding: Investigators have only begun their work, and more nauseating revelations are sure to come. Still, with banks now too big to fail and too complex to regulate, it seems that they’ve left us with no choice but to trust them with our money. Good luck to us all.
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