Libor rate-fixing: a scandal growing by the day
The thing just gets bigger. Now both Brussels and Washington have declared an interest in getting involved in the Barclays/Libor scandal.
Michel Barnier, the EU Commissioner who deals with financial services is already proposing EU legislation to go where UK legislation has so far failed to go.
Barnier wants the full force of EU-wide rules to outlaw the manipulation of either the Libor or Eurobor interest rate setting mechanisms.
Draconian consequences are in prospect. Barnier is moving at the very moment when David Cameron is fighting his rear guard action to “protect” the City from European supervision.
The scandal could not have broken at a worse moment – on the heels of Mr Cameron’s December row at the Brussels Summit, which saw the UK premier walking away from the negotiating table in protest.
In the US we have the scourge of Wall Street abuse, Congressman Barney Frank who inaugurated much of the law which has been jailing miscreants in the financial services industry.
All this tips an even sharper spotlight on today’s events in parliament after their woeful debate on the floor of the House of Commons on Thursday.
MPs on the Treasury Select Committee have a chance this afternoon to do a little to remedy their own disparate efforts to question Barclays’ Bob Diamond. Diamond walked all over them.
This all-party group of MPs displayed a determination not to deploy a coherent team approach to the questioning. Almost no one seemed prepared to follow up on anyone else’s question, each MP having his or her own agenda. Worse, there appeared to be no collective strategy for getting at the truth.
It is hard to imagine that five days will have cohered and strengthened this committee when it comes to question Deputy Bank of England Governor Paul Tucker when he takes the stand this afternoon. The questioning needs to establish whether the Bank did or did not give a ‘nod and a wink’ to fiddling the Libor.
In the meantime Marcus Agius remains both the chairman of Barclays AND the chairman of the British Banking Association which sets the Libor and to whom his own bank told lies.
It’s an Alice in Wonderland situation which can do nothing to reassure either Brussels or Washington that there is any serious will to challenge the old boy antics that got us into this mess. Indeed the presumption that a serving member of the board of Barclays – Sir Michael Rake will simply take over chairmanship of the bank won’t be doing much either. It is hard to imagine that any member of the Barclays board that presided over the ‘culture’ in which all this happened could be acceptable on the heels of so vast and so far un-quantified a scandal.
What must be keeping the City awake at night – beyond the far away markets, must be the awful reality that most of the other big UK banks were involved in it all.
The Canadian courts have followed the Baltimore courts in stating that HSBC and RBS together with Deutsche Bank and JP Morgan have been involved in the scandal as recently as 2010. All the banks are contesting the courts’ claims. But UBS has turned whistleblower and has produced reams of emails and documents.
As I said, this thing just gets bigger.
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There are 26 comments on this post
Just a skim read of the tone today . Yes it was the timing of the revelation which was interesting in the financial power struggle.
The financial power game is looming large. We actually don’t need arms when money/globalisation has a such powerful effect on control.
This scandal is a wake up call for all of us. I,and I am sure many other people , am angry and disgusted enough to begin the process of moving money to a local credit union. I will no longer be complicit in such outrageous behaviour. The appalling sight of elected members wasting public time and money trading insults and attributing blame instead of taking sober and considered action suggests that they too are unfit for purpose. How about a red card system, excluding members who act in such a way from debates with dismissal for recurrent offences ?
I agree although the Root has not been mentioned.
The problem is a banking business model that is dependent on being allowed to destabilise the societies that underpin its success – it’s greater than the old boys’ network. And it’s no surprise that the number of ‘others’ not enjoying its spoils has reached tipping point.
The main problem is that The financial sector produces nearly 10% of the UK’s GDP,and successive governments have either turned a blind eye to wrong doing,or even been complicit in it,becauseof their reliance on its benefits.
That is just not good enough,for it says if the crime is of benefit, then carry on.
At the same time surely the British Government do not want the European parliament/commission controlling our financial sector.Yet another reason either to walk away from Europe or repatriate our powers to govern ourselves.
It is, therefore,essential that strict financial controls are put in place and offences where transgressors can be taken to court and severely punished.There is no reason why a well regulated financial sector can not still produce a considerable income for the country
I am beginning to wonder whether regulation is ever going to be enough without a change of culture and a reevaluation of the purpose of banking. It seems to me that whatever percentage of GDP the financial services are responsible for if they are concurrently damaging small businesses and effecting the livelihoods of vast numbers of ordinary people then who knows what their real contribution is ?
I agree. But do we have the politicians able & willing to make it happen?
“10% of the GDP”
Where do you get your figures from?
Are they adjusted for the massive losses incurred to the tax payer since 2008?
I thought not!
If the bankers could take a maximum £100k bonus per year, with the remainder paid on a yearly £100k basis, heritable to their next of kin, leaving these substantial ‘profits’ (your 10% GDP) as banking capital subject to the vagaries of the banks trading, year on year… and in event of losses in any year, or a financial crash that capital (the bankers pool of bonuses awaiting payment) would be used instead of tax payers money…
It might make bankers think more carefully about balancing risky trading against long term bonus income.
I very much doubt that UK banking profits, when adjusted for massive losses covered by the taxpayer, really accounts for so much of our GDP.
I have far more respect for our German Mini manufacturers and Sir James Dysons innovative range of products…
Dr Gardner,perhaps it is time for real mutual banks
Jon,
If I was a betting man I would put my money on the CamCleggies raising the Euro “issue.” This will help divert attention from the systemic structural corruption now obvious to everyone except your standard Daily Mail/Sun-reading Tories in the backwoods of reactionary London.
Of course, a parliamentary committee is a total waste of time, and is intended to be. The only use of the last session with Diamond was an illustration of just how slimey a character he is.
The threat of course is that “financial services” will decamp elsewhere if they aren’t allowed to continue swindling our country…..To which the common sense response is, So What? I say get rid of the lot of them, they are nothing more than a gang of suited up Mafioso. If we can’t lock them up, deny people like Diamond residence here. Any UK nationals thrown out of work can always follow Tebbit’s advice and get on their bikes and do an honest days work elsewhere – if they can find it in competition with the other 2.6 million.
Typically, the Bullingdon Boys will block any attempts to expose their public school chums. It’s the same old story, the same old gang of Lahndan phoneys.
I am loathe to agree with any left wing analysis of economics (or pretty much anything else really) but it is hard to escape the conclusion that capitalism is failing us.
After many years of providing people with the highest standards of living and the most liberal and libertarian governments the world has ever seen, something has gone wrong.
My culprit is globalisation. It has enabled companies to get too big. It has divorced corporations from the communities they serve and created a “devil take the hindmost” philosophy we have never seen before at this scale.
My answer would be to cap company size. Limit turnover too say, £100 million. There would be huge obstacles to doing this, and it will never really happen. But it would be a solution.
I have enlarged on this idea in my blog. It’s the piece called Welcome to Fantasy Island.
What is interesting, now that I’ve read your blog (well not all of it- you know there is work to be done) is that I agree with much of what you say, both on it (your blog) and on here, but from a different viewpoint. Yes we are lucky, very lucky, but only some of us. Take the health service: fantastic though it is we stand and watch while Doctors defend the morality of aborting perfectly healthy babies at 20 weeks while in the very next room the same Doctors are being hailed as miracle workers for saving the life of an unhealthy baby born prematurely at 22 weeks. Which baby was the lucky one? Yes we have more food than ever before. Mechanically recovered meat stuffed with fat salt and sugar, you can see its result many times over on our cracked and worn out pavements with the average weight of a person getting ever closer to one metric tonne. More freedom? That’s debatable. More CCTV that’s for sure :- is that freedom? Capitalism is failing or is corruption winning? Why should life be measured in length? Surely depth is more important?
Rachel, I agree abortion is awful, but I reckon it’s the lesser of two evils. A young girls life can be utterly ruined by a mistake lasting a few moments. As in the past, many were.
Fat people, yes it is a problem. But if I have a choice, I would rather see poor people too fat because they are eating too much than too thin because they are starved.
Freedom. Well, it is relative. But if you look back most people had less, much less, freedom of speech and action.
As for depth . . .it is such a subjective thing. How do you define depth? We both know what it isn’t – celebrity culture, comic newspapers, reality TV etc etc, but trying to pin down what it IS – that’s hard.
In my opinion an ideal life should be happy (easy to grasp, but surprisingly hard to achieve)and fulfilled (that’s a tough one, even to try and explain)
Hello Jon,
This all adds weight to my theory that modern life in its entirety, is constructed of lies and deception, built on sand. We are all involved, most of us unwittingly, in a dangerous game of musical chairs on a global scale: a game in which all the chairs have long since rotted away, leaving the Politicians and Bankers to do “whatever it takes” to keep the music playing, so we won’t notice that actually, there is nowhere to sit, and if the music stops (which it will), we’re all out.
Keep smiling
Rachel
Rachael, you must realise that is a ludicrously simplistic statement. You are not alone here. Phillip has also come up with a farcical rant with lots of words signifying nothing.
I know this is only a web forum, but the paucity of argument and emotional incontinence of some contributors is positively embarrassing.
I’m not pretending my own posts are Nobel prize winning stuff, but at least I attempt to keep them rational.
Thanks for that Caliban. Such a peach. Perhaps you think my name is overly simplistic also since you have added an extra and unnecessary character to it. My analysis is simplistic because the problems of the world are simple. However, the human male condition is such that it won’t accept simplicity or that anything can or will happen without its say so, which is odd really, because that is such a simple mistake to make.
Keep smiling
Rachel
Your name is lovely.
Your assumptions are tenuous (I could be female)
Your analysis is non-existent (the essence of my point)
I get very tired of the shallow misanthropic comments. “We are all doomed” “The world is a dreadful place” “It’s all a massive conspiracy by …..”(complete as required).
The facts are very clear. In the Western democracies The People are wealthier, healthier, have more freedom, are better fed, have better health care, have less war death and destruction in their lives and generally live much longer than at any time in Human existence.
Obviously stuff goes wrong. It always has. Read some history. Corruption, inequality,over weaning power, disease and war have always existed. At most periods in history they were much worse than now.
They will continue to go wrong, Life is not a Disney movie. You (and I and everyone else) are staggeringly lucky to have been born at all, and very lucky indeed to have been born now.
Modern life is not all lies and deception. One needs a sense of perspective – and proportion.
But, I will admit your post was the unfortunate victim of the more general point I was trying to make. As I mentioned, you are far from alone.
Jon,
I agree we are only at the beginning. I am a lawyer specialising in derivatives and banking disputes and have been considering the implications of this for some time (and will no doubt continue to for years)
However, what will be really interesting is the examination of what went on during 2008, when a number of banks were reporting figures at a time when their peers were of the view that they could not borrow on the interbank market at any price, and they were only still in existence and able to pump figures into the LIBOR calculation because of government intervention. What if they had not been bailed out? Are the ramifications of government intervention in the markets now about to be unravelled?
The government was concerned about rising LIBOR increasing borrowing costs at a time when lending to business was all but non existent. But I suspect what they didn’t know then was that a lower LIBOR rate was much more damaging to the vast number of businesses who had been required to take interest rate swaps as a condition of lending. Rising LIBOR was a non-issue for them.
Just too simplistic in an age of derivatives and hedging – always three steps behind.
When it comes to financial scandals, look no further than a state run positive rate of inflation systematically robbing the saver
In any organisation or society, self interest is the prime motivation even if the overall agenda is beneficial. Those who step out of line even unknowingly get hurt, punished or excluded by those with the power.
If Barclays was the next to fall then those on the inside would do whatever it takes to prevent that happening. [bankers, ministers colleagues ] I am sure the net will be wide.
What is the role of the European banking elite?
London’s position has long been an objective for change.
Where does American finance stand with regard to the dominance of London ?
Did the influence on Barclays to change this rate spread to involve many in Europe as well as the States.
How much more will emerge?
Incidentally mp’s are not experts on banking which is why so little was found out initially.
It will be interesting to see who closes ranks in the inter party enquiry.
Something which could encourage a banking system with some underlying ethics is to have a duty of care in how loans are made to individuals and companies. This duty could be built into the regulatory process and provide a framework as to what is actually of benefit or to the greater good.
A duty of care that was instilled behind the banking process may help allow a change of course from the increasingly reptilian nature of the modern financial system which causes too much misery to too many people.
Not so long ago was the scandal of Arthur Anderson Accounting being ineffectually ‘audited’ by their buddies Arthur Anderson Consulting (if I remember the names correctly) – a laughable approach to the necessity of independent audit in order to arrive at the truth.
How was nothing learned from that débacle I just cannot fathom.
Now we see Bob Diamond looking about to pull a stunt akin to one Fred (the shred) not being sacked and as a result getting an extraordinary pension fund… we should be taking exceptional measures to ensure that Bob cannot take his terms and conditions for granted if it may yet be shown that he was guilty of gross professional misconduct in failing to ensure the fundamental principal of honest libor reporting took place on his watch.
So many honest workeres in this country have lost value in their modest pensions, yet these incompetent/negligent/dishonest corporate executives with track record or ‘history’ as they say, appear to get ‘out of jail free’ without ever stepping foot in the nick. This is the culture that needs to change in the UK, regardless of the technicalities.
Why will nobody listen?
I have been saying for over 10 years that the system is corrupt – even proving the FSA lack integrity with official complaint.
This goes to the SFO – of whom I have evidence of the exact same behaviour..
Are such complaints so common that this is of no interest to the media.
The whole LIBOR issue is the tip of the iceberg. Traders always push the limits and were held in check by the managers of the business. Now and money making scheme is accepted.
The next two scandals are Exchange Traded Funds and Structured Notes. They are a primary cause of volatility and are not directly related to investments in shares but dominate markets. if stock-markets were to rise sharply these products would be exposed.
No one is looking at he Root which is the Wars that have been fought, as President Eisenhower spotted in Korea
Freedom of information act.