The Office of the Comptroller of the Currency, which under the direction of Thomas Curry has been moderately more tough-minded against the banks, released a report that essentially admits that the big banks are poorly managed and have inadequate risk management controls. As Yves Smith points out, this means that the executives need to go to jail, under the Sarbanes-Oxley Act. Control fraud is a serious crime.

And we should point out that this poor management reveals itself on an almost daily basis. UBS is about to get hit with twice the fine of Barclays Bank for their role in the Libor scandal. And the bank’s Japanese subsidiary will reportedly plead guilty to a criminal charge. But pushing this off onto one subsidiary neglects the serious lack of control from the top executives in the firm. If one unit is criminally responsible, so are its minders at the central office.

In fact, we know now that the problem was widespread and obvious:

Every morning, from his desk by the bathroom at the far end of Royal Bank of Scotland Group Plc’s trading floor overlooking London’s Liverpool Street station, Paul White punched a series of numbers into his computer.

White, who joined RBS in 1984, was one of the employees responsible for the firm’s submissions to the London interbank offered rate, or Libor, the global benchmark for more than $300 trillion of contracts, from mortgages and student loans to interest-rate swaps. Behind him sat Neil Danziger, a derivatives trader at the bank since 2002. On the morning of March 27, 2008, Tan Chi Min, Danziger’s boss in Tokyo, told him to make sure the next day’s submission in yen would increase.

“We need to bump it way up high, highest among all if possible,” Tan, known by colleagues as “Jimmy,” wrote in an instant message to Danziger, according to a transcript made public by a Singapore court and reviewed by Bloomberg before being sealed by a judge at RBS’s request [...]

The next morning RBS said it paid 0.97 percent to borrow in yen for three months, up from 0.94 percent the previous day. The Edinburgh-based bank was the only one of 16 surveyed to raise its rate. If it had lowered its submission in line with others, the cost of borrowing in yen would have fallen one-fifth of a basis point, or 0.002 percent, according to data compiled by Bloomberg. Even that small a move could mean a gain of $250,000 on a position of $50 billion.

This casual rate manipulation among traders at up to a dozen banks was rampant throughout the industry, to the extent that the Bank of England now believes that such manipulation was inevitable. This speaks to poor controls at the top of the chain. Indeed, Bloomberg reports that senior managers at Royal Bank of Scotland, at least, knew about the rate-rigging at least as far back as mid-2007.

Regulatory forbearance obviously plays a role here. Despite all this criminality, whether you’re talking about Libor or the mortgage mess or any of a number of other major scandals, all the US seems to engage on is insider trading. Anything else, and you get that traditional fallback, which amounts to “too big to jail.”

But that’s typically an argument for protecting the bank itself, not the senior management. They must be expendable and prosecutable if you ever want to have a modicum of accountability on this runaway industry.