The email from Bob Diamond (known as “RED” in Barclays, it would seem from the email) to fellow Barclays bosses John Varley and Jerry de Missier (the latter also resigned today) raises serious questions for the Bank of England’s Paul Tucker, seen by many as the heir apparent to Mervyn King.

The select committee will presumably think it owes him a very early evidence session alllowing him to clear his name. The email will also trigger a “deep throat” style hunt for the “senior” Whitehall sources who were pestering the Bank of England over Libor rates in 2008 – though one veteran of that government and the banking crisis tells me “You’d be hard pressed to find anyone who wasn’t worried by the libor rate – that doesn’t mean they promoted illegal acts.”

You can see the email below.

03 diamondletter 602 Red Diamond, deep throat and the bank

There will inevitably be suspicion that the Whitehall sources were led by Baroness Vadera, the old city hand brought into the Treasury by Gordon Brown and (from a perch at Business and the Cabinet Office) an extremely close adviser to him as PM over banking. That suspicion will be fuelled by the Daily Mail story this morning suggesting Baroness Vadera had her eye on the Libor rates.  In a comment on the article Baroness Vadera said concern about Libor rates was very different from market manipulation, which is true.

In the Barclays submission, the bank argues that Jerry de Missier interpreted the Bank of England call between Paul Tucker and “RED” as ”an instruction” from the Bank. Barclays says it didn’t affect the Libor rate as Barclays was “regularly excluded” from the calculation and that “the instruction became redundant after a few days as liquidity flowed back into the market”.

But that won’t wash much. The overall impression is left that a Bank of England senior figure and candidate for the governorship ended up (intentionally or unintentionally) giving the impression (indirectly) to a Barclays employee (the employee claims) that he wanted Barclays to keep its interest figures down – presumably, though not explicitly, by submitting lower estimates. That seems exactly the impression that Barclays wants you to come away with.

The email ropes in another bank governor candidate who gets talked about – John Varley, RED’s predecessor. Another possible candidate, Lord Green, now a minister, chaired the British Bankers’ Association at the time.

Every time the scale and reach of this scandal increases, Labour will feel that its arguments for the judicial inquiry increases. Labour is still insisting that it will not back down even if it loses Thursday’s vote on how the inquiry should be constituted.

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