Steffen Schmidt, IAFC Blogger
Steffen W. Schmidt, University Professor of Political Science and Public Policy at Iowa State University, WNYC blogger, and chief Political correspondent of Insider Iowa.
In case you've been away at the cabin fishing or in a maximum-security isolation prison and haven't heard about the most recent international banking scandal, let me catch you up.
This latest iteration involves the system by which banks set the London interbank offered rate, Libor. This is the rate that banks charge each other for loans, and "is used to determine the borrowing costs for trillions of dollars of financial products, including mortgages, credit cards and student loans." The fallout of this manipulation is thought to be responsible for huge losses at state, city and municipal levels of government and in some way affected the lives and finances of almost every human being on this planet.
This is an issue that both President Obama and Mitt Romney need to address frontally. To date, both campaigns have pussy footed around all of this dangerous and toxic mess. This is bigger than Obamacare. It's much more significant than Romney continuing as CEO of Bain after 1999. It has a far greater impact on every American this election year than any other issue the candidates have been discussing or will address in presidential debates this fall.
The American voter and the American people need to understand this crisis and be aware that they as individual citizens, investors, and workers have almost no control over their future. It doesn't matter where you invest your hard earned savings. It doesn't really matter how many of those fancy computerized investment "tools" advertised by companies you use to plan your financial future. Stocks, bonds, mutual funds, real estate, gold - it's all really irrelevant. We now know that it's all in the hands of a bunch of faceless, unscrutinized bankers operating in London, New York, Tokyo, and Frankfurt.
An easy position both candidates could take would be to criticize the settlements regulators have so far struck with bad-acting banks. One that infuriatingly comes to mind is Barklays nonprosecution agreement in which they were assessed a "penalty of more than $450 million," which the New York Times notes, is "a comparatively paltry sum for a bank that had more than £32 billion ($50 billion) in revenue in 2011."
Romney and Obama could both articulate that it is essential that people are arrested, chained and cuffed, humiliated, tried, convicted and sentenced to LONG, I mean LONG, jail terms in some of the dampest and most unspeakable prisons. Too bad Devil's Island is now just a tourist attraction. Just paying a fine is the cost of doing business and will NOT serve as a deterrent to future criminal bankers and financial scamsters.
Harsh sentences are imperative. Think of these people as the equivalent of drug cartel lords or terrorists. They have in fact, terrorized and destroyed millions of people's lives and sunk entire cities, states, and countries into pauperism, default, and permanent poverty. All in a cavalier and most arrogant and despicable way (just read the e mails of how these people set the Libor rates and your hair will catch on fire.)
Remember that unless any president puts out a realistic plan to fix the banking and financial services industry, which is the glue that holds together all the pieces of capitalism, our economic woes will continue and grow. Our economy's major ills - the housing default crisis, the toxic financial instruments crisis, the crisis in Europe, the Bernie Madoff fraud scandal, Barclays and Libor bank scandals - are all owing to the sense impunity the financial sector has enjoyed in recent years.
Let's at least talk about that this election.