Fortune -- Here's one thing you won't find among the trove of e-mails released as part of Barclays' $450 million settlement for its part in the scheme to fix Libor: Loan officers or commercial bankers asking for higher rates. The question is why not. Barclays is one of the biggest banks in the world. And Libor, as the world now knows, is the basis for trillions of dollars in loans including everything from corporate lines of credit to auto loans. So if Barclays is a huge lender, and the Libor fix was on, why wasn't there any e-mails from loan officers asking the bank to jack up the rates in order to boost lending profits in the quarter?
Instead, the e-mails are from traders. And often they are asking for the bank officials responsible for reporting Barclays' lending rates to the London group that set official Libor to push the rate down, not up, in order to benefit the bank's, or an individual trader's, positions. And in many instances the submitters complied. At some banks there appeared to be a concerted effort to coordinate their rate reporting and their trading operations. Allegedly, some banks sat their Libor traders right next to the submitters in order to boost profits. Yet, there appears to be very little effort to coordinate bank lending rates with actual lending. And very little concern for how pushing the rate lower would hurt lending profits.
One of the revelations after the JPMorgan Chase (jpm) London Whale blow-up was just how big and important trading activities, which Jamie Dimon calls hedging, had become at the bank. Roughly, one-third of all the money JPMorgan has taken in from depositors, or around $350 billion, is invested, rather than lent out. The fact that the bank diverted so much of its resources to trading, and away from lending, Reuters' Felix Salmon and others pointed out, was the real problem for the economy, and not the fact that a large well-capitalized bank had messed up a trade.
The same appears to be true for the Libor scandal. The real story, and the long-term concern for regulators, is not that lending rates were fixed, but how much of the business of big banks these days is driven by trading, not lending. Clearly, Barclays and other banks believed they could make more money on their trading desk manipulating the rate, then they would lose in their lending operations. As Floyd Norris wrote in the NY Times over the weekend, "It is interesting to note that even before the financial crisis, the manipulation was not, as one might expect from a lender, always in the direction of higher rates. The trading department at Barclays was rigging the report, and sometimes its trading positions called for lower rates, even though that might reduce the interest income received by the bank."
All this appears to be more evidence for why we need a strong Volcker rule that separates lending from trading. It's not just to insure against large trading losses at the big banks. The reason we need the Volcker rule is that at time when the economy is struggling to grow what we really need is bankers who are focused on lending. The Libor scandal shows once again that lending is a sideshow in the world of modern global finance. And that's the real problem.