Li(E)bor Banks: Too Big to Jail

The confidence in the system is so fragile still… a disclosure of a fraud… could result in a run, just like Lehman.

Tim Geitner, US Treasury Secretary

 When the banks rush to offer $40 billion in compensation -- more than the estimated penalty to be paid by BP for the Gulf Oil Spill, the alleged greatest environmental disaster in the history of the universe -- we can be sure they are attempting to stave off much more severe punishment.

Like what?

Well how about sixteen times more severe. There were sixteen banks involved in fixing Li(E)bor. They've already agreed to contribute to a group penalty, a clear acknowledgement of guilt. So why not have each of them contribute $40 billion to a compensation fund for those who've been ripped off, this amount not to constitute a limit on their liability.

But this penalty should not come solely at the expense of bank shareholders. In the first place, the payment should be funded by repayment of all directors and traders salaries, bonuses and incentives in excess of $1 million per year for the duration of the Li(E)bor scam.

Now some would say leaving the bastards with even a million bucks a year is too generous. But remember champagne and caviar don't come cheap, and we are not proposing to force them into literal starvation.

But in addition, there must be a reconstruction of the banking industry. The high street banking sector must be separated from the investment banking business and established on a depositor-owned basis, like the credit unions, or in Britain, the Building Societies that were acquired by geniuses such as the, former sir, Fred Goodwin of the bailed out Bank of Scotland.


As for the rest of the banking industry, I recommend exile to the Bahamas or some other cockroach infested place where they could mug one another to their hearts content.