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Former Senior Barclays Staffer Charges Diamond with Lying to MPs in Select Committee Testimony

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It’s hardly surprising to think that Barclay’s CEO Bob Diamond shaded the truth more than a tad in his Parliamentary testimony earlier this week. Recall that he said the manipulation was the doing of 14 traders, and in context, he was clearly saying only those 14, their immediate supervisors, and the lax compliance types were at fault out of all of Barclays. The FSA’s letter to Barclays shows that to be untrue. It clearly says “at least” 14 traders were involved, as well as various “submitters” which were in a completely different unit operationally.

The Independent has posted an interview with a former senior executive who calls out Diamond for his biggest howler, that he had no idea that anything untoward was happening until about two weeks ago. This blog had noted that Diamond’s claim that he had just found out about the rate fixing two weeks ago was utterly implausible, but it is quite a different matter for an insider to confirm that

From the Independent:

Diamond said he found out what his traders were up to only two weeks ago, when the fines dropped into his inbox. What I don’t understand is why the MPs didn’t make more of that. If that is the case, and yet they’ve paid £300m in fines, in my view it is impossible that he wouldn’t have known.

Barclays operates a policy of escalation. That is endemic. It is almost entombed in the culture of the bank. The purpose of that is that if something goes wrong it gets escalated up the line. I don’t know how or why Diamond wasn’t questioned more on that point. Libor fixing was escalated by several people up to their directors, they would then have escalated it up to the line because, at Barclays, if you don’t escalate and it is found that out you haven’t, it is grounds for disciplinary action. You will be dismissed. You are taught that, and you have to do regular in-house FSA courses. You have to sign off every year. If a member of a team saw something and didn’t escalate they would be fired….

Back in 2008, we noticed what was going on with Libor. We were informed on a weekly basis of the rates we were having to charge to clients and the rates at which Barclays was borrowing. The dealers in our Treasury area, they would send a monthly update of the difference between the Libor interest rate they were quoting and the Libor they were getting. They were advising us of the difference of what was being published and their actual cost of funds. This was escalated up.

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66 comments

  1. psychohistorian

    Wee need a good new war to focus out attention away from this mundane stuff.

    1. Jane

      Looking forward to a front seat for this show.

      The Serious Fraud Office are ‘rottweilers’ – here it comes – drip………drip………..drip…..

  2. Mohammed Al A

    The Barclays counterfactual
    Bob Diamond resigns from Barclays over Libor scandal – live
    3 July 2012 10:11AM

    Why blame the banks’traders. It was the Barclays top management’s instructions that they were made to follow. In one word, the bank and top management of Barclays stink. It all boils down to nothing but greed to make more money for themselves and the shareholders. How come the UK authorities are still sleeping. If one can recall, a few years ago at the time of financial crisis hitting large UK banks, only Barclays did not want any Government support/bailout (unlike RBS) as if they had taken the Government support then, this scandal (LIBOR fixation) would have broken out long ago and taxpayers would have saved some money then. Unfortunately all was wrapped so well.
    Libor/Eibor (in the UAE) Fixation: This game is not new to the Barclays top management. They have been doing this in the UAE operations as well. The top management in their Dubai operations are making big monies by such methods only and also getting fat bonus for job well done. Who cares if Dubai, UAE goes down financially in the bargain.

    1. LeonovaBalletRusse

      Does “the Shard” in London not demonstrate that Dubai and the City are one?

        1. LeonovaBalletRusse

          Jane, thanks for the correction. My question about Dodi still stands, which would “complicate” the motives for eliminating the pregnant Princess Di.

          1. Susan the other

            It’s so heartbreaking to think about what happened back then. Whether or not it was an assassination. With every passing year a goal comes clearer into focus via the bizarre deaths of Arafat; Rabin. Poor guys. So where do we stand? Politically, at a juncture of globalism, we stand ready to nullify the sword of Damocles, no? Replacing it with what? How will we replace nationalism?

    2. Doug Terpstra

      UK authorities were not asleep at all; they were in collusion, just as the Criminal Reserve Cartel is with Dimon et al. There is evidence that this escalated all the way up to Whitehall, to the royalty. So if necessary, more good soldiers up the food chain will be induced to fall on their swords. But otherwise, nothing can be allowed to change because the entire market is now fully fixed and the rigging can no longer be untangled without wholesale collapse. The Central Committee can’t allow that.

  3. David Habakkuk

    What this Barclays insider depicts is a culture where if people do anything which can turn out badly, and are found out not to have ‘escalated’ they get fired.

    If this is so — and it is eminently believable — then the suggestion that top management were ignorant not only does not work as regards 2008, it is not clear how it can possibly work in relation to the 2005-7 period, and probably even earlier.

    The natural conclusion would appear to be that LIBOR and EURIBOR fixing was known about, and endorsed by, top management, either from the point it started, or from the point the culture described by the insider came into being — whichever is the later.

    It would also appear to be that the regulatory authorities in the UK, US, and Europe alike were either complicit or extraordinarily inept.

    According to the Economist:

    ‘”Fifteen years ago the word was that LIBOR was being rigged,” says one industry veteran closely involved in the LIBOR process. “It was one of those well-kept secrets, but the regulator was asleep, the Bank of England did’t care and [the banks participating] were happy the reference prices.” Says another: “Going back to the late 1980s, when I was a trader, yousaw some pretty odd fixings. With traders, if you don’t actually nail it down, they’ll steal it.”‘

    (See http://www.economist.com/node/21558281 )

    But the fundamental question is not what traders did or did not do — it is what they were allowed to do by others.

    1. LeonovaBalletRusse

      DH, Why do we keep saying “either complicit or inept?” Obviously, these gangsters are NOT “inept.” Their magnificent “compensation” NEVER went to anyone “inept,” including “inept at lying, coverup, fraud, ripping off faces.”

    2. Up the Ante

      “According to the Economist:

      ‘”Fifteen years ago the word was that LIBOR was being rigged,” says one industry veteran closely involved in the LIBOR process. “It was one of those well-kept secrets, ”

      And awareness of that was one of George W. Bush’s justifications for allowing it to be used as a takedown tool.

      Rather obvious to one with a memory and a sense of continuity.

      Is a “drunk under the streetlight” one who searches for the lost key in the circle of streetlight or the one who expands the circle to find it ?

    3. mac

      There are crooks out there, many work at banks, there are regulators who allow the crooks to do what they do.
      Solution ,put all the regulators and crooks in jail.

    4. Up the Ante

      “As the financial crisis began in the middle of 2007, ”

      This should read ‘began to be acknowledged openly in 2007′.

      ” .. regulators had a pretty clear motive for wanting lower LIBOR: British banks, in effect, were being shut out of the markets. The two hardest-hit banks, RBS and HBOS, were both [ZOMBIES] .. ”

      fixed it

      http://www.economist.com/node/21558281

  4. David Habakkuk

    Another point the insider’s account from the Independent brings out is that, quite simply, people in major banks work too hard. A culture where, even if you are doing your job very well, pressure is put on you to work longer and longer hours and work at weekends, is a culture where, progressively, people become cut off from the outside world.

    While greed is clearly one factor behind all this, another may be that those involved may have been obsessed by the games they were playing inside a kind of insulated cocoon, with little thought for the possible consequences. But that is how a lot of politics operates these days.

    1. Lambert Strether

      That is why banks should be boring regulated public utilities.

      I’d make knowing how to play golf, or even knowing the location of a local course, a disqualification for any bank executive. That should root out the rot!

      1. David Habakkuk

        Another major change here is that the FT is now endorsing a formal separation of different kinds of banking on Glass-Steagall lines. From an editorial on 3 July:

        “The government accepted the principle of separation last year when it endorsed the conclusions of the banking commission presided over by Sir John Vickers. This argued for an internal split rather than a total separation on the basis that the diversity of assets within a universal bank could be a source of strength at times of financial stress.

        “While the FT supported those conclusions, we are now ready to go further. For all the diversification benefits, the cultural tensions between investment and retail banking can only be resolved by totally separating the two, on formal Glass-Steagall-style lines.”

        (See http://www.ft.com/cms/s/0/498248bc-c518-11e1-b8fd-00144feabdc0.html#axzz1zfd8hbnp )

        As to golf, I would not be as categorical. It all depends who is playing with whom. A comment from the FT Alphaville interview with Yves Smith back in February seems to the point:

        “The other issue is just the loss of information. You used to have a branch officer making decisions. He knows if the local hardware business is any good. He knows the man running the big car dealership and if he’s applying for a business loan, he has a sense of the risks based on the outlook for the community and his sense of the character of the business owner, and he knows that in turn not just from his own impression in a meeting but from various bits of information he has picked up from lots of sources. He knows when he looks at the income of a husband and wife applying for a mortgage, he has a sense of how stable their jobs are. And that kind of information… it’s just gone. So we have people making much lower, poor credit quality decisions and we also have a system where people are permitted to be more leveraged. I mean, it’s crazy.”

        An analysis of the networks by which local knowledge would have been obtained would be interesting. I suspect the golf course would have been one of them.

        1. LeonovaBalletRusse

          FT is HEDGING: “along Glass-Steagall lines.” They will NOT recommend that CityBanking bite the bullet, with amputation of gangrenous limbs.

        2. Up the Ante

          Your last two sentences are parallel to the knowledge Justice and FSA should have by now, namely who among the traders’ contacts placed insider trades conincident with the LIBOR rate fixings ? Is there a LexisNexus search in emails ? “local knowledge” we’re assured is findable by forensics in the surveillance state.

          “An analysis of the networks by which local knowledge would have been obtained would be interesting. I suspect the golf course would have been one of them. ”

          “head above parapet”/2 tier justice

          1. LeonovaBalletRusse

            Why closed system golf among elites? ALWAYS to share 1% secrets in “private.” This is true of ALL “Old Boys Clubs,” including “The Club” that Carlin derides.

      2. Warren Celli

        Bill Clinton played golf…

        “It depends on what the meaning of the word ‘is’ is.” “I did not have sexual relations with that woman, Miss Lewinsky.”

        Is this apropos here? Yes!

        Why? It was a milestone in the intentional coarsening of the society as it began the normalizing of outrageous deceptions. This is all part of incrementally increasing the the societal chaos so as to get society to a state of perpetual conflict and chaos so as to end up with a ruler and ruled world.

        The fox has normalized the aberrant and murderous Xtrevilist killing of chickens and taken the wind out of the sails of ‘outrage’, all the while increasing the energy dissipating perpetual conflict in the chickens.

        Ho hum. A wrist slap for the fox. Move along now.

        Are we ready for the election boycotts and Constitutional rewrite yet?

        Deception is the strongest political force on the planet.

        1. LeonovaBalletRusse

          W.D., dead right. What better shill for the .01% than a “poor White boy” from Winthrop Rockefeller’s Arkansas, a boy whose appetite for “the Roundtable life” was whetted at Oxford thanks to the Rhodes Trust?

      3. F. Beard

        That is why banks should be boring regulated public utilities. Lambert Strether

        Credit creation is theft of purchasing power, especially from the poor since they are considered less “credit-worthy.” It follows then that everyone must have absolutely equal access to credit regardless of their supposed ability to repay or NO ONE should have access to credit.

        1. F. Beard

          Hasn’t “boring” meant in the past that people who live in certain neighborhoods did not qualify for credit? Or a much higher interest rates?

          Redlining is the practice of denying, or increasing the cost of services such as banking, insurance, access to jobs,[2] access to health care,[3] or even supermarkets[4] to residents in particular, often racially determined,[5] areas.”

          What part of “the rich should not steal from the poor” is so hard for people to comprehend?

          1. LeonovaBalletRusse

            FB – No. “Boring” meant that you would NEVER make the killing that a “Merchant Banker” did, no matter what. Your business was local. You took local deposits and made local loans, and you HELD the paper until the loan was paid out with interest (pegged to prime), or until the client defaulted on the loan. If that happened, your REQUIRED amount of Loan Loss Reserves covered the loss. For this reason, the “Banking/Loan Officer” had to be “responsible” — which meant he (no women officers yet) had to KNOW YOUR CUSTOMER.

            To be “responsible” is to be “boring” in America. Our culture was perverted along with the wrecking of our Real Economy, by a foreign power. Clue: the “foreign power” is NOT “Israel” and it speaks the “King’s English.”

          2. F. Beard

            Credit creation is still theft regardless of how “responsible” it is. Plus the racial riots of the 60′s indicate that exploitation is not especially “responsible.”

            Honest lending of existing money would allow the poor and other “non-creditworthies” to save their way out of poverty instead of relying on loan officers.

  5. LucyLulu

    A banking executive lying during testimony before lawmakers?

    Shocking. Absolutely shocking.

  6. Ram2009

    George Osborne is headed for Europe to defend the indefensible banksters pay and bonuses thus ‘earned, while emasculating the public sector to do so.

    1. LeonovaBalletRusse

      Ram, is “Europe” code for “Switzerland” in this case? There’s a mighty good reason that Switzerland did NOT become a lowly part of the EuroZone, much less allow its sovereign currency to be taken away.

  7. joebhed

    Liquidity manipulation to facilitate financial bubbles is what modern debt-based monetary capitalism is all about.

    We pretend there is a free market in finance while we plan for, accommodate and implement the always growing next financial bubble.

    The next financial bubble is always bigger than the last, usually by orders of magnitude. This is ALL a Ponzi scheme.

    Debt-based money IS a Ponzi scheme.
    It MUST be a Ponzi scheme.
    Think about it.

    Create un-payable debts and attach(securitize) assets.
    Cheat as much and as long as is possible to keep it alive.

    I thought we knew what they did, and WHY they did it.

    Solution here.
    http://kucinich.house.gov/uploadedfiles/need_act_final_112th.pdf

    Non-debt based money. Real money.
    Permanently providing exchange in the national economy.

    Either that, or we have the grandkids do this all over again.

    For the Money System Common.

          1. F. Beard

            Actually, if one understands “credit-creation” – “loans create deposits” (for the so-called “credit-worthy”, including the poor but only IF they pay high interest rates) – then JUSTICE is REQUIRED, not altruism.

            Why this blindness to “credit creation is theft?”

          2. Warren Celli

            FB said; “Why this blindness to “credit creation is theft?””

            Because credit creation in and of itself is not theft. It depends on how the credit is allocated. In a moral fashion — altruistically metered out — or by the aberrant few sociopathic Xtrevilists, in which case, yes, JUSTICE IS REQUIRED.

            Deception is the strongest political force on the planet.

        1. LeonovaBalletRusse

          WHY did the warning of Sir James Goldsmith in 1994 fall on deaf ears? To SEE how the deck was stacked, view the clip of the Charlie Rose show on Feb 1, 2010, when Sir James had to suffer the ignominy (with grace) of going head-to-head with that gangster shill Laura d’Andrea Tyson, fronting for Clinton fronting for Rubin fronting for the .01% Global Reich, “defending GATT.” Posted on The Solari Report Blog of Catherine Austin Fitts, a whistle-blower from way back:

          http://www.solari.com/blog/sir-james-goldsmiths-1994-warning/

          See also: “The Power Principle” – link:
          http://topdocumentaryfilms.com/power-principle/

  8. alan

    My view from the standing room only seats… Isn’t the whole world economy based on our collective “confidence”, or “faith” in said economy? How could anyone have any confidence at all at this point? Its all make believe, isn’t it?
    I’m the least well informed person to ever leave a comment on this blog, but I wouldn’t give a banker or investment firm a nickel of my money. Even if my guy is super legal and loyal, the system is far, far beyond broken.
    The libor thing, the jpmorgan thing( Ooopsy), wall street, obviously just the tip of an iceberg, right?
    Confidence? Not in people who lie for a living…
    Fool me once, shame on you, fool me twice, shame on me…

    1. YesMaybe

      True. But (a) even if you were the least informed commenter here that’s still quite a distance from Joe Six-Pack (and the average business owner/manager who is simply a richer, but equally idiotic, version of JSP); (b) the faith is to a large degree sustained, against the evidence, by fear or ignorance regarding the alternatives; and (c) collapse will happen by a thousand cuts, and we’re still at an early stage.

      http://dilbert.com/strips/comic/2009-05-10/

    2. F. Beard

      The problem is that unless you keep your money under the mattress (or equivalent), the bankers WILL use your money without your permission and without adequate compensation against your interests.

  9. RepubAnon

    Let me understand this correctly: Bob Diamond is saying that:

    1) He only found out about the LIBOR rigging a few weeks ago,

    2) On October 29,2008, Mr. Diamond claims that Bank of England deputy governor Paul Tucker encouraged him to rig LIBOR rates downward.

    Short of time travel, these two statements seem inconsistent. Anybody see a blue police box with a flashing light on top near Barclays HQ, or someone calling himself The Doctor in the executive bathroom?

    1. YesMaybe

      No, no, no. Bob would presumably claim to have understood Tucker to be saying they should get their actual borrowing rate down, not that they should report fake numbers. Felix Salmon also interprets what Tucker said this way: http://blogs.reuters.com/felix-salmon/2012/07/03/defiant-barclays/ . I say ‘presumably’ because I don’t recall him saying it specifically in the bits I’ve seen. To all of us, it’s obviously BS, of course.

      1. YesMaybe

        To clarify: he did say explicitly that he didn’t interpret Tucker as instructing him to rig the rate. What I’m not sure about is whether he said explicitly what he did take Tucker to mean.

        1. Up the Ante

          Nah, he only told him certain results were highly desirable and indicated he’d look the other way.

          Kind of like NRC nuke plant fixes.

    2. JCC

      I also remember him saying that the Bank had spent nearly $1 Mil on an internal investigation… seems like an awful lot of “internal investigation” in just two short weeks.

  10. smellslikechapter11

    This says it all as to why everyone in authority knew about this:

    “The dealers in our Treasury area, they would send a monthly update of the difference between the Libor interest rate they were quoting and the Libor they were getting. They were advising us of the difference of what was being published and their actual cost of funds. This was escalated up.”

    My guess is that the spread between the fix (er um the “quote”) and actual was in the daily VAR report given to the CEO of the bank.”

    We now have pool on the date the first CEO gets frogged hopped on this one. Cynic that I am I am betting on never.

    Clearly, a material misrepresentation by a counter-party is an event of deafult under any ISDA swap agreement allowing the non-defualting party to terminate the swap. This means that if any of the LIBOR colluders have a swap of any knind based on LIBOR, the non-bank counterpary can terminate the swap. If the ISDA agreement uses Method One to compute the parties liabilities, the bank counterparty is just plain fucked becuase it allows the non-defaulting party to simply walk from the agreement without netting the parties’ respective provisions as allowed under Method Two.

    The disitnction between Methon One and TWO is explained as follows on the Allen & Overy Website:
    Under the First Method, in the case of an
    event of default, if the lump-sum termination amount is positive, then it is paid by the defaulting party to
    the nondefaulting party, but, if it is negative, then no payment is due: the nondefaulting party is not
    required to make a termination payment to the defaulting party after an event of default. Under the
    Second Method, if the lump-sum termination amount is a positive number, then the defaulting party will
    pay it to the nondefaulting party; if that amount is a negative number, then the nondefaulting party will
    pay the absolute value of that number to the defaulting party.

    Self-deception is the biggest political force on the planet

  11. Guy Fawkes

    It is FAR past the time to hook these liars up to lie detector monitors. And if these monitors detect a lie, they get a jolt of electricity that stops their black hearts.

  12. Guy Fawkes

    Question: If all the interest rates for the last several years were based off a fraudulent LIBOR, wouldn’t that make all the contracts entered into with any interest rate tied to them voidable?

    “A contract involving fraud in the inducement or material misrepresentation is voidable.”

    1. smellslikechapter11

      Only if the party making the representation, i.e., fake libor quotes, is aprty to the contract and the quote is material aspect of the contract. That is why the interest rate swaps are so potentially punishing to the banks.

      However, where neither party has knowledge of the mistatement of the LIBOR quote, then the contract can be rescinded on the grounds of mutual mistake, if the rescission will not work a serious injustive on the other innocent party. I think it will be very hard to rescind if both parties are innocent if either party would bear an extreme and unanticipated cost of rescission.

      1. Up the Ante

        “if both parties are innocent”, traders innocent of benefitting the bank or themselves or clients, right …

  13. barrisj

    From The Guardian:

    “At this week’s treasury select committee, Bob Diamond, the former boss of Barclays, had said: “I understand that there will be follow-up criminal investigations on certain individuals … It’s not up to us, but we are certainly not going to stand in the way of it”.

    Which is “Legs” way of saying he’ll hang some traders out, but no “criminal investigations” going up the ladder. SFO has no stomach for bringing the hammer down on culpable senior directors.

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