Said TARP Inspector General Neil Barofsky to Bloomberg, in part, about the LIBOR scandal and how it's a result of TBTF banks' capture of our regulators:
From what we see, there appears to be criminal misconduct here. [...] That's securities fraud. [...] And I want to see someone brought to justice.... There's a lack of leverage that the government has to a certain degree, because they cannot ... go and indict JP Morgan, they can't indict Goldman Sachs for something it's done, they can't indict Citi, because if they did that, they'd bring down the entire financial system. And you know what, that's part of the whole problem here. Because the banks know that. Which is why they can go and do unethical and borderline criminal and possibly criminal acts because they know in the long run they're too big, they're too powerful, they're too politically connected to be brought to justice.
This was not said by a flaming liberal like moi, or a crusading journalist like Taibbi, this is from the mouth of the guy who oversaw TARP. This is serious.
Nevertheless, I predict there will be pansy slaps on wrists all around, and maybe some fines for a few $ million, despite these LIBOR cheats having made untold $ billions by manipulating LIBOR for at least 6 years. I'd be pleasantly shocked if the SEC brought any indictments.
What will be interesting to see is whether Republicans, as they court Wall Street's money and support this election season, decide to criticize Tim Geithner (for actions as head of the NY Fed before Obama was elected) for "regulating" the LIBOR cheaters basically the way Republicans say we should regulate banks: by copy-pasting banks' own recommendations. (But let's not overlook that Geithner could not have forgotten what he learned about LIBOR once Obama appointed him Treasury Secretary; he just decided to continue to ignore it.) Will Republicans not be able to resist trying to do some collateral damage to Obama? Or will they not risk digging into the Dubya years and meanwhile try to protect their TBTF bank cronies? Probably the latter.
But if there were any justice: 1) Geithner would resign from Treasury immediately, and possibly face criminal prosecution; 2) LIBOR cheats would be prosecuted and thrown in jail; and 3) too big to fail would be ended by breaking up the TBTF banks. Fat chance.
July 13, 2012 | Bloomberg
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