General Motors sold out of G.M.A.C., its financing arm in, in 2005, borrowed $17.2 billion from the Treasury at the height of the financial crisis, changed its name to Ally Financial (and yes, sponsored Adam Davidson's Marketplace). Now Ally is spinning off Residential Capital, its mortgage lender, through bankruptcy proceedings, and Steven M. Davidoff sees Ally's debt to the government as hindering risk-taking.

The Wall Street Journal sees the Obama administration's involvement in Carlyle Group's deal to buy a Pennsylvania refinery at odds with the Obama campaign's attacks on the private equity industry.

Regions Financial, the Alabama-based lender that repaid $3.5 billion in bailout funds to the U.S. Treasury in April, is the subject of a grand jury investigation, The Journal reports. The rub: the lender's relationship with a recruiting firm that wined and dined Regions' execs and borrowed money from the bank.

The Journal also sees some buy-out firms struggling to raise funds, Wilbur Ross among them.

A Vietnamese banker was arrested, and markets swooned.

The first recipient of the Security and Exchange Commission's whistle-blower program received $50,000, or one-third of the funds recovered due to the individual's case. The payee stands to gain more as the SEC continues to recover funds.

The Justice Department and Federal Reserve are probing Royal Bank of Scotland for possibly violating sanctions against Iran, sources told Bloomberg. Long-arm-of-the-Lawsky and the New York State Department of Financial Services are staying out of this one, apparently.

With a lull in the Libor action, Iran sanctions becoming old hat, Reuters digs into the other, other British banking scandal: interest rate swaps. Lenders such as RBS and HSBC have provisioned funds against lawsuits charging banks mis-sold swaps to small businesses in the run-up to the financial crisis.

Muni-rigging trial: Three former UBS employees go on trial today on charges they fixed bids on municipal bond investment contracts. Three employees of GE Capital were convicted on similar charges in May, though those defendants have asked the trial judge to toss out that verdict; banks have paid more than $700 million to settle charges arising from the probe that lands the former UBS bankers in court today.

Rapid rise: Matt Zames, the JPMorgan executive elevated by CEO Jamie Dimon to staunch losses on positions amassed by the trader known as the London Whale, is a "mathematician and a poet," apparently. The 41-year-old graduate of MIT's Sloan School of Business took charge of the firm's chief investment office in May to wind down positions that led the bank to billions in losses. Last week, Mr. Zames was named co-chief operating officer, placing him in charge of more experienced executives such as chief financial officer Doug Braunstein and head of regulatory affairs Barry Zubrow.

Whither Europe: European Central Bank president Mario Draghi has gone on the offensive, first signaling that the ECB would not allow the euro to fail, then working to build consensus for a plan to ease the region's sovereign debt woes. Count Paul Krugman as among the doubters. CEOs in London for the Summer Olympics are privately voicing concern about the state of the British economy, according to The Financial Times.

Hard to do: Bank of American explored a possible breakup in 2010 and 2011, The Wall Street Journal reports, but decided against splitting off Merrill Lynch or Countrywide units.

Drink up: Funds that invest in tangible assets such as wine, art and classic cars are attracting investors amid fears that the world's currencies are unstable.

Not so fast: The Securities and Exchange Commission froze the accounts of traders who allegedly made $13 million illegally trading ahead of the Chinese offshore oil explorer Cnooc's $15 billion acquisition of Calgary-based Nexen last week.

Provisions: HSBC set aside $700 million to cover U.S. regulatory matters after the bank was scolded by Congress for lax anti-money laundering standards and amid ongoing inquiries into Libor-rigging at banks worldwide.

Early Whale sighting: Bank of England noticed in 2010 that JPMorgan's chief investment office was taking outsized positions in certain markets, but didn't share the observation with regulators responsible for supervising the bank, The Wall Street Journal reports. The trades noted in two years ago were not the same bets on corporate credit derivatives that led to $5.8 billion in losses associated with the London Whale.

Whither Europe: Greece is "hugely off track" from the cost-cutting terms of its most recent bailout package, making it likely that the country will require a further restructuring of its debt, European officials told Reuters. Meanwhile, Spain's borrowing costs are making a sovereign bailout increasingly likely.

What will Libor cost? Investors would like British banks to estimate expected costs of settling investigationsinto the manipulation of interbank lending rates. Barclays paid about $450 million to settle inquiries into its role in the unfolding Libor-rigging scandal; Bloomberg cites one report estimating that civil lawsuits relating to the matter could cost the bank twice as much.

For sale: Former Lehman Brothers chief operating officer Joe Gregory is selling his 15,000 sq. ft. North Shore home, Business Insider reports. The asking price is $22 million.

On second thought... Fun lead in Dealbook: "A technology research analyst who gained notoriety for taunting the federal government over its pursuit of insider trading is expected to plead guilty in United States District Court in Manhattan on Wednesday."

Rare miss: Apple missed Wall Street's estimates for the company's earnings for the second time in nearly 10 years, as iPhone sales fell from the previous quarter.

Bharara sued: The New York Post reports that Yeshiva law student Benula Bensam is suing U.S. Attorney Preet Bharara, the U.S. Marshals and the Department of Justice for unreasonable search and seizure after marshals took her cell phone during the insider trading trial of former McKinsey & Co. CEO Rajat Gupta. Ms. Bensam was pulled from the Southern District courtroom in which the trial was taking place and asked to stop writing letters to the judge.

Hey, big boy: Several groups of traders are under investigation for colluding to rig interbank lending rates, The Wall Street Journal reports, and most of them are unconnected to the Barclays traders whose cheerful emails surfaced as part of that bank's $451 million settlement with U.S. and U.K. regulators.

Libor numbers suck...Says Alphaville Lisa Pollack. She means the estimates of what banks may pay to end inquiries into interbank rate-rigging, as well as attempts to quantify the size of the derivatives market that moves with Libor.

More London Whale: JPMorgan's chief investment office made large trades in corporate credit derivatives at the end of January and February that may have temporarily boosted the value of the CIOs holdings ahead of internal audits, Bloomberg reports. The lender said earlier this month that the CIO had lost $5.8 billion in the position associated with the trader known as the London Whale, and that an internal investigation had revealed some employees may have exaggerated the value of certain positions to conceal the extent of losses.

Buffett leads on ResCap? Warren Buffett is positioning himself to acquire all of Ally Financial's bankrupt mortgage lender ResidentialCapital, or ResCap, The New York Post reports. Mr. Buffett had already been named the lead bidder for a portfolio of mortgage loans, but it now seen to be overtaking Fortress Investment Group to acquire the firm's mortgage platform as well.

Scott Thompson resumes...his career, joining e-commerce start-up ShopRunner as chief executive officer, some two months after Mr. Thompson was ousted from the top job at Yahoo after activist investor Dan Loeb uncovered inaccuracies on the executive's resume.

Whither Europe: European inspectors are in Athens to decide whether to continue making bailout loans to the troubled country. Spain placed a three-month ban on short-selling stocks, and Italy put a one-week stop on short-selling a list of 29 financial companies. Moody's placed a negative outlook on Germany, citing increased chances of a Greek eurozone exit and continuing struggles in Spain and Italy.

Worst days past? Real estate website Zillow called a bottom on the housing market: "We expect home values to remain relatively flat as the market works through a backlog of foreclosures and high rates of negative equity,” chief economist Stan Humphries said in a release.

Smaller mac: McDonald's said second-quarter profit fell 4 percent.

Diamond of Barclays.

From outside the elite preserves of the financial industry, Britain’s LIBOR scandal follows a wearily familiar narrative arc: Yes, a leading investment bank has confessed to gaming a central borrowing index—the so-called London Interbank Offered Rate, which establishes how much banks charge each other to borrow money. And yes, that bank—Barclays of London—has coughed up 290 million pounds in fines to stave off the prospect of a criminal prosecution. But jaded consumers of financial news can be forgiven for thinking that this all amounts to the perennial status quo for the investment class, in the city and on Wall Street alike. Haven’t these characters always sought to live by their own self-seeking code—and haven’t fund managers long been little more than glorified corruptionists? If we systemically prosecute this sort of behavior, are we just futilely attempting to issue a restraining order against human nature?

In reality, the LIBOR dustup is a very big deal—and largely because of its very routine profile. Barclays has confessed to artificially deflating its LIBOR rate going back to 2005, in an effort to stave off jitters among investors in the bank’s sprawling derivatives portfolio. But the costs of marginal vanity upgrades to an institution’s profitability run very quickly into the billions in a market that covers hundreds of trillions in investments. LIBOR numbers govern just about every sort of borrowing done on a major scale, from bad mortgage bets to the credit default swaps used (delusionally, it turns out) to hedge against them. What’s more, the evidence suggests that conduct of Barclays—one of 16 banks now under investigation, on both sides of the Atlantic, for manipulating its LIBOR numbers—prolonged, in sweeping fashion, the ghastly derivatives bubble that collapsed in 2008. With much of world economy transacting its credit business on artificially swollen bottom lines during those wheezing boom years, the fallout from LIBOR fixing could run easily into the trillions.

The unprecedented scale of the LIBOR scam helps explain the alacrity that British lawmakers and regulators have so far shown in at least creating the appearance of a crackdown. The present drive across the pond to punish the lords of capital comes, we all know, athwart a long-standing culture of impunity in financial matters; the real outrage of jury-rigging the LIBOR is that it exposes the whole global credit system as an exercise in cronyist bad faith. And even symbolic shows of civil authority in the dealings of the city trigger large-scale cognitive dissonance at this point. Robert Diamond, the American head of Barclays, seemed a bit flummoxed to be so suddenly prevailed upon to resign; if Jamie Dimon and Lloyd Blankfein continue to reign securely atop their scandal-rocked investment fiefdoms, why should he be made an example of—especially with some 15 other banking chieftains potentially on the LIBOR make as well? And why should Paul Tucker—the presumptive incoming head of the Bank of England, who has sedulously groomed himself for the top slot since his arrival at the British equivalent of the Fed more than two decades ago—suddenly be dragged before Parliament to find his nomination in jeopardy for little reason beyond a vague impression that he should have done more to hunt down evidence of LIBOR-rigging back in 2007?

In truth, if British authorities were themselves more vigilant, the LIBOR mess wouldn’t have festered on for so long in the first place; a little-noted institutional side benefit of these nine-figure immunity deals that regulators so routinely cut with prosecution targets is that they insulate both the banks and their lax regulatory stewards from unwelcome public scrutiny. But even so, the public outrage stoking the British inquiries makes for an instructive contrast with America’s largely fatalist outlook on financial malfeasance. As Chancellor of the Exchequer George Osbourne announced in a recent speech on the LIBOR scandal before Parliament, “Fraud is a crime in ordinary business—why shouldn’t it be so in banking?”

Why, indeed? In the United States, the long-hapless Commodities Futures Trading Commission has been conducting its own years-long inquiry into LIBOR-fixing and has a grand jury reviewing potential criminal charges. But as Mr. Diamond well knows, these official investigations have a distinctly Potemkin feel in the States: At most, a fine is assessed, and a plea deal entered. Nothing as gauche  as an actual criminal prosecution ever dogs our scandal-plagued investment class, even though maximum-minimum sentences are standard fare in most jurisdictions when nonaffluent citizens commit their own repeat offenses, or run afoul of our draconian drug wars.

Even though England is a far more class-bound social order than ours is reputed to be, it’s clear at moments like this that the American polity has no real stomach for holding our financial overclass accountable to anyone. Indeed, our leaders have precious little real incentive to put the brakes on the stateside regime of banking impunity when financial titans can pull up stakes from their jurisdictions, taking both payrolls and donor rolls with them—even though the anemic condition of our credit and employment economies is largely the handiwork of that selfsame banking sector Better to shunt the whole business over to the largely captive regulatory system, which at least brokers its appointed fines and honors its appointed silence in somewhat decorous fashion. To really get to the bottom of something like the LIBOR cartel, you have to subject a whole culture of corruption to sustained scrutiny—and worse, to work out actual, enforceable measures to prevent it all from happening again. We have, it seems, gone in stunningly short time from a financial order deemed too big to fail to one that is simply too big to care about.

For collateral evidence of this trend, one need look no further than the wheezing machinery of the presidential race. Presumptive GOP nominee Mitt Romney clearly had banked (as it were) on widespread public indifference to financial niceties when he misleadingly claimed that his tenure as CEO at Bain Capital ended in 1999. So what if, as Mother Jones’ David Corn noted, SEC documents clearly listed him as CEO and 100 percent owner of the equity fund as late as 2002—well past the job-hemorrhaging Bain takeover of the GST steel mill in 2001, recently featured in a series of Obama attacks? Who reads SEC filings, let alone their supporting documentation? And until The Boston Globe sleuthed out the damning documentary record last week, Mr. Romney’s bet was bearing fruit; indeed, the same day The Globe story broke, Mr. Romney’s campaign released its own counterattack ad, seeking to refute the GST saga largely on the grounds that the entire deal went down at a time when Mr. Romney was no longer affiliated with Bain.

One little-noted casualty of the LIBOR scandal is Mr. Diamond’s public role as a Romney booster. Diamond had been a major overseas bundler of expat donations to the Romney campaign and was scheduled to host a July 27 fundraiser for Romney during the candidate’s trip to London for the 2012 Olympics. For obvious reasons, Diamond has had to relinquish that high-prestige gig as well. It’s a pity—the two men doubtless would have had a lot to talk about.

editorial@observer.com

You know, you know we went through a period where we were putting in where we really thought we would be able to borrow cash in the interbank market and it was, and the next thing we knew, there was um, an article in the Financial Times, charting our Libor contributions and comparing it with other banks and inferring that this meant that we have a problem raising cash in the interbank market. And, um, our share price went down. So it's never supposed to be the prerogative of a, a money market dealer to affect their company share value. And so we just fit in with the rest of the crowd, if you like. So, we know that we're not posting, um, an honest Libor.

That phone call took place in April 2008, and the message was shared with the other Federal Reserve banks, the U.S. Treasury and the Bank of England. But not, apparently, the Securities and Exchange Commission U.S. Department of Justice, the Commodity Futures Trading Commission or the the British Financial Services Authority, the three regulators that settled Libor-rigging charges with Barclays last month to the tune of $450 million.

Take this settlement document, which culls from emails and telephone conversations to spell out Barclays executives disinclination to stick their heads "above the parapet" by submitting U.S. dollar Libor estimates above those of other submitters:

During the financial crisis period, Barclays directed its U.S. Dollar Libor submitters to lower their daily U.S. Dollar Libor submissions in order to protect Barclays' reputation against what it believed were negative and unfair media and market perceptions that Barclays had a liquidity problem based in part on its high Libor submissions.

Which seemed like good work on the part of the three regulators when the settlement was reached. But which seems like a lot of effort to have uncover something the Fed had known for years.