Tuesday, 3 July 2012

The Barclays LIBOR scandal will be a cracker

I have a good feeling about the Barclays LIBOR scandal. I think it's going to be a cracker.

The week started well with a really classy move from Bob Diamond. He engineered the removal of the hapless Barclays chairman Marcus Agius. Somehow, I do not think it will be enough to save Brave Bob. The public are baying for blood, and one head will not be enough. Still, good try Bob. Tastefully done.

Bob will be heading down to Westminster for a guest appearance before the Treasury committee. Presumably, the committee members will broach the subject of his resignation. However, all the signs are that Bob isn't inclined to write any painful letters soon, at least not without a fight. Instead, he's going to come out with all guns blazing.

According to his close mates who conveniently briefed the press, Bob will argue that Barclays needed to manipulate the LIBOR rate to save the UK banking system. If, at the height of the crisis, Barclays customers had known the true interest rate that the bank was paying, they would have rushed to their local branches and withdrawn all their cash. Barclays needed to fix the rates to paint a picture that the Bank was doing fine. Manipulating the rate was a necessary evil, which had the occasional unfortunate consequence that Barclays made a little extra cash on some of its derivative trading. Bob had to ensure that the bank survived, as Malcolm X might have said, "by any means necessary".

However, there is every indication that Bob won't stop there. His friends have dropped heavy hints that the regulators and the Bank of England knew about the LIBOR fiddles. At the time, everyone grasped the big picture. Bob wants to remind them how difficult things became during the crisis for honest banks like Barclays. Bob may sing like the proverbial canary and he might bring down a few big names. Good for you, Bob, but I don't think it is going to help you much.

Bob also has a third line of defence. Why is he being punished for coming clean when all the banks were at it? It is a fair question, but banking isn't about equity or justice. There is nothing fair about Bob's long history of unwarranted pay packets. Nor will there be anything fair about his ultimate dismissal. So it goes. Life is like that. Bob has to take a long walk, and bitching, finger-pointing, and whingeing isn't going to change a thing.


Anonymous said...

Best free entertainment in London

Anonymous said...

Assume Bob will enjoy a generous pension.

It doesn't add up... said...

You can find the pre-briefing here:


The main link on the Barclays home page.

Now the interesting question is: who were the senior Whitehall figures? Where does that trail lead? Does it have (B)brown stuff on it?

The defence seems to be that everyone else was already manipulating the figures, so Barclays joined in, thinking they had been told to do so by the BoE acting as messenger for government, although no-one really senior (i.e. RED as he calls himself in email) issued any specific instructions. In these situations, absence of instructions can be as meaningful as a clear instruction not to do something.

Code RED.

ernie said...

Don't I remember that many of the emails were dated 06 and 07? Or is that wrong? If so, talk about helping the BoE disguise the problems around late 08 doesn't really wash?