Barclays Banks - A Whitehall whodunit

 

Which senior Whitehall figure told the Bank of England to tell Barclays that they should get their LIBOR - or inter bank lending interest rate - down? That's the whodunit which is absorbing Westminster.

The crime - if it ever happened - occurred in 2008 in the midst of the banking crisis. The evidence for it is a note, made at the time, by Bob Diamond, the banker formerly known as the chief executive of Barclays. It is only one man's account of one side of a conversation but what's at stake is something more valuable than money - reputation.

We have to start by remembering that there were good reasons for the Bank of England and the government to worry about a high LIBOR rate at the time since it was a symptom of the credit crunch - ie the disappearance of inter-bank lending. This was robbing businesses of the money they needed to stay afloat, let alone expand.

Indeed the very day after this memo in October 2008 the chancellor was urging banks to lend more of the billions pumped into the system out to businesses

There were also good reasons to worry specifically about Barclays' LIBOR rate since it was a bank which had chosen not to be bailed out by the taxpayer and the fear was that it could collapse as RBS had.

The former Chancellor Alastair Darling has expressed astonishment that anyone in the Bank of England or the Treasury would have been stupid enough to tell Barclays to rig the rate.

Lord Myners, his deputy, has said that he had no discussion about the "LIBOR rate setting process" and didn't speak to the Bank of England's Paul Tucker about it. He said, pointedly, that he didn't fall into "the category of people who had no recollection of" - a clear reference to Gordon Brown's City fixit woman Shriti Vadera who was resented at the Treasury.

Vadera says she cannot recall speaking to anyone at the Bank about the rate but she did talk with bankers about a policy change (altering the price of the government's Credit Guarantee Scheme as I wrote yesterday) to get the LIBOR rate down overall. That, though, is very different from urging anyone to rig a particular rate.

That leaves a question as to whether Treasury officials expressed their concern about Barclays' high LIBOR rates in their conversations with the Bank of England. To count as "senior" - the word used in the Diamond memo - that would have to mean a top official such as Sir Nicholas Macpherson, the Permanent Secretary at the Treasury.

"What about Ed Balls?" cry the Tories. After all, they say, he used to be Gordon Brown's chief economic adviser at the Treasury, the City Minister and, even after he became Children's Secretary, chatted to him about economic policy.

Balls tells me that he never had a conversation about LIBOR with anyone in government or outside it and the idea he would have spoken to the Bank of England about it when he was running the country's schools was absurd.

So is there any evidence against him? The stream of Conservative tweets, press briefings and quotes talk simply of him having "questions to answer".

Today, under cross examination by MPs, Bob Diamond may reveal more about his call with Paul Tucker, the man from the Bank of England who said senior Whitehall figures were pressurising him.

Tucker, when we hear from him, may tell us more about who it was in Whitehall. It may turn out that no one ever told Barclays to rig its rate but that an atmosphere was created in which the message was received - "Who will rid me of this troublesome rate?"

This whodunit matters and the inquiry into it - whatever form it takes - will reveal a lot about the way power works in Britain.

Never forget, though, that part of what is fuelling it is the desire of the Tories and, in particular, the chancellor's cheerleaders to remind people of the mistakes made under Gordon Brown's government and to try to destroy Labour's economic credibility.

For years the Conservatives used the Winter of Discontent to warn voters not to trust Labour again. they hope to do the same with debt, the banks and that obscure rate few of us understand, called LIBOR.

 
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  • rate this
    0

    Comment number 160.

    Why do we bother to vote for Mp's when they do every thing to hide stuff from us and tell us any thing but the truth this is going to be the same as any other Mp's inquiry the bear minimum will come out to the public
    if you look at Mp's expenses that was just a gloss job were some rules were changed but not many went to jail over that and they still control who is sent to explain there expenses

  • rate this
    +1

    Comment number 159.

    The Tories have got the cover up they want no Judge lead inquiry so they can control what comes out
    Bad Bad Day for the UK

  • rate this
    +1

    Comment number 158.

    "142.John_from_Hendon

    PPP started under the Tories! (aka PFI)

    No regulation was a Tory policy.

    It is foolish to blame any party"

    So it's foolish to blame any party but you blame the Tories.

  • rate this
    0

    Comment number 157.

    Having read what BD actually said today makes a hoot of this here NR piece.

    BD, (the one who was spoken to) says he understood nothing as telling him to fix LIBOR.The "misunderstanding" was internal to Barclays.

    Notwithstanding, Mr Tyrie suggested to BD that the conversation with Mr Tucker could have been interpreted as "a nod and a wink".

    Words.

    Mouth.

    In.

    Putting...

  • rate this
    +1

    Comment number 156.

    Humans normally accept good fortune pretty much at face value, it's only bad fortune which is questioned and examined in detail. Companies are made of humans. When Barclays made stellar gains over its competitors (and its former self) I'm guessing that the humans running and shareholding didn't examine why very much - they just went out and bought cars and houses with the bonuses.

  • rate this
    0

    Comment number 155.

    snuff 149

    Yes, nice one.

    Certainly future generations will one day read about the Anglo-American investment banking model, centred in Wall Street and the City, and they will be suitably astonished.

    Rather like we look back at things like the South Sea bubble.

  • Comment number 154.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    0

    Comment number 153.

    Base-costs of Income Inequality -

    Personal accounting: life-sapping

    Small business: life-crushing

    Large business: get help, fingers-crossed

    Global business accounting: beyond most imaginings

    Lessons -

    Conflict of interest = culture-sapping = vulnerability to rogues

    Commercial, national, global ruin: evidence enough?

    Need Equal Democracy to make trust in such as Bob rational

    Get 'even'!

  • rate this
    +2

    Comment number 152.

    Well, there I was, waiting with bated breath, for Diamond to spill the beans on the Labour government's involvement in 'fixing' the Libor rate. Surely this smear campaign had to have some basis in fact. After all there's no smoke without fire?
    But he didn't. In fact his evidence was that neither the government or the BoE leant on him. Leaving Dave and Ossie and their smear looking foolish.

  • rate this
    +2

    Comment number 151.

    146 Low relative to now of course and during a cyclical low point, Brown had bought the farm on money being all about high finance and city dealings I think , he simply viewed it as useless lumps of yellow metal - real money was created by tapping numbers in a computer.

  • rate this
    +1

    Comment number 150.

    The inexorable logic of free market banking is that banks have to put up a smoke screen to hide speculations that go badly wrong, and to lie - whether criminal or not - to protect their image + credibility. To recoup losses they may engage in further high risk speculations, lie about reserves, sell toxic products etc. Why are our profits, savings and pensions in the hands of shallow gamblers?

  • rate this
    0

    Comment number 149.

    re#137
    Is the City Myth the ultimate MUM? < modern urban myth

  • rate this
    -1

    Comment number 148.

    I suspect that this false accounting was done both for bankers' immediate financial gain and in the interests of the bank's overall survival. If the bank had reported its true borrowing rate, its reputation and ability to borrow wd have been impaired, with a subsequent downward spiral. If one bank reports falsely, others have to do so to compete. The true health of these banks remains obscure.

  • rate this
    -1

    Comment number 147.

    Culture revealed, of vulnerability to rogues

    Corruption invited by reward for "self-interest"
    Even now thinking should be "on firm results"
    Need on Nation's 'results'

    Still thinking 'compromise' on Conflict of Interest

    Of 'the 14', more misguided youth than rogue
    With 140,000 staff, 4,000 traders, a small count
    (general pop: 1-3% psycho-sociopathy)

    SEE the 'trial': be ashamed of MPs & electors

  • rate this
    +2

    Comment number 146.

    144 - Agreed that it was bone-headed incompetence rather than deceit regarding the selling off of gold, although it would still have been at rock-bottom prices.

    Of course arrogance also played a part. Brown was told by advisors not to sell and if he did sell then not to pre-announce the sale. He didn't listen.

  • rate this
    0

    Comment number 145.

    Banks not lending, low interest savings rates, bosses on huge bonuses and gold plated pensions, how come King and Osbourne didn't see any lights flashing? King & Osbourne need go too!

    Tories are running scared of a judicial inquiry, so we get 'transparency behind closed doors', they might have chums with egg on their faces? .

    It wasn't just Barclay's at it, Miliband had the right idea at PMQs.

  • rate this
    +1

    Comment number 144.

    139 You will find the whole fuss about selling the gold was that they didn't use any unethical or deceptive practices. Brown openly told the market he was going to do it allowing them to lowball the price he got. Had he kept his trap shut and disposed of it decpetively the price would not have been so low, it was incompetence not deception.

  • rate this
    +1

    Comment number 143.

    All very depressing really. The article below shows why criminal prosecutions are unlikely. I'm all in favour of a more robust "US style" approach to dealing with 'white collar' crime.

    (That's why I work so hard to stay firmly within the letter of the law)

    http://www.bbc.co.uk/news/business-18671228

  • rate this
    -1

    Comment number 142.

    117. rockRobin7

    PPP started under the Tories! (aka PFI)

    No regulation was a Tory policy.

    The whole establishment blew it!

    It is foolish to blame any party as it leads to the wrong conclusions that the other lot are better - as they are not!

  • rate this
    +1

    Comment number 141.

    139. Mark "I would like to see T Blair and G Brown answering some questions...."

    Their response - they were only following Mrs Thatcher's orders as voted fro by the British People (and enforced by R. Murdoch) that is after all what they promised to do - and did!

 

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