A new survey showing the extent of bankers' criminal inclinations, together with the "LIBOR" scandal, gives us more insight into how deeply corrupt the banking industry has become.

Big banks have metastasized into a kind of "Financial/Industrial Complex" which is distorting and engulfing our economy. And they've captured the critical government functions designed to stem the corruption and keep them in check.

Washington, we have a problem.

Scandalous Survey

The survey, sponsored by whistleblower defense firm Labaton Sucharow, is a revelation: Almost half of the senior-level bankers in a recent poll refused to say they wouldn't break the law. One in four said they "had observed or had firsthand knowledge of wrongdoing in the workplace." Only 41 percent of them said that colleagues in their own firm had "definitely not" committed crimes to get ahead.

And nearly one-fourth "... believed that financial services professionals may need to engage in unethical or illegal conduct in order to be successful."

I discussed the survey with a few other people familiar with the banking industry, and they had the same reaction I did: If anything, those numbers sound low. That makes sense. Admitting your criminal inclinations to a total stranger isn't as easy as telling a them your favorite color or what kind of music you like.

But even if taken at face value, the poll's an eye-opener: One in six bankers said they were "fairly likely" to commit a banking crime if they could get away with it. 45 percent refused to rule it out if the payoff were big enough.

And it's not just a matter of personal morality: "Nearly one-third of all financial services professionals reported feeling pressured by bonus or compensation plans to violate the law or engage in unethical conduct,. Nearly one-quarter of the respondents felt similar pressure from other sources." (Presumably including their bosses.)

In other words, the system is designed to encourage lawbreaking in critical banking functions. The survey's sample size was fairly small -- only 500 people -- but that's still a decent-sized group. Even if you don't think they're understated, the answers are devastating.

The Big LIBOR

LIBOR -- the London Interbank Offer Rate -- determines borrowing costs for trillions of dollars in loans. It's based on each bank's own reporting of the interest rates it expects to be charged from other banks. Barclays admitted it lied about the number and agreed to pay a half-billion-dollar fine. Its Board Chair and CEO resigned.

But the real story isn't about Barclays. Reuters now reports that "More than a dozen banks... including Citigroup, JPMorgan Chase & Co, Deutsche Bank, HSBC Holdings Plc, UBS and Royal Bank of Scotland" have been implicated in the LIBOR scandal.

Of course they have. Banks were allowed to report their own borrowing costs without outside auditing. How many were likely to tell the truth with so much at stake? LIBOR lying was one of the worst-kept secrets on Wall Street.

The LIBOR scandal is also the story of politicians, regulators and journalists who actively collaborated in banking's descent into lawlessness and amorality.

Fallen Fed

Take the Federal Reserve, which was created by Congress to serve the public interest. Reports say that the Fed knew about Barclays' deception back in 2007 and did nothing. No, scratch that: It rescued Barclays and its executives with nearly a trillion dollars in publicly-backed loans.

Thanks to the GAO audit of the Fed -- an audit which it vigorously resisted -- we know that Barclays was the fifth largest recipient of emergency loans. Bailout loans for Barclays came to $868 billion. That means that Barclays probably made billions off the reduced interest rate alone, courtesy of the American people.

Those loans were granted between December 2007 and July 2010. That means the Fed was doling out billions to Barclays after it learned that the bank was lying about its LIBOR rates.

How much did the Fed know about the other banks under investigation, which it was also propping up?

Self-Policing Perps

Self-reported LIBOR figures aren't the exception, they're the rule. Deregulation and political decision-making let the banks "police themselves" in a number of areas. The Bush/Ashcroft Justice Department reduced oversight efforts and began "trusting" banks to report their own illegal behavior. The Obama/Holder DoJ has continued that practice.

Banks only "self-report" when, as seems to be the case with Barclays, the evidence is about to come out in other ways. Then, like Barclays, they "volunteer" limited evidence to the Justice Department in return for a promise they won't be prosecuted.

That's right: The Obama Justice Department promised not to prosecute anyone in the Barclays case.

When commentators say that there's no evidence of criminal wrongdoing in the LIBOR case, that just means the banks haven't volunteered any. But then, why would they?

Barclays just paid nearly half a billion dollars in fines, and its CEO and Board Chair stepped down. But nobody knows the real extent of their wrongdoing, because they're still relying on Barclays to tell the truth.

Imagine what its executives must know to agree to a deal like that.

Buy-Partisanship

The moral decay extends to the Republican Party, whose servility toward dishonest bankers would make a Tammany Hall boss blush. (Remember "Washington exists to serve the banks, not the other way around"?)

It also extends to the many officials in administrations of both parties who keep trading their Washington authority -- and the way they use it -- for the riches they know they'll earn on Wall Street once they leave. And there's increasing suspicion that it extends to the Justice Department, which has refused to prosecute bankers for fraud in the face of overwhelming evidence.

The White House's opportunity to convince a skeptical public otherwise won't last much longer.

Money Talks

Sure, bankers know the Democrats will regulate them somewhat more than the Republicans will. That annoys them to no end. But they also expect top Administration officials to work for them someday (see "Orzsag, Peter" or "Summers, Larry"). They'll be joking and smiling with golf partners they've enriched -- partners like Bill Clinton -- this weekend.

The President and the Treasury Secretary have been signalling to bankers that they're off the hook for criminal charges. In fact, the President described Jamie Dimon as "one of our smartest bankers" even as Dimon came perilously close to admitting investor fraud in Senate testimony -- close enough to trigger an immediate SEC investigation.

But then, politicians depend on campaign cash from big Wall Street donors. And the biggest donors of all run the mega-banks.

The Gulfstream Gang

Leading bank executives gather each year for the Davos conference on international finance. A government committed to enforcing its laws would have posted agents at executive airports to arrest a few as their private Gulfstream and Lear jets arrived from Switzerland.

Each and every major bank CEO presides over an organization whose employees have engaged in repeated criminal acts, even as they signed legally-binding documents saying they had personally implemented effective anti-fraud procedures.

SEC documents used in multi-billion-dollar settlements document a massive Wall Street crime wave which includes bribery, forgery, investor fraud, and stock fraud. It's all on paper, right there in black and white.

It's true that bank CEOs, like everyone else, are innocent until proven guilty. But if they weren't encouraging criminal behavior, which the survey also seems to suggest, then they're utterly incompetent as managers. Unethical, or incompetent?

To be clear: The two aren't mutually exclusive.

Excuses: The Golden Oldies

As the evidence of Wall Street lawbreaking grows, the excuses for government inaction keep changing. It's hard to keep track of them all, so here's a walk down memory lane:

First the authorities and pundits said that bankers wouldn't cheat the rest of us because "Wall Street and Main Street rise and fall together."

Then they allowed that, well, yes, perhaps they did lie and cheat a lot, but in ways that weren't illegal.

Then, as the settlements and fines for illegal activity grew -- from hundreds of millions to billions, and then to tens of billions of dollars -- they reluctantly allowed that, yeah, laws probably did get broken here and there. But, they said, getting a jury to convict bankers on finance-based charges was just too hard.

Then, when a recent case showed that it's not any harder to convict bankers than it is to convict mobsters (if there's still a difference), they said ... well, they didn't say anything at all.

The Financial/Industrial Complex

Bankers used their wealth to purchase deregulation from the political system, then used deregulation to seize an ever-increasing percentage of our wealth. Banking profits grew from their traditional levels -- in the low 20s as a percentage of total corporate profits -- to 40 percent of profits before the 2008 financial crisis.

Then we bailed them out, rescuing their industry and saving executives who were as inept at their profession as they were lax in their morals. Did we use that as an opportunity to slow the growth of the Financial/Industrial Complex?

No. Financial institutions take up a larger percentage of our country's GDP than they did before the crisis they created, and before we bailed them out. (We're still bailing them out -- and pumping up their profits -- through a variety of Treasury and Federal Reserve actions.)

A new Working Paper for the International Monetary Fund provides rigorous analysis to back up what many have long suspected: "(A)t high levels of ﬁnancial depth, more ﬁnance is associated with less growth."

In other words, once you get past a reasonable size a simple principle takes effect: The richer they get, the poorer we get. And they keep getting richer.

Honorable Gentlemen and Ladies

Although the Financial/Industrial Complex remains untouchable, smaller players aren't immune. That's led to indictments and/or investigations for Bernie Madoff, MF Global, and now PFGBest. But the tragic suicide attempt of PFGBest's Chairman only underscores how times have changed. In Olde England the "right people" knew what to do when there was a scandal: Friends led a "gentleman" into his study, where his pistol hung on the wall or lay in a desk drawer, and "expected him to do the honorable thing."

But nobody expects honor from the men and women of Wall Street anymore -- not even that misplaced sense of honor that leads a person to the devastation of suicide rather than the healing process of punishment, amends and restitution.

Nowadays, bankers frustrated by their profession's justly tarnished reputation merely wait for the next journalist to write a flattering profile of them. (I'm talking to you, Roger Lowenstein.) And even as they conceal their latest hapless (and possibly illegal) blunder, bankers shamelessly appear on television to pontificate about why the poor and elderly must sacrifice to pay for their misdeeds. Then they schedule their next golf date with an ex-President or two.

That's how the Financial/Industrial Complex works. Until the public demands prosecutions, bankers never have to worry paying the price for their crimes. They don't even have to worry about being revealed for what they really are:

Corrupt to the core.

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About author Richard (RJ) Eskow, a consultant and writer, is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the



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Richard (RJ) Eskow, a consultant and writer, is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project. Richard blogs at: