Hit 'em again? Is LIBOR still being rigged?

When CFTC Chairman Gary Gensler spoke to the annual meeting of the Institute of International Bankers held in Washington on March 4, he discussed, among other timely topics, the continued reliance of the credit markets on the London Interbank Offered Rate (LIBOR), which he correctly asserted is ill-advised.  He mentioned that in 2012 LIBOR was dramatically more stable than comparable measures of volatility.  According to Chairman Gensler, for more than 115 straight trading days the LIBOR three month U.S. dollar rate did not change. 

Perhaps it is time to investigate LIBOR once more, starting where the recent settlements left off.  The marvels of modern word processing could make the burden of issuing new subpoenas a matter of minutes.  The attorneys and investigators that first snagged the liars now have a learning curve behind them.  It could be a perfect example of doing more with less.  And if this unbelievable stability is a sign of unbelievable stupidity or hubris, doesn't it cry out for continued redress?  Perhaps the tuition was too low for the last lesson in civic responsibility. 

Chairman Gensler's public expression of skepticism about this remarkable turn of events implies that his staff likely shares his doubts.  Hopefully, enforcement officials will be able to head off any corps of bankers hammering away at the "delete" buttons on their keyboards and running red-hot shredders.    

Is the correlation between results and compensation tightening at big banks?

The announcement on Wednesday that JP Morgan CEO and Chair Jamie Dimon's compensation for 2012 will be $ 11.5 million -- roughly half of his compensation for 2010 -- may provide some hope that the big banks will begin to bring executive compensation into better alignment with results.  Although Mr. Dimon will not have to change his lifestyle because of his pay adjustment, it does show that JP Morgan is taking the "London Whale" fiasco and its continuing fall-out seriously.

But some commentators believe that the bank did not go far enough.  Slate's Agnes T. Crane argues that Dimon should have been relieved of his Chairmanship.  Whether this should have been done as an additional sanction or simply as a matter of sound management restructuring, the benefits of separating the two offices that Ms. Crane point out are real.  And Bloomberg's Jonathan Weil faults the Bank's report on the London trading scandal for not analyzing how the Bank's Chief Investment Office morphed from a risk management operation into a speculative powerhouse -- a transformation urged by Mr. Dimon.

Still, a journey of a thousand miles ... .  There are many chapters yet to written in this, and the many other, trading scandals that came to light last year.  It is difficult, however, for those who maintain even a shred of optimism about whether the US financial sector can be salvaged in its present form not to see this as a ray of hope -- dim and flickering, perhaps -- but still as step in the right direction.