“He’s wrong,” said Ed Balls, on the Andrew Marr Show, publicly contradicting the regulator, Adair Turner, who previously claimed that cheating the Libor market was not a criminal offence. It was a ridiculous example of how a regulator can’t see the woods for trees, and it was right of Ed Balls to bring clarity.
Adair Turner is an economist and an academic. He can’t be expected to know the law, and we’ve learnt in recent years that we need a tough lawyer to perform the role of regulator. It is therefore extraordinary that his replacement will be Mervyn King, another economist and academic, who also can’t be expected to know the law.
Ed Balls, by stating that those working on the markets will be treated the same as any ordinary citizen who commits fraud, has firmly backed the age-old principle that we are all equal in the eyes of the law, and has indicated that Labour’s policy is to prosecute wrong doing where it is unearthed. Take note Mr Turner and Mr King. This is the way the wind is blowing.
In the past, public policy has shied away from arresting people in the City, preferring to have regulators who can reason with wrong-doers, for fear of frightening enterprise out of taking risks. We have learnt the hard way, of the consequences of having no disincentive to criminal behaviour in financial services.
It’s worth looking at the lessons learned from Hacking to bring clarity on where we are going with Libor.
In the original Hacking inquiry, only two people were prosecuted, Goodman and Mulcaire. Although it was well known that the culture of hacking was widespread, there was little enthusiasm for a witch hunt. Lawyers call it “The Thin Ice” principle, whereby an example is made with a single prosecution, to act as a sign for others to beware of the danger.
Unfortunately David Cameron then made a mockery of this by employing Coulson. Any notion that the establishment considered hacking to be a serious matter was blown apart by the highest political endorsement of this individual.
With that business in mind, the question the DPP will have to ask is whether to make an example of the few, or to go wide with this prosecution. With the Canadians producing further frauds and the likely global reach of these crimes, it may well be that this builds into a truly major prosecution. If that’s the case, then the DPP may rely on the alternate guidance of the Thin Ice principle; that if the ice is so thin as to be an obvious danger, then there is no need to put up a sign. Prosecute all.
We live in times where the rhetoric of politicians is heightened in proportion to the stress of the nation. It’s not the way of the Labour Party to politicise institutions, however when the debate becomes red-hot, the political pressure on those institution is considerable.
The political priority for Labour is to ensure that a prosecution does happen, then to get out of the way, and allow the judiciary to apply their wisdom as to how the prosecution proceeds.