“This is not an efficient market; it is not a sane market; it is not an ethical market; and it may well explain why the stock market rose yesterday on a shocking first quarter decline in U.S. GDP. Fundamentals don’t matter to pirates.” ~P & R Martens
Yesterday, New York State Attorney General Eric Schneiderman filed a civil fraud complaint against the global bank, Barclays, for what can best be summed up as fostering an internal culture that rewards serial lying to customers and enforces the culture of lies by firing or intimidating employees who refuse to go along.
The lawsuit was framed around well documented allegations that Barclays is running a dark pool that allows, encourages, and facilitates high frequency traders to front run the orders of slower market participants like pensions and mutual funds; but the critical takeaway from the complaint goes to the very heart of global banking. The complaint is the clearest proof yet that the insidiously corrupt culture of global banking has not been reformed but has instead metastasized throughout each operating unit of the unmanageable behemoths.
To fully grasp this reality, it is helpful to reflect on what was happening at Barclays in the summer of 2012. Barclays was fined $451 million for fostering a culture which resulted in its traders colluding with other employees of the bank and outside banks to rig the interest rate benchmark known as Libor. Embarrassing emails showing the casual attitude the employees demonstrated toward breaking the law resulted in hearings by Parliament’s Treasury Select Committee in 2012 to examine Barclays’ leadership.
On July 10, 2012, the Treasury Select Committee called Barclays Chairman, Marcus Agius to testify. It also released an April 10, 2012 letter to Agius from the U.K.’s Financial Services Authority, the main U.K. regulator of global banks at the time, which outlined a laundry list of serious concerns about Barclays and noted the following: “…I wished to bring to your attention our concerns about the cumulative impression created by a pattern of behavior over the last few years, in which Barclays often seems to be seeking to gain advantage through the use of complex structures, or through arguing for regulatory approaches which are at the aggressive end of interpretation of the relevant rules and regulations.” Continue reading