It’s not July 4 in Britain (almost caught ya!), and normal midweek business continues. That means a closely watched Parliamentary hearing with Bob Diamond, the former CEO of Barclays Bank who resigned after the scandal of bank employees rigging the benchmark Libor inter-bank lending rate. The Guardian liveblog is the best place to follow this right now, and it’s been fairly explosive, as Diamond accused Paul Tucker, deputy governor of the Bank of England, of essentially encouraging Barclays to manipulate the Libor rates, to make their financial situation look less dire. Tucker has gone on the offensive, requesting a hearing with the committee investigating Barclays, to tell his side of the story. Much of this depends on interpretation:

Barclays has issued a memo in which Diamond made a record of a conversation he had with Tucker during the 2008 banking crisis and which led to some confusion in the bank about whether the central bank was encouraging Barclays to cut its Libor submissions – figures supposed to represent the interest rate at which banks are willing to lend to one another [...]

The regulatory documents show that Diamond did not interpret that conversation with Tucker as a signal that Barclays should cut its Libor submission. But the Barclays banker Jerry del Missier apparently interpreted the memo written by Diamond as clearance to reduce the submission – which led to the bank cutting its rates.

Del Missier resigned yesterday along with Diamond.

In today’s hearing, Diamond called the behavior of Barclays traders “reprehensible”, and said simultaneously that the bank discovered the nature of the rigging three years ago and that he only learned the full extent of it this month. Here’s the key section on the conversation between Diamond and Tucker:

Q: What did you take Tucker’s reference to Whitehall to mean?

Diamond says the Whitehall reference explains why he took a note.

Q: What did you take it to mean?

Diamond says two days earlier Barclays received funding from the Middle East. Whitehall meant government officials, he says.

Q: Why did you say you don’t believe you received an instruction?

I didn’t believe I received an instruction, he says.

Q: So what was it? A nod and a wink?

If people in Whitehall thought Barclays had trouble raising funds, the implications would be serious, he suggest.

Another MP asked that, if bankers go to prison (Joe Stiglitz’ suggestion), whether this would improve the culture of banking. Diamond replied that people who violate the law should be dealt with “harshly.” But Conservative MP Andrea Leadsom did not accept that this consisted of the actions of “rogue traders.” There were incentives to rig the Libor, she said. Diamond replied, ” I understand there will be criminal prosecutions.”

The time frame in question covers a period when Labour controlled the government, and you can see the Conservatives trying to pin the blame on those previous Labour figures. Meanwhile, Labour is attacking Prime Minister David Cameron for narrowing the investigation, making it a Parliamentary inquiry rather than an independent probe led by a judge, that widens the investigation into the culture and practices of the City of London, the financial center of the country. Cameron retorted today in Question Time that the investigation will cover culture and practices, and that the Serious Fraud Office may also launch an outside investigation. There will be votes in the House of Commons on the type of inquiry, as both sides see political advantage.

The British press is treating this as a full-on scandal for banking in the UK. And they were exasperated with the hearing, which they say did little to penetrate the heart of the problem. I’m glad they don’t watch hearings in the US!