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LIBOR scandal - canary in the coal mine ?

more from the chief conductors of the Titanic er the City of London:

Lord Adair Turner, head of the Financial Services Authority (on whose watch the Libor rate-rigging took place), has just condemned the scandal - and admitted that the true scale of City wrongdoing is much greater.

Turner told the FSA’s public meeting this morning that the full investigation into what went wrong will take years.

Here’s the key quotes:

The LIBOR scandal has caused a huge blow to the reputation of the banking industry. The cynical greed of traders asking their colleagues to falsify their LIBOR submissions so that they could make bigger profits – has justifiably shocked and angered people, in particular when we are facing hard economic times provoked by the financial crisis.

But sadly it is clear that the behaviours evidenced in the LIBOR case were not, in the years before the crisis, confined to this specific area of financial activity.

Barclays blames 'senior Whitehall figures' for Libor scandal as Bob Diamond resigns

Liberal Democrat peer Lord Oakeshott has swiftly welcomed the news of Bob Diamond’s resignation, and again called for prosecutions against those responsible for the Libor scandal.

Oakeshott told Sky News:

This is a great day. Bob Diamond was the greedy gambler, personified.

What really matters now is that the criminals inside Barclays, that they are charged and they are convicted and the full force of the law is brought to bare.

Stealing money as a banker is the same thing as stealing from a house.

Bankers and the neuroscience of greed The unconstrained power of bankers acts like a drug on their brains' reward systems, creating insatiable appetites

On 11 August 2011, Bob Diamond, chief executive of Barclays, delivered the BBC Today Programme business lecture. In it he declared that “culture” was the critical element in responsible banking, and the best test of it is “how people behave while no one is watching.” We now know that banking failed the test and so must ask why, in Sir Mervyn King’s words, “excessive compensation”, “shoddy treatment of customers”, “mis-selling” and “the deceitful manipulation of a key interest rate”, flourished in the banking sector. Cognitive neuroscience can point to some answers.

Senior bankers hold enormous power, greater than that of many elected national leaders. Largely unaccountable except to occasional shareholders meetings and often quiescent boards, their power is much less constrained than that of democratically elected leaders. And given that power is one of the most potent brain-changing drugs known to humankind, unconstrained power has enormously distorting effects on behaviour, emotions and thinking.

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