By: John Charles Dyer, UK Correspondent
Parliament’s Treasury Select Committee interviewed Jerry Del Missier 16 July 2012 as Parliament broke for a 10 week “recess.” Jerry Del Missier is the former Barclay’s official who allegedly interpreted Bob Diamond’s email as a directive to artificially lower interest rates.
Politicized Process both sides of the Atlantic
To date, members of the Treasury Committee have displayed a single minded focus on either finding “the smoking gun” of Labour involvement or proving that there was no such involvement. Members, including the Chair, dismissed Diamond’s testimony as “economical with the truth.” Last week the Chancellor publicly accused Shadow Chancellor Ed Balls of “having questions to answer.” Despite clearly consistent, exonerating testimony from Bank of England Deputy Governor Paul Tucker and Barclay’s Bob Diamond, despite Number 10 acknowledging Balls had no personal involvement, Number 10 steadfastly refused to apologize but instead repeated that Balls and Labour “have questions to answer.”
Dell Missier had not testified as of the writing of this article. One has the impression that whatever he testifies, the Chair will likely find "economical with the truth" any testimony that does not finger at least the regulators at the Bank of England, and Number 10 will continue to insist Labour “has questions to answer.”
In the meantime, the US Senate plans its own inquiry into what Timothy Geithner knew about LIBOR, when and how, and what he did or did not do with the information, prompted by information that suggests Barclays complained as early as 2007 that its competitors were low balling LIBOR.
The version of “the truth” on the airways in the US is Diamond repeatedly tried to warn the Federal Reserve in New York (translate Geithner) that others were low balling LIBOR. The airways believe they already know what Geithner will testify. Sky News reported 13 July that Geithner leaked a 2008 email to Sir Mervyn King warning UK banks were low balling LIBOR. Following the New York Fed's release of documents, the Post reported Geither recommended 6 changes to the regulation of LIBOR. Saturday the 14th the Independent reported that regulators both sides of the Atlantic knew banks were fiddling LIBOR, but did nothing about it.
Neither inquiry takes place in a Courtroom or academic setting free of fear or favour
The US is deep into a Presidential election campaign some describe as a virtual dead heat. Although the average of all reputable polls suggests Geithner's current boss, President Obama, has the edge (and it is a couple months before the polls become truly indicative), the race is nevertheless hotly contested and too close to call.
The GOP candidate seeks to pin the economy on the President’s handling of it. The President seeks to portray the GOP candidate as “of, by, and for” the financial sector, with questions to answer concerning his tax affairs and job outsourcing at Bain. It would not be an exaggeration to say social conservatives and progressives are fighting an all out battle for the hearts and minds of the American electorate. The implications for the future and the stakes are nothing short of staggering.
For the supporters of the President (and possibly his challenger) there would be an advantage to pinning the LIBOR tale, indeed the banking crisis as a whole, on The City, the UK’s regulatory structure, and regulators. Both men would profit from removing blame for the banking crisis and economic downturn from their plates, Romney as a financier, Obama because the US recovery has slowed.
It is beginning to look like election year politics in the UK, also. There are some indications that the Coalition may be destabilizing. There is an undercurrent among Conservatives. This past week 91 Conservatives joined with Labour to hand the Coalition its first defeat on an issue dear to their Coalition partners. Some Conservatives would be happy to see the backs of both the Coalition and the Prime Minister and a general election called. While some say the timing is bad for them, Conservatives might conclude things will only worsen unless they make boldly ruthless moves now.
Foreseeable Consequences from Divergent Interests producing Competing Narratives
One can readily see the rapidly developing politicized narratives. The Tory Party seeks to pin the tail on the Labour donkey. The Labour Party seeks to pass it along to someone else. Together they raise questions concerning the integrity of The City and its regulator. Those questions will remain unanswered for 10 weeks. In the meantime, politicians in the US reframe the story as the US economy brought down by an untrustworthy British banking and regulatory system whose “good old boy network” of regulators and the regulated conspired to artificially lower LIBOR and G*d knows what else.
A broken system
It may even be true. It is not always the case things said and done for political advantage are untrue. And it is no doubt necessary the culpability of the culpable see daylight.
But true or not, emotionally satisfying or not, valuable or not, something much more important could be lost as the protagonists dump compost on each other.
There is a problem that must be fixed. Pinning the tale on the donkey is fun. It may temporarily redirect heat onto one’s opponents or elsewhere. But it doesn't fix the bank regulatory system in Europe, the UK, and the US. That is a necessity, and it is a necessity that has eluded neo liberal leaders all sides of the Atlantic for 4 long years.
We need to reinstitute a comprehensive regulatory scheme, thorough inspections, audits not so disclaimed as to be meaningless. Enacting that is the sort of work for which we hire politicians.
We hire prosecutors and judges for the sort of work into which politicians now race. Those prosecutions require time, prep work, due process and evidence. Emotive speeches and circular “I just know you're lying” because the witness did not give an answer that fits with the politician's narrative just aren't good enough.
Politicians both sides of the Atlantic, but particularly in Britain, need to consider the doctrine of unintended consequences.
What we need from our politicians on all sides of the Atlantic is the reinstatement of the tried and true. We all know what once worked to protect all our interests. If we let this moment get away from us, the new UK term for political failure, "omnishambles," will be totally "spot on" for both sides of the pond.