Watchdog Capital: Setting a hedge fund bloodhound on the trail of financial crime
The ease with which the Libor scandal has brought down the towering figure of Bob Diamond, master of the universe and investment banker extraordinaire, is truly momentous. It reveals how small cracks in corporate structures can turn into gaping chasms that engulf whole management teams. For those that haven’t been following the scandal, the gist of it is that traders have been caught submitting inaccurate figures to manipulate the Libor rate – an index which tries to reflect the average rate that banks can borrow on the 'interbank market' (aka. from each other) – for various dubious schemes. Libor relies on banks submitting honest figures to the British Bankers Association (BBA), the organisation that calculates the index. Interestingly enough, I was at a debate a few weeks ago on the topic of financial sector corruption, which pitted investigative journalists Ian Fraser and Nick Kochan against a representative of the British Bankers Association. Kochan and Fraser argued th...