In a recent interview for Bloomberg, economist Nouriel Roubini spoke about the scandal caused by the Barclays bankers who tried to fix the LIBOR rate to protect their own interests. Nouriel Roubini wanted to discuss certain aspects of the crisis that were not yet talked about or considered so far taboo. “Banks are still encouraged to cheat and do illegal or immoral things for profit. The only way we can avoid this is to divide these financial markets. When you have in the same business: commercial banking, investment, asset management, brokerage, insurance, underwriting and derivatives, the result is massive conflicts of interest”.
Roubini believes that it is better to be more cautious about the system itself than the people that are part of it. “Bankers are greedy. They have been so for hundreds of years. The question is not that they are more immoral than a thousand years ago, but we must ensure that we minimize these risks. One way to do this is to separate the activities of these giants, in order to minimize the conflict of interest, otherwise we will have many such crisis”. That does not mean however that people responsible for these actions should not be punished. Roubini thinks that we should do everything possible to prevent such behavior. Current penalties are not enough.
“Nobody went to jail since the crisis began. Banks do illegal things and in the worst case they get a fine. If some people would be behind bars, maybe this will make bankers in the future to refrain from activities harmful to the economy. ”
Nouriel Roubini believes that the current risks will punish the world economy in 2013.
The collapse of the euro area and another drop in the U.S. economy would affect everybody, including emerging markets. Wall Street banks had a big role in fixing Libor, but the problem is that it’s not yet very clear which other banks were part of the same activity.
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