The quick version of the Libor banking scandal is that for a few years, a bunch of international banks headquartered in London flat out lied about what they needed to charge each other to borrow money, and what revenue they were getting from it. (Libor is the London interbank lending rate.)
That mattered not just because it hid big holes in bank balance sheets (like covering up that you’ve been fired by taking cash advances from your credit card), but because the number they lied about was the basis for interest rates on a lot of other things – like the mortage on your house in the U.S., or the variable rate you were charged on a loan, or municipal bonds issued by cities like Baltimore.
Essentially, Libor was supposed to be a thermometer that took the temperature of the market so we knew what was sick and what was healthy, and bankers were working together to stick it on lamps and ice cubes to get doctors’ notes.
One consequence is that banks were able to rake in literally billions of extra dollars on people’s mortgages, because whenever it was time to reset a variable rate, they had a button under the roulette table. This significantly contributed to the housing crisis and the European sovereign debt crisis.
Something similar happened simultaneously in Iceland (although on a smaller scale), and that’s notable because both Iceland and the City of London were in the E.U. but not the currency union. Employees could enjoy the protections of E.U. residence, but the banks themselves escaped oversight and regulation by the European Central Bank.
It’s almost like being able to shop around and pick your regulator creates a fertile environment for fraud.
One possible silver lining of hard Brexit with no passporting is that it may break up the too-cosy relationship between the Bank of England and the City of London investment banks which will move their operations. I expect they’ll find their own scummy level again soon, but it’s nice to imagine a temporary bust-up on the horizon, even if it’s for gloomy reasons.
It lets me daydream that someday Delaware will do something so stupid we’ll be able to take down Delaware. Yes, Delaware. Part of the reason U.S. corporations are assholes is they all claim to be from Delaware, and Delaware says corporations have no obligations whatsoever. Hence even though I have ancestral connections to Baron De La Warr, and even though I love Joe Biden, Delaware is my white whale. Someday, Delaware. Someday.