The strange silence and an absence of information

 

There is a strange silence at the core of the Barclays Libor manipulation. A strange absence of information.

But this may be remedied on Wednesday if a committee of MPs gets better answers than Newsnight is getting about emails alleged to exist between a Bank of England boss and the boss of Barclays.

Barclays was found guilty of, and paid a fine for, two types of market manipulation.

First, that said to be organised by relatively junior staff, to boost the bank's profits (and their own bonuses). This involved day-to-day rigging of Barclays' submission to the mechanism that sets this key inter-bank interest rate.

But it is the second offence that is raising systemic questions.

This involved a decision by Barclays to manipulate the rate during the credit crunch of 2007-08, with the purpose of avoiding the impression that Barclays was in trouble.

As the US regulator found: "Certain members of management of Barclays, including senior managers in the treasury department and managers of the money markets desk, directed that the Barclays Dollar Libor submitters contribute rates that were nearer to the expected rates of other Contributor Panel banks rather than submitting the proper, higher Libors."

As Barclays struggled to avoid being forced to take bailout money from the UK government, on 29 October 2008: "A senior Bank of England official contacted a senior Barclays manager... As the substance of the conversation was passed to other Barclays employees, certain Barclays managers formed the understanding that they had been instructed by the Bank of England to lower Barclays' Libor submissions, and instructed the Barclays Dollar and Sterling Libor submitters to do so - even though that was not the understanding of the senior Barclays individual who had the call with the Bank of England official."

These senior people have now been named by the BBC's business editor Robert Peston: Paul Tucker at the Bank of England, and Bob Diamond at Barclays.

Thus, the official picture drawn by the FSA is that the Bank of England did not instruct Barclays to fiddle the rate, and that Bob Diamond "did not understand" that he had been so instructed.

And here is where the unfortunate silence begins. Why was the discussion between Tucker and Diamond not noted or recorded? And where does the trail of orders begin that led to Barclays lowering their submissions on 29 October?

Whistleblower

These are questions on which the future of Bob Diamond and the rest of Barclays board hangs.

Newsnight understands the Treasury Select Committee is examining claims that an email trail exists between Mr Tucker and Barclays' senior management.

A whistleblower has claimed that the FSA has seen emails from Mr Tucker to Mr Diamond and Barclays senior management; that these emails have been read out orally in FSA meetings, but that they were not included in the FSA's findings released last week.

When I asked the FSA if they had seen emails from Mr Tucker they said they could not add anything, or answer questions about anything not in the document, as a wider FSA investigation is ongoing.

When I asked the Bank of England whether they had supplied emails from Mr Tucker to the FSA as part of the inquiry they said said were "not aware of any emails".

When I asked Barclays if the emails existed, they said they "could not add to what is in the FSA report at this stage".

Paul Tucker's communication with Barclays senior management came after there'd been a BBA review into allegations of Libor manipulation, and after months of press comment.

Core to the FSA's case against Barclays is that, whatever it said to the Bank of England about its general concerns at the reliability of Libor, it never indicated that it, itself, was manipulating Libor.

The Bank of England told the Daily Mail: "It is nonsense to suggest the Bank of England was aware of any impropriety in the setting of Libor. If we had been aware of attempts to manipulate Libor, we would have treated them very seriously."

 
Paul Mason, Economics editor, Newsnight Article written by Paul Mason Paul Mason Former economics editor, Newsnight

End of an era

After 12 years on Newsnight, Economics editor Paul Mason has moved on to pastures new and this blog is now closed.

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  • rate this
    0

    Comment number 79.

    #77 Alison

    wrong-doing at all times.

    They are both buyers and sellers into the market, they tried to raise the rate when they were sellers and lower it when buyers.

    They didn't do this as some kind of philanthropic gesture to save the UK taxpayer from picking up another broken bank, they did it for profit (past, present and future)

    And they aren't illiquid, they are insolvent.

  • rate this
    0

    Comment number 78.

    Is it not likely that only one figure could expect to be heard respectfully, by a senior banker, in the national interest, seeming either to ask for a major bank take-over without due diligence, or to have it appear that at least one of Britain's Big Four was not close to sinking? A moral debt may be owed, perhaps a knighthood as for one Francis Drake?

  • rate this
    0

    Comment number 77.

    Good journalism, but is it really SO bad to manipulate Libor downwards at a time of crisis? Reduced Libor = lower borrowing rates for all. And who would have wanted yet another British bank to be perceived as illiquid & forced to go cap in hand to taxpayers at that time? Technically wrong-doing, but maybe right at the time.

  • rate this
    +1

    Comment number 76.

    FSA, BoE I really hope the electronic trail is found with you both having knowledge of what was going on. I would therefore suggest that if this is the case you are also culpable of fraud. Too big to fail has just come back to bite you in the ass.

  • rate this
    +2

    Comment number 75.

    Good Banking Practice: Lesson Number 1

    When you have a telephone conversation with someone who apparently tells you to do something immoral and possibly illegal, do it without seeking clarification or challenging the advice.
    If you put this advice into practice you too could become the CEO of a major British bank and "be released" with a shed load of money and never have to work again.
    Alan

  • rate this
    -1

    Comment number 74.

    Help! Sirs Mervyn & Adair

    Is it so hard to grasp?

    Grateful for Evolutionary past, but another planetesimal we can do without

    Grateful for Erosion of rock to soil, but of drought* & flood* we have enough

    Grateful for State past, Defence & Progress, but what of 'OUR' Democracy?

    Our Great fail duty to ensure money circulation equally for ALL accounts

    Inequality means OUR currency by-passes US *

  • rate this
    -1

    Comment number 73.

    All so unnecessary, hanging on to Mammon

    Elections naturally promote 'able & affable'

    They did not need to sacrifice democracy

    What really hurts, poverty & waste & war

    The blighting of lives, economies, planet

    Just for moats, duck-houses, chat-careers

    Content now to squabble for party points

    Ignoring urgent need, for Democracy NOW

    Truth & Reconciliation to follow, for record

    Equal Incomes

  • rate this
    0

    Comment number 72.

    Yesterday it was a few "rogue traders" today Marcus Agius admits the buck stopped at Mr del Missier who is a senior executive, how can yesterdays claim be so far different from todays and what will tomorrow bring?

    It would appear that we are being dripfed the scale of deception.

  • rate this
    +1

    Comment number 71.

    Oh dear ...all this happened before the Coalition took over Whatever comes out now will be down to the government that was in "control" and will be seen in the same light as the CEO's of Barclays.Brown & Balls...you either knew what was going on and therefore were part of it or if you didn't know then you can only be judged as incompetant.No wonder Labour are calling for the 'LONG' enquiry ie Iraq

  • rate this
    +1

    Comment number 70.

    I believe there is a connection!
    Big banks - since 2005 - have rigged Libor-based market. Barclays says BoE gave explicit approval. Barclay’s manipulated Libor to make bank look healthier than it really was. Guess what - US did this too: Tarp Inspector General said Hank Paulson (then Sec. of Treasury) misrepresented big banks’ health prior to TARP.
    How high, how wide this scandal?

  • rate this
    +1

    Comment number 69.

    So the BoE did seem to "hint" to Barclays that they "needn't" post such high levels:

    http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/06/Tucker%20Note%20Barclays.png

    The response from Barclays is along the lines of "we're playing a straight bat, so you're better off dealing with the other phonies".

    How high does this go?? Who is No. 1 ??

  • rate this
    0

    Comment number 68.

    IS THERE A CONNECTION?
    US national debt is growing at $1.5 TRILLION/yr. Ultra-low interest rates MUST be maintained to prevent debt from overwhelming govt budget. Near-zero rates also need to be maintained because even moderate rise would cause multi-trillion dollar derivative losses for banks. Needed: Arbitrage - borrowing at 0% & investing at higher rates.

  • rate this
    +1

    Comment number 67.

    Is there a connection?
    When Jamie Dimon, CEO of JPMorgan Chase Bank, went before Senate Banking Committee on June 13, the groveling of the Senators was obvious. Why was Congress so condescending to Jamie Dimon?
    I contend $3B + losses in London HEDGING transactions (subject of hearing) could be be traced, to record-low interest rates maintained on US government bonds.

  • rate this
    0

    Comment number 66.

    UK’s SFO (Serious Fraud Office) is considering whether appropriateness + possibility to bring criminal prosecutions against traders at Barclays (or elsewhere who allegedly manipulated Libor.) Decision expected within month. Osborne is talking investigation & inquiry into banking standards.
    Persons need SILENCE in order to figure out what INFORMATION to provide.

  • rate this
    0

    Comment number 65.

    Settlement documents ALLUDE to prior dealings with regulators. Allegedly, these include a conversation with the FSA about 1. extent Libors have been understated + 2. October 2008 exchange between Diamond & Paul Tucker, Deputy Governor of BoE.
    After latter, mid-level Barclays managers “mistakenly believed” bank had been told by the BoE to reduce its Libor submissions.

  • rate this
    0

    Comment number 64.

    Diamond threatens to provide embarrassing details about Barclays’ dealings with regulators IF HE HIMSELF COMES UNDER FIRE at parliamentary hearings. Barclays states it has been unfairly singled out for criticism while 20 OTHER BANKS ARE STILL EMBROILED IN PROBE. Diamond maintains authorities/regulators knew rates were inaccurate, but did not object at the time.

  • rate this
    0

    Comment number 63.

    The role of the press is often the use of selective evidence to reinforce cliche. One of these cliches is that suicide is purely egoistic.

    http://globalsociology.org/post/20756309060/suicide-as-social-action-putting-durkheim-and-merton

    Paul Mason raised the issue of anomie in Greece but the focal infection of anomie is banking. They broke the social contract of capitalism (wealth for all).

  • rate this
    +3

    Comment number 62.

    Perhaps we should all look back with fondness at the mutual building societies that the greedy amongst us were induced to break up for small gains during the 80's and 90's. Let's face it the rot really started there when sound personal financial management was driven from the market. Who did it benefit? none but the newly created financial spivs.

  • rate this
    -2

    Comment number 61.

    #60 yeah ED balls is a bit silent on this along with his master Brown

  • rate this
    +1

    Comment number 60.

    Are we witnessing another attempt at cover up?
    Even while it is happening?
    What fun it is when the tangled web of deception unravels in front of our eyes, but mighty expensive in the long run.

    Governments have fallen over less, or perhaps more pertinently blamed previous ones if they can. Look out Ed B.

 

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