Labour’s hands aren’t clean on Libor

The bad debts and toxic products of our banks have already scarred the early years of this century and destroyed the hopes of a generation. Now we discover that while many of these banks were using our money to bail them out, they were also manipulating the Libor rate to inflate their profits and the mortgage payments of millions of hard pressed tax payers.

The role of Barclays in this corrupt practice is even harder to take following Bob Diamond’s public admonishment that banks had paid their penance and deserved a break. He wasn’t Chief Executive at the time but was running Barclays Capital, the division responsible for the ‘derivatives dudes’ engaged in this filthy practice. His ‘apology’ and offer to forgo his bonus is small and pathetic given the scale of the scandal. He could make a start by repaying all the bonuses for the years when this was happening under his nose.

There’s been considerable publicity about the £290million fine Barclays have paid but only £59million of that will go to the British FSA and to put it in perspective, Barclays made £5.9billion profits last year with a bonus pool of £1.5 billion reserved for their investment division. In 2009, one of the years covered by the investigation, their profits were up 92% at £11.6 billion.

Labour’s hands aren’t clean over this; we presided over a ‘light touch’ regime where such scandals flourished. We should have done more and had not the last 18 months of Gordon Brown’s government been dominated by the world wide economic crisis I have no doubt that the demands for action would have grown. Conveniently the Tories now blame Labour while suffering a collective amnesia over their view that the regulation wasn’t light enough. We may not be able to prosecute the ‘offenders’ although justice demands that every avenue should be explored but we can legislate so that it never happens again and ensure that the penalty for such wrong doing is a custodial sentence.

In March this year Labour called on the government to review the way the Libor rate is set. They were given short shrift. We no longer need a review but an immediate clause in the Financial Services Bill, currently before Parliament, which means the Bank of England becomes responsible for regulating the Libor rate.

This isn’t just a dry banking scandal. These people created a financial crisis that has wrecked lives on a global scale. They took our money to bail themselves out and at the same time conspired to cheat the market like common crooks. They did it without any regard for the impact on mortgage payers or small businesses on which they were forcing interest rate swaps and hedge products as conditions for a loan.

There are those who sneered when Ed Miliband first raised his voice against irresponsible and predatory capitalism, they won’t have so many backers now. Regulation of these institutions isn’t an impediment to wealth creation, it’s a moral imperative for those who believe that our financial system must be characterised by honesty and legal trading.

Steve McCabe is the Labour MP for Birmingham Selly Oak