Speaking of bank fraud, the British Parliament continued their investigation into Barclays Bank and the Libor scandal this week, and it’s just getting worse and worse for everyone involved. Yesterday, Jerry del Missier, the former COO of Barclays, testified that he was instructed by CEO Bob Diamond to manipulate the Libor down in 2008, to mask the ill financial health of the bank. Similarly, the Financial Services Authority focused on Diamond, accusing him of “selective testimony” and saying that a “culture of gaming” at Barclays emanated from the very top.
Mr Bailey told the committee there had been strong concerns about the investment bank operations at Barclays and its attitude to risk.
“There was a culture of gaming. It had to change,” said Mr Bailey, adding: “We drew the conclusion that there was a problem with this institution.”
He said: “You could not escape the conclusion that the culture of this institution was coming from the top.” And when asked if “the top” meant Mr Diamond, Mr Bailey replied “yes”.
This is actually the opposite of what Diamond said in his testimony, that regulators were pleased with the “tone at the top” of Barclays.
Much of the hearing with del Missier focused on that phone call between Diamond and Paul Tucker, the deputy governor of the Bank of England. Del Missier said that, as a result of being briefed on that call, he rigged the Libor downward, under instructions from Diamond. For his part, Diamond said this was all a misunderstanding, and he did not direct del Missier to rig Libor.
Mervyn King, the governor of the Bank of England, testified today, and in addition to denying that the central bank asked Barclays to reduce their submissions on Libor, he denied that the NY Fed warned them about manipulations of the rate.
Senior British officials said they did not receive warnings from the Federal Reserve Bank of New York about the rate-rigging scandal during the financial crisis of 2008.
Speaking to a British parliamentary committee on Tuesday, Mervyn A. King, governor of the Bank of England, the country’s central bank, said discussions with American authorities had instead focused on ways to improve the London interbank offered rate, or Libor.
The Bank of England governor said the correspondence with Mr. Geithner, who is now the United States Treasury secretary, did not represent a warning about potential illegal activity related to Libor.
“At no stage did he or anyone else at the New York Fed raise any concerns with the Bank that they had seen any wrongdoing,” Mr. King told the parliamentary committee on Tuesday. “There was no suggestion of fraudulent behavior.”
This seems pretty accurate. Geithner’s communications with the BoE, where he just regurgitated some options for improving Libor forwarded to him by the banking industry, did not explicitly assert that the NY Fed had knowledge of fixing, even though we now know that a Barclays employee admitted this to them back in April 2008.
I don’t know if BoE officials are misrepresenting the nature of their conversations with the NY Fed, but the public record does show an unwillingness to explicitly call out fraud on the rate-fixing of Libor. This looks extremely bad for the NY Fed and Timothy Geithner. But the Bank of England doesn’t come off scot-free, either. They didn’t take up any of the recommendations designed to “eliminate incentive to misreport.” They have given confusing responses to the allegation that they encouraged Barclays to set the Libor downward. The responses they have given show an unusual familiarity between a bank and their government minder:
After it was announced that Mr. Tucker would become the deputy governor of the Bank of England in December, 2008, Mr. Diamond emailed to congratulate him: “Well done, man. I am really, really proud of you,” the former Barlcays chief wrote.
Mr. Tucker was equally friendly in his response. “Thanks so much Bob. You’ve been an absolute brick through this,” he said in an email.
And Mervyn King’s claim that he only learned about Libor fixing two weeks ago, and that he’s not a regulator so they had no role, was criticized:
Why did the New York Fed take such an active interest in the potential rigging of Libor, but the Bank of England did not, asks Pat McFaddon
King explains that the two central banks are different: “They’re a regulator, we’re not …”, adding that the Bank had to pass the concerns on to the BBA.
So you’re just a postbox, asks McFaddon?
Certainly not, replies an irked governor. The Bank played an important role in the BBA’s inquiry, he adds.
If that’s not having it both ways, I don’t know what is.




23 Comments

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All true, but it’s not just LIBOR, and this is the real issue: all the reference prices are crap, and the whole system is built on it. The “regulators” have no capacity or will to even begin to come up with a solution to this.
Of course they don’t. The regulators are just bidding their time till they get a big payday working for the banksters they are supposed to be keeping an eye on.
What does that mean?
I understand for accounting purposes, much of the stuff on the books of fin corps is allowed to be priced from theoretical models.
We haven’t gotten to that can of worms yet.
They wouldn’t indict any of these pricks if they had video of them loading gold bars from their bank’s vaults into the back of their Escalades.
It’s all a friggin’ dog-and-pony show to make it look like they are doing something.
Part of the show is that it is getting closer to U.S. election, so must throw some crumbs to voters.
eCAHN,
You are probably right on that comment.
Next post up is “Bernanke ‘prepared’ to do more for jobs.”
Feeling the heat Mr. Bernanke?
Amid the “background noise” … certain “cans-o’-worms” are not even a distant “blip!” on the radar of “awareness” …
Someday, eCAHN, I hope that you might consider a wee diary with which to lay out those “peripheral” and still inchoate “sweet-spots”, those icebergs which the titanic collossus, that is our political economy, might … “encounter”, some dark and stormy night …
DW
What are the odds that if Little Timmeh has to face questioning by Congress, we’ll be treated to another invocation of executive privilege by O?
I don’t know anything about the accounting. My comment comes from something I picked up from the ether, by dint of working in the area. I’d forgotten until just now that I had heard it.
I do remember thinking when I heard that: What could possibly go wrong with that.
That’s a thought I’ve had often over the years.
Now we’re seeing what could go wrong.
Their sense of entitlement is beyond narcism.
Understood, eCAHN, however what you “pick up” has, in my experience, a “way” of “popping-up” in the larger context.
Call it intuition, call it prescience, yet you’ve got “it”, and your musings and speculations, which you always identify as such, are more informed, and far-seeing, than the “grasp” of many who pretend to “expertise”.
;~DW
“The few who understand the system, will either be so interested from it’s profits or so dependant on it’s favors, that there will be no opposition from that class.” — Rothschild Brothers of London, 1863
“The eyes of our citizens are not sufficiently open to the true cause of our distress. They ascribe them to everything but their true cause, the banking system”
– Thomas Jefferson
“Advocates of capitalism are very apt to appeal to the sacred principles of liberty, which are embodied in one maxim: The fortunate must not be restrained in the exercise of tyranny over the unfortunate.”
-Bertrand Russell
“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” -John Maynard Keynes
“Fascism is capitalism plus murder.”-Upton Sinclair
I agree with you on that.
That was my constant experience on Wall St.
I think it’s executive function that allows you to evaluate the downside when making decisions.
I saw little evidence of executive function on Wall St. I had many derogatory one-liners to describe ‘management.’
Example: They get up every morning, put on blinders, and proceed to do exactly what they did yesterday.
That works spectacularly well when markets are rising, which they mostly do. It does suck at downturns. However we have found out that the U.S. taxpayer bails them out at downturns, so perhaps the absence of executive function is a major plus.
” … to evaluate the downside when making decisions.”
In the artificial world of high finance, clearly, for the chosen, there are no downsides.
I have not the slightest doubt, eCAHN, that you were considered, when you worked on Wall Street, to be very “dangerous”.
You still are.
;~DW
Superb!!!
Thank you, Ironcomments.
DW
OMG, this is so bad for the PGA Tour and especially for its FedEx Cup Playoffs, which start end of August with The Barclays at Bethpage, NY, followed the next week with The Deutsche Bank Championship in Boston.
Sonofabitch. Did Timmy ssend his memo regular mail????
What a doofus.
Remember, Geithner was not a regulator while at the Fed.
Funny though… several months ago Geithner declared that he would not be returning after the election. What are the chances that Geithner knew Liebor was going to blow? I’d place the odds around 100% that he knew this was coming and he was going to look bad…
Plus, I’m sure Blankfein has already gotten verbal approval from his BOD for the creation of an entirely new “Senior Vice Chairman of Global Relations.” I mean, TG certainly deserves a BIG payoff for everything he’s done for Wall Street and Goldman over the past few years.
I love it!!! Thanks David.
Geithner says he sent the British regulator a memo on LIBOR irregularities (which was a chicken-sh*t passing the buck move to begin with), and now the British regulator is saying essentially “no way Jose” you did not tell us anything of the sort.
Drip, drip, drip…worse and worse this will get.
The dog ate Bat Boy’s homework
“theoretical models” … is that like pro forma?
http://www.slate.com/articles/business/moneybox/2002/04/my_pro_forma_life.html
Well put. Where is Madame Defarge when we need her?