Bob Diamond was almost certainly ignorant of the market manipulation Barclays have admitted to. You don’t take notes on a criminal conspiracy and you don’t run a major bank without knowing how to not know what you shouldn’t in a defensible manner. Sorry for the Rumsfeldian epistemology.

But this isn’t limited to individual banks, or a lapse in the regulatory regime. Other banks were directly involved in the LIBOR manipulation and in the credit swaps fraud that will be announced shortly. Not to mention all the other incidental frauds that haven’t been discovered yet. There’s a systematic problem that all the major commercial banks are or were actively and gleefully participating in.

The ever astute Gaby Hinsliff pointed out the fundamental issue with a thorough Leveson-esque inquiry into this. It seems justified but would make the current IT issues at RBS seem like a good day as the UK portion of the international financial system collapsed under the weight of its own shit.

I don’t really know what to do from here. The banks have caused a massive world recession which has caused huge government deficits and the failure to deal with the recession in a sensible manner by governments, not least the austerity programs in Greece, Spain and the UK have made matters worse. Yes, there are issues about the way that the Northern European countries benefited from a relatively low Euro exchange rate at the expense of countries like Greece and Italy, that the better off benefited from the policy of price stability pursued by the BoE and the ECB at the expense of the worst off but there’s a deeper issue about the way that corrupt financial institutions have literally collapsed the Western economy around us all through fraud and corruption.

There’s essentially three questions which may well have conflicting answers:
1. How do we get out of this?
2. How do we stop this happening again?
3. How do we punish the incredible malfeasance which got us here?