For those who can receive it, this three part series is currently on BBC iplayer
. The first episode, called Fixing The System
, concentrates on the LIBOR scandal. According to the programme makers, it was this rather than the big crash of 2008 that brought the banks down.
The problem with LIBOR we are told is that it is, or rather was, based on trust.
LIBOR - the London Interbank Offered Rate - as it exists today, was established only in the 1980s. According to one contributor, it involves contracts valued at $300 trillion, many times bigger than the world economy, and clearly something as big as that cannot be run on trust.
The reality is that crash of 2008 and LIBOR scandal aside, the bankers have been ripping us off for not decades but centuries
; the computerisation of banking seems to have speeded up not simply the process but the frauds, so it was only a matter of time before the whole sorry edifice came crashing down around their heads like a house of cards. The LIBOR fraud actually came to light in 2008; the Federal Reserve tipped off the Bank of England, but the warning went unheeded.
The following year, the UK regulators made an extraordinary discovery: cheating and lying at the heart of the banking system. It is suggested here that LIBOR started as a means of keeping the system going but that it deteriorated quickly into self-aggrandisement. The FSA uncovered some amazing e-mails between traders arranging to fix the LIBOR rate. This government watchdog has now been not axed but split in half. Its old website has been archived
, and the two new bodies are the Financial Conduct Authority and the Prudential Regulation Authority
, the latter is now part of the Bank of England.
A major "star" of the show had to be Bob Diamond, who was hired by Barclays in 1996, taking up his post on America Independence Day. Diamond is one of those inside men who doesn't understand how banking works, or maybe he does
and is not letting on, but either way people like him have no business running banks. He was forced to resign on July 3, 2012. If the background music here sounds familiar, that is because it is Shine On You Crazy Diamond
Barclays was not of course the only player in this scam, nor was it the most corrupt, but it was the biggest name by far. Founded by Quakers John Freame and Thomas Gould in 1690, in 1736, James Barclay, Freame's, son-in-law, became a partner in the bank that would become know as Barclay, Bevan, Tritton & Co
, and finally the Barclays of today. The bank's motto was and remains: honesty, integrity, plain dealing. Unsurprisingly, this was something Diamond didn't know.
So what is to be done now? According to Anthony Browne of the British Bankers' Association
's, we need banks. But do we?
The two principal functions of the high street banks are book-keeping and acting as a strongroom. As far as we need banks at all, these are the only services
most of us need, and we can now handle most of our transactions on-line. We certainly don't need so-called investment banking, and the idea that banks should lend to each other is ludicrous. An honest system of finance based on Islamic banking
principles would negate this entirely. Don't expect to see any suggestions like that in the following two episodes of this series, nor in the corridors of power on either side of the Atlantic.