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.

 
Nick Robinson, Political editor Article written by Nick Robinson Nick Robinson Political editor

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  • rate this
    0

    Comment number 140.

    137 "Only difference (and it's not really important in practice) is that it came more naturally to the Conservatives. Labour had to rather work at it - but boy did they ever."

    No it's not important.

    But of course you still try and make the point.

    Besides, I'd say Blair, Mandelson et al (or should I say et Ed) seem to find it effortless.

  • rate this
    0

    Comment number 139.

    Why are labour politicians quizzing Diamond on ethics and deception?

    1/ Illegal wars
    2/ Selling gold at record lows
    3/ Pilfering the pension pot
    4/ Bankrupting the country
    5/ Blatantly lying about immigration levels
    6/ Presiding over a catastrophic boom & bust

    I would like to see T Blair and G Brown answering some questions for scams against the British people?

  • rate this
    +2

    Comment number 138.

    What you say now is hindsight - what would you have said THEN if the Labour Government had introduced controls that stopped your bank loaning you money to buy your new car - and your bank said "The Government won't let us lend you the money"
    Have you never borrowed on the strength of your income under the assumption that your job is safe?

  • rate this
    +5

    Comment number 137.

    andy 131

    It's been going on for decades and both main parties are culpable. Both fell for the City Myth, hook line and sinker.

    Only difference (and it's not really important in practice) is that it came more naturally to the Conservatives. Labour had to rather work at it - but boy did they ever.

  • rate this
    +2

    Comment number 136.

    I like the 2nd to last paragraph. Perhaps someone should tell the Chancellors cheerleaders that you cannot destroy something that does not exist.

  • rate this
    -1

    Comment number 135.

    "Exiledblade
    At the time that Labour 'abolished meaningful banking regulation' the majority of the media and the Tory opposition were screaming for the dead hand of Government to be removed from the thrusting entrepeneurial dynamism of the City."

    I'm neither in the media, nor a member of the Tory party.

    So what's your excuse now for Labour's failings?

  • rate this
    +2

    Comment number 134.

    AndyC555 - you really should follow your own advice! At the time that Labour 'abolished meaningful banking regulation' the majority of the media and the Tory opposition were screaming for the dead hand of Government to be removed from the thrusting entrepeneurial dynamism of the City.

  • rate this
    -1

    Comment number 133.

    It is time for us to ask where our money has gone. The blind have led the blind and all of us to the edge of a financial abyss. I made this video in 2009. It asks the question we should now all be asking. Where is our money. we want it back!!http://www.youtube.com/watch?v=18ISDR6RrHM

  • rate this
    +2

    Comment number 132.

    According to what Diamond said this afternoon that he didn't take the questions from the BoE as an instruction to lower LIBOR, so it was a mis communication between Diamond and Del Missier that caused the lowering of the rate. Seems like a bank that is quoted on the NYSE does not have proper SOX compliance procedures in place if one email can cause such havoc.

  • rate this
    -2

    Comment number 131.

    "sagamix
    But there IS a Magic Money Tree...it can be found in one particular place.
    We call this place the 'Investment Banking sector'."


    You'll have to complete the picture though, saga. It's an historic picture. It existed under Labour, because they'd abolished boom, bust and meaningful banking regulations.

    Alas, the tree turned out to be as real as the Emperor's New Clothes.

  • rate this
    0

    Comment number 130.

    #124 -rockrobin "Chancellor George Osborne has given the go-ahead for 61 PFI projects, worth a total of £6.9bn, since coming into power." according to Channel 4 news, 18th April 2011
    'It's a waste of money, coalition style.'
    Did the LibDems make him do it?

  • rate this
    0

    Comment number 129.

    rr7 @ 125

    But there IS a Magic Money Tree, Robin. It's rare, true, but it can be found in one particular place.

    It's a place where cash falleth from the sky and raineth down on inhabitants like a gentle dew from heaven. A place that one wouldn't believe could possibly exist except for the fact that it does.

    We call this place the 'Investment Banking sector'.

  • rate this
    -1

    Comment number 128.

    G Paul Turner 91

    'It is inconceivable that a Tory-chaired inquiry will want to disclose all that should be revealed'

    Given that everything that went wrong went wrong under the Labour party, the more that can revealed about their incompetence the better. It's just that we don't want to have to wait 4 years.

  • rate this
    0

    Comment number 127.

    "The ‘culture at Barclays’ are always willing to be No.1 at any cost"
    Yes Mr Diamond, this is why we have a problem. The ‘culture at Barclays’ is nothing other than criminal. We are also aware that the ‘culture at Barclays’ is also the ‘culture at ’ and in time we will find them too.

  • rate this
    0

    Comment number 126.

    125.rockRobin7

    Paying 5 times what it was worth?

    Typical private sector rip-off.

    Debt going UP under tories as the economy collapses and government income is slashed.


    Tories: taking labours mess and making it worse.

  • rate this
    +2

    Comment number 125.

    and while we are at it jon112dk, what really is 'sick' is the left constantly bleating about the hospitals and schools that 'nice' newlabour built while the 'nasty' and 'sick' tories have to sort out all the debt associated with them.

    When will someone on the left acknowledge that there isn't a magic money tree?

  • rate this
    0

    Comment number 124.

    jon112dk

    correct. The schools and hospitals newlanour wasted money on. If you think 65bn total bill for work of 11.4bn of hospitals over thirteen years is 'a price worth paying' then take that argument to the next election campaign. Personally, I try not to pay more than five times the price for anything. It's a waste of money, newlabour style.

  • rate this
    +1

    Comment number 123.

    #117rockRobin7

    We have it in writing - tory cheerleader believes schools and hospitals are a waste of money.

    Sick.

  • rate this
    0

    Comment number 122.

    I think Peston's piece a breath of fresh air, after this naked attempt at suffocation of the issue:

    http://www.bbc.co.uk/news/business-18704715

  • rate this
    +2

    Comment number 121.

    If this had been a Tory scandal for example involving ex PM John Major the BBC would have had his face all over their site.
    John_from_Hendon, Major left office with a budget IN SUPLUS, Labour left us BANKRUPT, go figure?

    'Despicable and totally in line with the BBC's agenda. Why do they continually want to support and protect Labour is beyond me.

 

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