By Jennifer Ablan

It was not supposed to be like this.

 After the worst financial crisis since the Great Depression almost took the global economy over the cliff, tough new rgulations and stronger internal controls at the world's major banls were meant to help restore confidence in the financial system.

But the recent headlines have some top investors and strategists questioning whether there has been any progress at all.

The horror stories include the deepening scandal that big banks rigged Libor - the beanchmark London interbank offered rate that influences interest rates around the world - and JPMorgan Chase's mounting losses from disastrous credit bets and a possible cover-up attempt.

Add in the problems surrounding the botched trading debut by Facebook, as well as an insider-trading scandal that led to the conviction of hedge-fund managers and big-name businessmen such as former Goldman Sachs director Rajat Gupta, and the picture is not pretty.

The signs of a fall in investor confidence are not hard to spot.

Even though some of that investment trend may reflect the fragility of the United States economic recovery, the real problem lies elsewhere, said Mr Larry Jeddeloh, founder and chief investment officer of TIS Group, an institutional research firm that also manages client money.

"The bigger problem, which I think investors are focusing on, is that confidence in the financial system is eroding," he said.

"There have been a litany of failures and confidence-reducing events recently which should cause anyone with a stock certificate and a heartbeat to think hard about what to do with his stocks."

For many small and some big investors, the recent headline events create a perception that the system can be gamed - and that they could lose money because those who are able to manupilate a rate or a stock price, or have an inside information, wield a big advantage - said investors and strategists.

At worst, in cases like failed brokerages MF Global and PFGBEST - with the echoes of the Bernie Madoff and Allen Stanford Ponzi scams also ringing in investors' ears - it means that someone could simply raid their account and take their money.

It all feeds into a wider political backdrop. The speed with which the Occupy Wall Street movement gathered pace last year was seen by some economists and major investors as a growing symbol of the distrust of banks and the inability or unwillingness of the authorities to crack down on corporate malfeasance and greed.

Almost all of the scandals lead to allegations that regulators are asleep at the wheel or simply lack the firepower to keep up with the misbehavior.

In the scandal over the rigging of Libor, documents released last week showed that regulators on both sides of the Atlantic knew - years ago - that there was something very wrong with the system but they did very little to try to fix it.

Even so, investors sometimes still shake off fears and plunge back into risky assets.

Last Friday, after JPMorgan revealed that its trading losses could be as high as US$7.5 billion (S$9.5 billion) and Reuters reported that federal criminal investigators were investigating whether JPMorgan employees in London hid the problem, its shares rose 6 per cent and the US stock markey rallied.

Among the reasons given by traders and investors: The worst of the scandal may be behind the bank.

The lack of confidence may not always be apparent in day-to-day trading, but it is showing up in the financial markets in a number of other ways.

Investors are mostly shying away from assets that carry high, or even modest, levels of risks, and parking their money in US Treasuries and other places that pay very low interest rates.

Cash balances at major companies remain at very high levels.

Those trends are occurring even though the world's major central banks, led by the Fed. have found innovative ways to create easy monetary policies in an attempt to get companies and consumers to spend.

The Libor scandal may be the most insidious.

More than a dozen banks are under investigation by the authorities in Europe, Japan and the US over the suspected rigging of Libor, which is used to set many lending and borrowing rates on hundreds of trillions of dollars' worth of financial instruments.

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