The LIBOR scandal: It can’t just be bad apples

By Leah McLaren - Monday, July 9, 2012 at 2:51 PM - 0 Comments

Dylan Martinez/Reuters

Earlier this week, when American-born Barclays chief executive Bob Diamond finally stepped down in the wake of his bank’s interest-rate-rigging scandal, it was with characteristic defiance. “I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth,” he said. Not entirely surprising, given Diamond’s reputation for partisan toughness, though it’s interesting to wonder exactly which incongruous “truth” and “impression” he was referring to.

Here’s another truth: between the fall of 2007 and spring 2009, Barclays, one of Britain’s largest banks, found itself, like many other financial institutions, in dire straits. It was struggling to raise funds. Had it revealed it was paying higher-than-average interest rates, Barclays risked “reputational” damage and could have ended up being bailed out like the Royal Bank of Scotland or Lloyds Banking Group. Instead, its investment banking staff began subtly rigging the London interbank offered rate (LIBOR), an average interest rate estimated by the city’s leading banks of what they would be charged if borrowing from other banks. As the rate is calculated daily and underpins trillions of dollars of financial transactions, the habitual rigging had untold reverberations on the British economy as a whole. Last week, the scandal exploded as Barclays was fined $460 million by British and U.S. authorities for attempting to manipulate rates.

As for the impression? Here in the U.K., the Barclays scandal has been taken as a clear indication that the bank, and by extension the culture of finance in the city of London as a whole, is unacceptably corrupt. As governor of the Bank of England, Sir Mervyn King told media last week after yet another financial scandal came to light (this one involving improper selling of complex financial products to small businesses), “From excessive levels of compensation, to shoddy treatment of customers, to a deceitful manipulation of one of the most important interest rates, and now news of yet another mis-selling scandal, we can see we need a real change in the culture of the industry.”

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Five seriously austere measures that aren’t in the Drummond report

By Erica Alini - Friday, February 17, 2012 at 6:35 PM - 0 Comments

Roger Blackwell/Flickr

Economists have long warned that current spending patterns have put Ontario on track for a fiscal doomsday. In an attempt to show Ontarians the way to economic salvation, Premier Dalton McGuinty appointed a commission on public-service reform last year, headed by former TD economist Don Drummond. His report, unveiled on Wednesday, is a 362-item long laundry list of cost-cutting (and a few revenue-boosting) measures the provincial government should consider to keep the public deficit from ballooning to $30.2 billion by 2017-18. The prescriptions go far beyond the usual calls for budget freezes and capping wage increases in the public sector; Drummond recommends scrapping all-day kindergarten, increasing class sizes, and shutting down casinos. To make Ontarians feel better about the coming age of austerity, we’ve put together a list of the five most unusual ideas other governments have considered or implemented to fix their own beleaguered finances. 

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The next frontier for beer: women

By Chris Sorensen - Friday, August 26, 2011 at 11:05 AM - 0 Comments

Photograph by Andrew Tolson

With beer consumption falling for seven straight years and neighbourhood pubs closing at a rate of 29 per week, traditionally suds-soaked Britain is facing a beverage identity crisis while brewers are left scrambling to find new markets for their products. And at least one, Molson Coors Brewing Co., believes it has found the answer: women.

Molson Coors, the company that resulted from the merger of the storied Canadian brewer and Coors Brewing Co. in 2005, is rolling out a new brand in the U.K. and Ireland called Animée, aimed directly at the fairer sex, which currently accounts for just 17 per cent of beer sales there. Described as “lightly sparkling and finely filtered with a delicious fresh taste,” Animée contains four per cent alcohol by volume and comes in three flavours: “clear filtered, crisp rosé and zesty lemon.”

“We are way behind almost every other beer drinking country in the world when it comes to women,” says Kristy McReady, a spokesperson for Molson Coors in Britain, noting that 79 per cent of women in the U.K. say they never, or rarely, drink beer—in part because it’s viewed as being high in calories. “Beer is seen as very masculine, the way it’s marketed and sold. It’s drank from pint glasses and sold in big boxes.”

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Everyone’s gone mad

By Andrew Coyne - Tuesday, August 23, 2011 at 10:15 AM - 24 Comments

Reuters/Dylan Martinez

What can explain it? How to account for such a fit of collective madness? Do we blame the schools? The parents? Perhaps it was a cry for help, the bitter fruit of lives without meaning or hope? Whatever may be the cause, we can see the results, the single largest outburst of journalistic nonsense in a generation: swarms of unhinged pundits running wild through the op-ed pages, leaving a trail of broken syllogisms in their wake. Such mindless mindlessness can only be condemned in the strongest terms…

But of course the same thing happens every time, doesn’t it? Wherever and whenever some outrage or atrocity occurs, there is always an army of “root-cause” rationalizers close behind, ready to supply the deeper meaning of it all. And though the explanations vary, the one constant is to shift the blame from those who commit the crime to other, more politically useful villains. Marc Lépine was no mere nutter with a grudge: he was a product, or at least an extreme example, or at any rate a symbol, of a generalized male hatred of women. Jared Loughner was not, as he claimed, chiefly concerned with the power of grammar to control the mind, but rather was the inevitable outgrowth of hot-headed Republican rhetoric. And so on.

With something as widespread as a riot, let alone the cascade of riots that spread across Britain, we are more obviously dealing with a genuinely social phenomenon. Though every individual is ultimately responsible for the choice to do good or to do ill, when so many people make the wrong choices at the same time, there is clearly a wider context to be considered: they can’t all be mad. But there’s a key word in there. Maybe you’ve spotted it: considered. Many of the instant analyses I read expressed a certain peevishness toward dissenters, as if the failure to adopt their own pet theory was a rejection of thinking itself. Well, no. It’s a rejection of simplistic, reductionist thinking. It is one thing to attempt to understand why people do what they do. It is another just to draw up a list of everything that’s been bugging you about society for years, then scrawl QED under it. Thus, if you are on the left: consumerism, individualism, poverty, Thatcher, unemployment, Thatcher. And if you are on the right: gangsta rap, Jamaican patois, multiculturalism, liberal elites.

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A nation infected by scandal

By Andrew Coyne - Monday, July 18, 2011 at 10:00 AM - 13 Comments

Adrian Dennis/AFP/Getty Images

Scandals used to be so simple. Power corrupts, we were taught, and scandals were the business of those few who held power. Teapot Dome, which before Watergate was what you thought of when you saw the words “American political scandal,” involved the payment of kickbacks to a single cabinet secretary. The Pacific Scandal was essentially a matter between Sir John A. Macdonald and Sir Hugh Allan.

In this democratic age, however, the locus of corruption has shifted. Now, scandals belong to everybody. The corruption more typical of our times—perhaps Watergate marked the transition—infects an organization generally, an “everybody does it” mentality in which large numbers of people who never thought of themselves as criminals become ensnared. Think of the huge numbers of people who participated in or at least knew about the various exchanges that went into the sponsorship scandal. The phrase popularized in Malcolm Gladwell’s The Tipping Point, social epidemic, seems apt. The culture of corruption spreads from person to person, encouraging each to adopt a standard of behaviour that, as individuals, they might otherwise find repulsive.

And so we come to the phone-hacking scandal—the second epidemic of corruption to strike the United Kingdom in recent years, after the parliamentary expenses scandal that led to charges being laid against more than half a dozen MPs and ended the careers of dozens more. It is by now well established that the hacking of personal phone messages by journalists at the News of the World was not, as was maintained for several years, a matter of a rogue reporter and his private investigator accomplice. Nor was it confined to the peccadillos of celebrities or royals.

It extended, as we now know, to literally thousands of people, including the widows of dead soldiers, the victims of the terrorist attacks of Sept. 11, and, most infamously, a missing 13-year-old girl, later found murdered, whose voice messages were not only intercepted but, when her mailbox became full, deleted, thus leading her family to believe she was still alive.

The invasions of privacy went beyond voice mail to include personnel records, bank accounts, and medical files—lawful in certain circumstances, but only where a public interest can be shown, as in cases of corruption. That would not appear to cover, for example, the news that the infant son of Gordon Brown, then the chancellor of the exchequer, had cystic fibrosis, discovered and splashed across the front page within days of the Browns learning it themselves.

This behaviour involved not only reporters at the News of the World, but at least in the Brown example, also the Sun and Sunday Times, sister papers in Rupert Murdoch’s News International empire. (The Sun denies it used Brown’s son’s medical records for its story.) In the fullness of time we shall learn whether it extended to other news organizations, though it is already established that some have hired the same private investigators.

If that were all, it would be shocking enough: the famously slipshod ethics of the British tabloid press spilling over into outright criminality. But it is the intersection with other pillars of British society that takes this story to the outer limits. Much of the confidential material sought by Murdoch’s spooks was supplied to them by police officers, often on the payment of bribes. Other police officers turned a blind eye to the News of the World’s phone-hacking activities, including those explicitly assigned the task of investigating how widespread the practice was, after the first cases came to light—in part, it seems, because their own phones had been hacked, and the evidence of professional and personal misconduct thus obtained. Even after it was revealed that News International had paid huge sums of money to other victims to settle their claims out of court, Scotland Yard somehow concluded there was no story here.

And overseeing all this, the political class of Britain: all of it, it seems, or nearly so. Since the days of Margaret Thatcher, leaders of both major parties have courted Murdoch with lickspittle zeal, in hopes of his papers’ endorsement. The current prime minister, David Cameron, employed one former editor of the News of the World as his communications director, and is close friends with another.

It wasn’t only political or personal connections that moved so many politicians to play nice with Murdoch. It was, as we are now learning, fear. Politicians who crossed him or his minions were openly threatened with the publication of embarrassing personal information. Only now that he is on the run, so to speak, are many daring to speak up. This was not so much a news organization as a bribery and blackmail racket.

The culture of corruption, then, did not just infect the Murdoch empire, but much of the British establishment. To be sure, it had its roots in power, as of old: the kind that comes with owning four national newspapers with a combined 40 per cent of total circulation. The reporters who stole people’s private information could not have done so without the approval of their editors, who in turn would have taken their cues from those higher up. All of them must have come to believe they could get away with anything. Who would dare stand in their way?

But it required also the acquiescence of hundreds of others, outside the News International ranks. Yes, they may have been acting, or failing to act, out of fear, or at least a sense of helplessness. But that is debauching in its own way. Power may corrupt, but so, it seems, does impotence.

Greedy Rita, meter maid

By Jen Cutts - Thursday, June 16, 2011 at 11:10 AM - 0 Comments

Brian Harris/Alamy/Getstock

There’s nothing like a parking ticket to ruin an otherwise pleasant day, and in the U.K., they’re being ruined at record levels. The 4.2 million tickets issued by town halls in England and Wales (excluding London) from April 2009 to March 2010 was nearly twice the number in 2002-03, according to figures from the country’s Traffic Penalty Tribunal. The increase has led to accusations that councils are using the resulting funds to fill out their budgets, which were shrunk by deep spending cuts announced by the British government last October. “We can only suspect they do want to increase revenue,” says Paul Watters, a spokesman for the Automobile Association, commenting on the rise in tickets, as well as plans by some councils to step up fine amounts.

The tribunal, however, insists the increase is simply a result of more communities opting to take over parking enforcement from police, which has been an option since 1992. The U.K.’s Traffic Management Act states councils aren’t allowed to generate revenue through fines and must reinvest in improving transportation. But “local authority finances are complex,” says Watters. “It is hard to prove any sleight of hand.”

Closer to independence?

By Alasdair Soussi - Tuesday, May 24, 2011 at 9:20 AM - 4 Comments

Andrew Milligan/PA Wire/PA Photos/KEYSTONE Press

Look at the political map of Scotland today and, but for a smattering of red, blue and orange, the land screams nationalist bright yellow. The scale of the Scottish National Party’s victory in the parliamentary elections of May 5 was nothing short of historic. Having secured their first ever parliamentary election triumph in 2007 over their bitter rivals Labour by a narrow 47 seats to 46, the SNP, after a four-year term as a minority government, was handed a stunning 69 seats by the Scottish electorate. That pushed Labour, seen by many as the natural governing party of Scotland, into a distant second place with 37, and gave the nationalists a majority in the 129-seat parliament with which to pursue their much-coveted referendum on independence.

Despite being ahead in the polls for some weeks prior to the election, SNP leader and Scotland’s First Minister Alex Salmond was himself taken aback by the nationalists’ margin of victory—which has shaken the very foundations of the United Kingdom. “It’s unprecedented, and it’s given the SNP a whole list of opportunities and challenges,” says Gerry Hassan, a Scottish-based writer and commentator. “They’ve got the potential for an independence referendum, and they’ve got an agenda to begin dismantling the Labour apparatchik state in Scotland, which was gatekeeping, stopping things from happening, that was looking after their own.”

On the independence question, analysts like Hassan believe that in building up to a referendum—likely in 2015—the SNP must make clear what independence, currently supported by just under 40 per cent of Scots, really means in a modern context. “The SNP are not going to galvanize Scottish public opinion by talking about border controls,” explains Hassan. “They have to talk about what kind of Scotland we want that fleshes out this concept of independence, which I think will be a very different kind of independence.” This “different kind of independence” will likely be less of a tearing up of the 300-year-old union with England, and more renegotiating the terms of the union—the “united kingdoms rather than the United Kingdom,” as Mike Russell, a SNP minister, told the Times.

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Is democratic reform dying out?

By Charlie Gillis - Tuesday, May 17, 2011 at 10:05 AM - 25 Comments

Mark Blinch/Reuters

For would-be reformers of the mother of all parliaments, it was a brief and ill-fated courtship—ending with a door-slam to the face. One year ago, nearly six out of 10 Britons were telling pollsters they’d gladly dump the familiar first-past-the post electoral system (FPTP) in favour of a method that better reflected their democratic will. But when given their say in a referendum last week, voters dispatched the alternative with extreme prejudice: nearly 68 per cent opted to retain the old method of electing MPs, soundly rejecting the proposed system of preferential balloting known as the alternative vote (AV).

Advocates for change were quick to marshal explanations. The rejection spoke less to disapproval of AV than to dissatisfaction with its chief proponent, Liberal-Democrat Leader Nick Clegg, they said. Some complained voters had been hoodwinked by hysterical-sounding advertisements suggesting that a costly overhaul of the electoral system would suck money from, among other vital services, intensive care for infants.

None seemed to consider the possibility that FPTP might have its own inherent appeal. “It’s simple, and it normally produces parliamentary majorities,” says Louis Massicotte, a Université Laval political scientist who has studied electoral reform initiatives around the world. “The ambiguities of minority parliaments may fascinate intellectuals. But for the average folk in the street, a clear outcome is always better than a murky one.”

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Cleaning up Britain's privacy laws

By Leah McLaren - Tuesday, May 17, 2011 at 9:50 AM - 5 Comments

Yui Mok/PA Photos/Keystone Press

No one can whip up a scandal quite like the British press. In a country in which the kiss ’n’ tell splash is both a lucrative and time-honoured tradition, many publications here view it as their right—in some cases raison d’être—to be able to publish the raunchiest details of a celebrity’s sexual indiscretions with impunity.

But the British courts don’t always agree. For several years now, British judges have been granting anonymizing court orders, commonly known as “super-injunctions,” which prevent U.K. media outlets (usually tabloid newspapers) from publishing stories that may be damaging to the parties involved. In some cases, the orders prevent the claimants themselves from being named, and in the most “super” of super-injunctions (a slang—not legal—term), the injunction itself is also banned from public mention. The injunctions cost between $30,000 and $80,000 on average to take out, prompting widespread criticism that they are an option open to only the already rich and famous.

If there is only one thing the British press like less than being scooped, it’s being muzzled. While super-injunctions have long been an irritant to the scandal sheets, they have only lately boiled over into front-page news, after the Wikipedia entries of four protected public figures were rewritten with lurid details inserted. In response, a number of others jumped at the opportunity to speak out against these gag orders, which some see as both hopeless in the digital era, as well as a dangerous infringement on freedom of the press.

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Stimulus vs Austerity 2.0

By Jason Kirby - Thursday, April 28, 2011 at 2:56 PM - 9 Comments

Economic arguments are, by their nature, complex and abstract. Few more so than the question of whether massive government spending helps or hurts the economy. That’s why there’s been so much attention paid to the divergent paths the U.S. and U.K. took after the Great Recession. Under Prime Minister David Cameron the U.K. pursued hard-nosed austerity to tackle the country’s deficits, while the U.S. resisted all such moves and instead opted for more stimulus.  Here we had a massive lab experiment pitting two economic theories against each other, playing out in real time on the world stage. Back in January Maclean’s delved into the battle in our story Which Country is Right.

How’s the experiment going? The results so far are inconclusive. Both sides have claimed some measure of victory. Just as critics predicted, cuts to government spending in the U.K. have kept a lid on economic growth, with GDP stagnant for the past six months. Writing on his New York Times blog economist and arch-Keynesian Paul Krugman has hammered away at the notion that spending cuts would awaken the so-called confidence fairy and lead to an investment boom. But at the same time U.S. economic growth slowed dramatically in the first quarter, despite the continued steroid infusion from fiscal stimulus and the Federal Reserve’s quantitative easing strategy. Worse still, rating agency Standard & Poor’s fired a shot across the bow when it downgraded the outlook for Uncle Sam’s debt from stable to negative for the first time in 70 years.

The experiment continues.

In the meantime, EconStories is back with Round 2 of their video battle between economists John Maynard Keynes and F. A. Hayek. In their first video, Fear the Boom and Bust, the two rap battle over their economic theories. Now they’ve been summoned from history again to appear before a Congressional committee. Watch and learn…

Big Society, big con?

By Leah Mclaren - Tuesday, March 15, 2011 at 10:52 AM - 10 Comments

Oli Scarff/Reuters

It’s been a difficult few weeks for David Cameron’s much vaunted Big Society.

The concept behind the British prime minister’s plan to rejuvenate the economy is either the great hope for modern Britain or a puff of political hot air, depending which side of the debate you fall on. As the initial round of deep public spending cuts approaches later this spring—the first of a planned $130 billion through 2015—some former champions are backing away from the notion of what Cameron calls the “plan to dismantle Big Government and build the Big Society in its place.”

So what exactly is the “big society” anyway? In the Conservative-Liberal Democrat coalition agreement, it is described as a plan to “take power away from politicians to give it to people.” Labour MP Ed Balls, on the other hand, has dubbed it “the big con.” Three points are certain: it seems to involve less government, more civic engagement, and the PM is very, very excited about it.

Others less so. Lord Wei, a consultant tasked by Cameron with pushing the Big Society agenda, revealed last month he would be scaling down the amount of time he devotes to the project (the irony of having a key volunteer abandon the volunteering bandwagon has been giddily noted in the country’s left-wing press). And in the same week, Liverpool city council, which was a test case council for one of four pilot volunteer schemes, announced it was pulling out and no longer supports the Big Society, as a direct result of the Tory-led government’s funding decisions.

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It just didn't add up

By Jen Cutts - Thursday, February 24, 2011 at 9:31 AM - 2 Comments

Oli Scarff/Getty Images

A former British MP is the fourth politician in less than three months to be convicted for claiming bogus expenses in a scandal that’s trying Britons’ patience with their parliamentarians. Jim Devine, 57, was found guilty of two counts of false accounting. A London court ruled on Feb. 10 that he’d forged receipts for over $13,000 in printing and cleaning costs he’d never incurred.

In an interview with Channel 4 earlier this month, Devine denied any wrongdoing. He said he’d simply been “moving money from communications to the staffing budget”—a move that, he claimed at his trial, another MP had told him, with a “nod and a wink,” was acceptable. Devine also tried to deflect blame by accusing his former office manager of the duplicity—the same woman to whom a tribunal awarded $55,000 last October after deciding he had harassed her out of a job. Despite Devine’s efforts, prosecutor Peter Wright was able to show he had committed “fraud on the public purse.” He’s now facing up to seven years in prison. Former MPs Eric Illsley and David Chaytor are serving jail time for similar convictions, while lawmaker John Taylor is awaiting sentencing.

The fight for fairness in foreign lands

By Erica Alini - Tuesday, February 15, 2011 at 3:26 PM - 13 Comments

Retired British war veterans living in Canada have threatened to publicly return their medals to the U.K. government if it doesn’t agree to enrich their pensions. Unlike pensioners living in Britain, retirees living in Canada don’t have their pensions indexed to the cost of living—some in Canada are receiving just 40 per cent of what they would get if they hadn’t emigrated. The Canadian Alliance of British Pensioners (CABP), which represents over 158,000 retired Britons in this country, has been fighting against the status quo for years. Britain does not index pension benefits for emigrés in Australia, New Zealand, South Africa and Canada, which don’t have reciprocal agreements with London, leaving it up to those governments to supplement the income of its impoverished pensioners. That’s costing Canada around $330 million a year, and Ottawa has long been eager to resolve the issue, but London always turned a deaf ear, according to Brian Lechem, CABP’s chair.

The International Consortium of British Pensioners, of which CABP is part, initially brought the battle to the courts, but after losing appeals in both the U.K.’s supreme court and the European Court of Human Rights, it’s now turning the fight political. While the former Labour government never paid much attention to the issue, Nick Clegg, leader of the Liberal Democrats and deputy prime minister in the Conservative-led government of David Cameron, has traditionally been a supporter of the cause. With a friendlier government in charge, “we’re pushing like mad,” says Lechem. That also included leaving a book at 10 Downing St. about war veterans with non-indexed pensions. But with London on a financial austerity crusade, the odds may once again be against Canada’s British seniors.

Getting a jump on things with parkour

By Leah Mclaren - Wednesday, February 9, 2011 at 11:03 AM - 2 Comments

On a dark, damp January afternoon in an abandoned south London council estate, an 11-year-old boy is trying to summon up the courage to jump off a six-foot-high brick wall onto a concrete bollard. He crosses and uncrosses his skinny arms, assessing the distance, then shakes his head. “I can’t do it.”

“Yes you can,” a man in a hoodie standing on the ground below instructs him. “Just bend your knees, spring up and forward. Let your legs absorb the impact.” The boy leaps, one trainer-clad foot flung out in front, but at the last second dodges the bollard and lands on the pavement beside it. The hooded head shakes, then speaks. “That fear you feel? It’s all in your head. Now try again.”

Welcome to the inner-city grit and inspiration of parkour—a training discipline and urban lifestyle philosophy that has become a British fitness obsession.

Initially called the “art of displacement,” and more commonly “free-running,” the practice originated 25 years ago in the suburbs of Paris among a small group of young, ethnically diverse French men determined to use the concrete jungle to strengthen both the body and the mind. This founding group of nine, known in parkour circles as the legendary “Yamakasi” (a Lingala word that translates to “strong spirit”), combined the influences of Japanese anime, Jackie Chan movies, martial arts and even comic book superheroes to bring a Zen-like focus and discipline to the age-old childhood pastime of scaling walls, hopping fences and jumping from roof to roof.

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No more games for drunk Brits

By Cameron Ainsworth-Vincze - Thursday, February 11, 2010 at 12:30 PM - 6 Comments

In a desperate attempt to stop Brits from drinking excessively, U.K. officials are banning drinking games and all-you-can-drink deals at pubs and clubs that cater to the nation’s growing binge-drinking culture.

The crackdown includes outlawing games such as the “dentist’s chair”—where alcohol is continuously poured into a customer’s mouth while they are restrained—along with incorporating compulsory identity checks on customers who look younger than 18 years old. In addition, establishments must provide free tap water and offer customers the choice to select either a single or double spirit, or a small or large glass of wine. Bar owners who break the rules could be fined upward of the equivalent of $34,000, or even spend six months in jail.

According to Britain’s National Health Service, alcoholic liver disease deaths are soaring, along with drinking-induced crimes that cost the U.K. between $13 billion and $22 billion a year. But health experts say the new laws don’t go far enough: it’s “better than nothing,” says Carys Davis, spokesperson for Britain’s Alcohol Concern charity, but the restrictions “seem tame” compared to raising the minimum price of bulk alcohol products (at shops and supermarkets, many alcohol products sell for less than the cost of brand-name mineral water), a move the NHS is lobbying for.

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