In science, there’s the “god particle,” the key ingredient in all of creation. In society trust is that crucial element. And trust has all but disappeared. When I was a boy it would have been unthinkable for a bank to cook its books. And especially Barclay’s Bank! If you can’t trust Barclay’s, who on earth can you trust?
But obviously you can’t trust Barclay’s. Rolling Stone’s Matt Taibbi makes that crystal clear in his reports on the British LIBOR scandal.
LIBOR is an acronym for London InterBank Offered Rate. It is the rate at which banks borrow from each other. Taibbi notes that “a huge percentage of the world’s variable-rate investments are pegged to LIBOR.”
And Alex Seitz Wald writes in Salon.com today:
While JP Morgan’s trading losses last month got plenty of attention, this week’s alleged manipulation of the London InterBank Offered Rate (LIBOR) could have much more direct impact on everyday consumers. The LIBOR is a widely used borrowing index that sets the price of lots of consumer debt, like mortgages and auto loans, and financial giant Barclay’s has admitted to rigging it. The bankers’ deception artificially impacted the price average people paid for new loans, though it’s impossible to say by how much. And the firm’s disgraced former CEO Bob Diamond alleges that many other banks did the same thing during the financial crisis, in order to mislead the public and world governments about banks’ health.
We all know by now that you can’t trust the big banks that control America’s economy. They’ve demonstrated over and over how thoroughly untrustworthy they are. But, growing up in Jamaica, I was impressed by the British banks. To me, they were a kind of benchmark of probity. So you can appreciate how I felt when I read this quote from Mervyn King, Governor of the Bank of England:
It is time to do something about the banking system…Many people in the banking industry are hardworking and feel badly let down by some of their colleagues and leaders. It goes to the culture and the structure of banks: the excessive compensation, the shoddy treatment of customers, the deceitful manipulation of a key interest rate, and today, news of yet another mis-selling scandal.
It was even more shocking to learn that high-up officials in the British government encouraged the banks to cheat because they wanted the country’s economy to seem more stable than it was.
The global financial system cannot survive without trust. And it is obvious that trust can no longer be taken for granted – even in the most respected institutions.
The institutions that control our lives can enjoy that power only so long as they have our trust. I am afraid that the existing institutions are rotten at the core and in imminent danger of collapsing.
The consequences of that collapse are too horrifying to contemplate.