Chapter 1

The Selfish Betrayal of the Global Investor: Libor and Its Consequences

Virtue itself turns vice, being misapplied,

And vice sometimes by action dignified.

William Shakespeare

In the post–credit-crisis market climate, international promises of financial governance and reform have too often fallen by the proverbial wayside. The allure of depravity, corruption, and market manipulation prove to be powerful motives that continue to harness virtues deeply seeded in the human spirit.

The voracious personal desire to assemble profit by illicit means is the most traditional of economic vices, and the most obvious. Yet, perhaps like never before, on a systemic level, the recent Libor crisis demonstrates how greed can push governance out of the way for maximum profit and personal gain for the few with great costs to many.

Unlike most financial scandals, the Libor fraud did not originate with one man, pervasively toxify one company, or rest on one financial product aimed to deceive. The Libor scheme defined the way that a cartel of large, “too big to fail” international banks conducted daily business.1

Widespread manipulation of Libor for short-term proprietary reasons is only another intense warning sign that economic vice has become part and parcel of the way institutions, governments, individuals and entire societies conduct their affairs.

Enhancing governance and lassoing out-of-control risk is essential for any banking institution considering long-term, sustainable growth, ...

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