Empty words

Paul Tucker, deputy governor of the Bank of England now dragged deeper into the LIBOR scadal. Others have noted that “On September 3, 2007, Barclays’ directors were feeling jumpy. The credit crunch had been in train for the best part of a month and, having tapped the Bank’s of England’s standby liquidity facility twice in a fortnight, questions were being asked about Barclays’ financial health”.

Others have argued that “Much as David Cameron and his Chancellor, George Osborne, would like to load responsibility for this culture of light touch regulation on to their predecessors, many in their own Government are as guilty as Labour in this regard. At the time all this nonsense was building up, they were cheering on from the sidelines. Light touch was widely applauded as part of London’s competitive advantage”. Crucially he argues “All markets require regulation to function effectively. To recognise this is not to become some latter day socialist – free markets remain far and away the most effective and dependable route to growth, prosperity and jobs – but only to acknowledge that without adequate policing, rule of law would fast break down, and like the streets, become subject to abuse, protection rackets or outright anarchy. There is a sense in which capitalism, in order to survive, has to be constantly saved from itself by the application of appropriate checks and balances. Every now and again, we are reminded of this abiding truism by an almighty financial crisis”. He closes noting rightly that “No amount of regulation will ever completely get rid of bad, irresponsible and dishonest behaviour in finance. But if the right incentives and penalties are put in place, it can be made to work much more effectively than it has been. Fraud is a serious criminal offence in any other business. Why is it that there seems to be some doubt about this in banking? What’s happened to the zero tolerance of abusive behaviour you see in other industries? If this were a pharmaceutical company, it would by now have been stripped of its licenses, closed down and its officials had up for endangering the public”. Yet, the greed that has always existed in humans has been praised and legitimated with the consequences now been seen.

Not only does the Bank of England seem to have been complicit with Barclays but their relationship is worsening almost by the day. It has been noted by some that Barclays has said “A memo published by Barclays suggested that Paul Tucker gave a hint to Bob Diamond, the bank’s chief executive, in 2008 that the rate it was claiming to be paying to borrow money from other banks could be lowered. His suggestion followed questions from ‘senior figures within Whitehall’ about why Barclays was having to pay so much interest on its borrowings, the memo states. Barclays and other banks have been accused of artificially manipulating the Libor rate, which is used to set the borrowing costs for millions of consumers, businesses and investors, by falsely stating how much they were paying to borrow money. The bank claimed yesterday that one of its most senior executives cut the Libor rate only at the height of the credit crisis after intervention from the Bank of England”. It has been mentioned that Bob Diamond may keep his £20 million final pay package.

Some have tried to argue that a weak City of London is a bad thing. Perhaps the City was simply too strong and from now on will be given the attention that it deserves as a percentage of the UK economy.

Diamond, in what will be the first of many witnesses to give evidencebefore the Treasury Select Committee “said he had felt ‘physically ill’ when he first became aware of the emails that showed Barclays traders had asked the bank’s Libor submitters to falsify the lender’s borrowing rate entries”. Tellingly the report goes on to note that Diamond “attempted to distance himself from the scandal. He said he had become aware of what had gone on just days before the results of the investigation by US and British authorities were made public. ‘I don’t feel personal culpability,’ said Mr Diamond. Instead, the former bank chief said the Barclays treasury team – responsible for funding the bank’s operations – had been behind the so-called ‘low-balling’ of Libor submissions during the financial crisis. ‘There was pressure from group treasury,’ said Mr Diamond, adding that the division had wanted to ‘get in the pack’ as it felt the bank’s Libor rates were higher than those being published by its peers. The bank boss suggested other banks’ submissions were false: ‘Some couldn’t fund at any level.'” This shows obviously that there is little contrition from Diamond and his ilk who see the scandal as a minor irritation. Different report have mentionedhow “Diamond said he felt ‘responsible but not culpable’. The 14 traders who rigged Libor between 2005 and 2007 were to blame for the ‘reprehensible’ behaviour. He claimed he only found out about their actions last month and reading their exchanges made him ‘physically ill’. Mr Tyrie said Mr Diamond’s view of when he found out sounded ‘implausible’. Compliance also failed”. Related reports on Diamond’s evidence mention that “He was reminded that Barclays has recently suffered other scandals, including mis-selling deals to small businesses and using complicated schemes to avoid tax legally. John Mann, a Labour MP, claimed Mr Diamond presided over a ‘rotten, thieving bank’ and reminded him the bank’s Quaker founders lived by a motto of ‘honesty, integrity and plain dealing’.

The previous Labour government under whom most of the LIBOR fixing occured is also being dragged into the scandal. Now however, the Serious Fraud Office has stated that it has launched an investigation into the affair with criminal charges possible.