I have mentioned a couple of times in the past few days that I think regulators and banks will be scrambling to deal with the LIBOR scandal. Said scramble seems to have started.
On the front page of the Financial Times (FT), accompanying an article titled “Bernanke calls Libor a ‘flawed’ benchmark,” are two photos. The first is of Ben himself, who was quoted as saying in 2008, “[T]here was active effort to report to all the relevant policy makers.” Immediately below that is a photo of Mervyn King, head of the Bank of England, with the quote, “The first I knew of alleged wrongdoing . . . was two weeks ago.” Now, either the Bank of England was not a relevant regulator, someone there did not bring Mr. King into the loop, or someone is, charitably, mistaken. The FT follows up on page 4 with “Libor scandal puts Bank of England in the line of fire,” and the Wall Street Journal (WSJ) has “Libor Scandal Ensnares Fed, BOE” on page C1. This just gets more interesting by the day.
Other deepening scandals are the HSBC money laundering problem, which is highlighted on the front page of the FT: “HSBC’s head of compliance quits at hearing.” Never a good sign, right? At least the regulators got them—in 2003, in 2007, and again now—for the same things. Meanwhile, the front page of the WSJ has “Trading firm CEO: I Spent It” in reference to the Peregrine Financial fraud and collapse. The best quote comes from the founder’s suicide note, in which he said that deceiving the regulators was “relatively simple.”
Cue the circular firing squads. Seems like there will be enough blame splashed around to get everyone.
In the times they are a-changing file, we have the following. First is the New York Times (NYT) front-page article, “At Fiscal Cliff, Anti-Tax Vow Gets New Look.” Just as we saw yesterday with the online sales tax exemption, Republicans, facing the need for revenue, may be starting to blink on the tax issue. Don’t get too excited, though—all of the positive comments on the idea are from Democrats, and the Republicans quoted at the end of the article are against it. Still, the fact that an article like this can make the front page is interesting. Providing additional support is another front-page NYT story, “Gloomy Forecast for States Even If Economy Rebounds,” which points out the pending revenue shortfalls states face as a result of probable federal spending cuts. Finally, on page 18 of the NYT is an article titled “Texas Counties Fear Residents Will Pay the Price of Perry’s Medicaid Rebuff,” which deals with the tax rise necessary to pay for uninsured health care in county hospitals—an increase that would probably not be necessary if Texas were to accept the federal Medicaid funds distributed under Obamacare. Just as we discussed in Florida several days ago, the politics of the health care bill will not be obvious going forward. Beware of unintended consequences.
Let’s end with a couple of good news stories, all from the WSJ. Who says capitalism isn’t fun? “Some Firms Opt to Bring Manufacturing Back to the US” is cheering, and “Top Schools Join Move to Offer Free Courses Online” will be good for everyone. My favorite, though, is “Chocolate: A Health Food?” on page B1. To avoid the suspense, the answer turns out to be yes for dark chocolate. Who says science can’t improve our lives? Now if they could just add bacon to that list . . .