Is the City of London worth defending? Not many in the government seem to think so. Vince Cable, the Business Secretary, calls it a ‘cesspit’. George Osborne blames the financial sector for causing the crisis – the Barclays Libor scandal, to him, was not an isolated incident but indicative of the whole rotten system, ‘the epitaph to an era of irresponsibility’. The City’s global enemies look on, amazed. Not even the Brits are prepared to stand up for their extraordinary financial sector. As I say in my Telegraph column today, now is their time to strike.
As the Americans are pointing out, much Wall St woe can be traced back to London. AIG, Lehman and Bear Stearns all collapsed after trades made by their London divisions. Even today’s scandals can be traced back to skullduggery at EC1, from the alleged $2.3 billion fraud at UBS to the $2 billion trading loss at JP Morgan. Hitherto, it’s been hard to link this to any regulatory failure in London – especially given that America is hardly immune from such scandal, as the spectacular Peregrine case shows. But Libor the scandal does seem like, finally, something the rest of the world can nail on London. The Americans are gunning for the whole British establishment. Even the Canadians have launched a probe into the trading Libor anddemand to see internal emails from RBS, which has virtually no operations in Canada.
Because of London’s dominance Libor ended up being used world over – setting everything from American mortgages to Swiss central bank interest rates. Just why an utterly unregulated index was depended upon so widely is an embarrassing question for many a mortgage dealer, but rather than answer these questions they point to London and cry fraud. There is no defence for the Libor scams, and even cynical souls like me are sickened by the ‘big boy’ and Bollinger emails.