It doesn’t look likely that US depositors would take losses if a megabank collapsed. Why should we even have to ask the question? Why don’t we just break them up?

Reuters, which has been generally pretty solid on the Libor story, reports that arrests are imminent in the rate-rigging scandal. It’s not clear whether the arrests will go beyond a few traders and reach into senior management who provided the cover.

The British Parliament continued their investigation into Barclays Bank and the Libor scandal this week, and it’s just getting worse and worse for everyone involved. Yesterday, Jerry del Missier, the former COO of Barclays, testified that he was instructed by CEO Bob Diamond to manipulate the Libor down in 2008, to mask the ill financial health of the bank.

As the Libor scandal intensifies, some of the scrutiny has shifted from the role of the banks to the role of the regulators who potentially either actively ignored the rate-rigging happening under their noses, or outright encouraged it. This was the accusation leveled by former Barclays Bank CEO Bob Diamond, though BoE official deny it. But it fits a larger pattern of regulators protecting the banks through actions and inaction on wrong doing.

I concur with Felix Salmon on this, we’re all associating the Libor scandal with Barclays Bank because they happen to be the ones who cooperated with the investigation first. In fact, pretty much every bank that determines the Libor – and there are 16 of them -stands accused of fixing the rates in one way [...]

Barclays Bank CEO Bob Diamond, who initially resisted resignation over his bank’s fraudulent manipulation of the benchmark Libor inter-bank lending rate (as well as Euribor, the euro equivalent), has now resigned, a day before testifying before Parliament. The Bank of England and the Financial Services Authority, the two top regulators in Britain, reportedly encouraged him to go.

Like America, European nations have been pursuing spending cuts and other austerity that lead to declining GDP growth numbers and fears of a double dip recession. Europe embraced austerity more quickly than did the US, and it’s predictably depressing, so the expected results are occurring: Britain, which ushered in a mass austerity program, is paying the price with zero growth and may now be reconsidering whether to pursue at least some monetary stimulus.