So the latest responses to the financial crisis are out. Banks that don’t abide by the ring-fencing requirements may be subject to a forcible break-up, says George Osborne. The Feds are after us, say S&P.

Let’s begin with George. It’s politics, that’s all. The rules are going to require a ring-fence. If the banks don’t apply it themselves, the FSA’ll do it for them. Big deal.

As to S&P – well, my experience is UK-based so I can’t comment on the specifics of the case (not that there’s anything out there yet anyway). What I can say is that over here this would be a nonsense. Mistakes were made, a lot of them, but they were mistakes. That’s all. And pretty much everyone made them.

At least that’s what I would have said a year or two ago. BL. Before LIBOR. Libor-fixing changed everything. I knew there had always been a culture on the city of “us against them”, of trying to work around the rules and spin the numbers, and I also knew, because it didn’t really sink in until I’d been out of the place for a year or so, how insidious it all was, how it seemed reasonable and automatic and basically harmless (and more on that to come). What I didn’t realise, BL, was that there was more than spin going on. There was serious cosmetic surgery, and there were a lot of surgeons, and they were trusted by the rest of the industry and they repaid that trust with one giant finger.

That was Libor-fixing, for me, and, I suspect, for the majority of people who work or have worked in the City. It might not have had much actual effect but it destroyed trust far more effectively than all the seismic shocks of 2007-8 put together.

So now I just don’t know. Maybe someone at my bank and someone at S&P really did it, really colluded, actively and consciously, in providing misleading information to the market and thus contributing to the whole big mess.

It’s a horrible thought.

update: I’ve just seen this. Not sure what to think yet. No doubt he is a sacrificial victim. But maybe that’s what’s needed.



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