The LIBOR scandal

What Goes Up... · **Posted:** Tue Jul 03, 2012 8:15 am

http://www.bloomberg.com/news/2012-07-0 ... ne-1-.html

Quote:

Diamond Quits as Pressure Mounts on Barclays Over Libor
Jul 3, 2012
By Ambereen Choudhury and Liam Vaughan

Robert Diamond, the architect of Barclays Plc (BARC)’s investment banking expansion, stepped down as chief executive officer, succumbing to political pressure to go after the bank admitted to rigging global interest rates.

Diamond, 60, will step down with immediate effect, the London-based bank said in a statement today. Diamond became CEO of Barclays on Jan. 1, 2011 after joining the bank in 1996. Marcus Agius, who said yesterday he would step down, will become full-time chairman and lead the search for a new CEO.

“I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth,” Diamond said in the statement.

.....(cont'd)

What Goes Up... · **Posted:** Tue Jul 03, 2012 8:19 am

http://www.nakedcapitalism.com/2012/07/ ... -here.html

Quote:

Massive Furor in UK Over Libor Manipulation; Where’s the Outrage Here?
07/02/2012
Posted by Yves Smith

In case it isn’t yet apparent to you, the unfolding scandal over manipulation of Libor and its Euro counterpart Euribor is a huge deal. Even though at this point, only Barclays, the UK bank that was first to settle, is in the hot lights, at least 16 other major financial players, which means pretty much everybody, is implicated.

First, Libor is the basis for pricing over $10 trillion of loans. As the CTFC noted:

US dollar Libor is the basis for the settlement of the three-month Eurodollar futures contract traded on the Chicago Mercantile Exchange, which had a traded volume in 2011 with a notional value exceeding $564 trillion.

The Wall Street Journal puts total in contracts affected at $800 trillion.

Second is that price fixing is a criminal violation under the Sherman antitrust act. The Department of Justice stressed that Barclays had been the first bank to cooperate with the investigation and had been extremely forthcoming, and for that reason it would not be prosecuted if it complied with the settlement terms for two years. The implication is that the DoJ will not be as generous with other banks involved in the price-fixing scheme. This is an overview from the Financial Times of Barclay’s misdeeds:

.....(cont'd)

What Goes Up... · **Posted:** Tue Jul 03, 2012 8:21 am

http://www.nakedcapitalism.com/2012/07/ ... andal.html

Quote:

Mirabile Dictu! Barclays CEO Bob Diamond Resigns Over Libor Scandal
07/03/2012
Posted by Yves Smith

Wow, this resignation took place a mere day before the Treasury select committee hearings on Wednesday. The Wall Street Journal bizarrely sent a news alert out announcing the resignation, yet it links to a front page story that is out of date, saying that Diamond “resisted pressure to resign” and has “no plans to leave. FT Alphaville, natch, already has the resignation announcement from the board posted, which clearly shows that Diamond has resigned with “immediate effect” and that the departing chairman, Marcus Aigus, will lead the search for his replacement.

This sudden announcement also makes it seem much more likely that serious shoes will drop at the Wednesday hearings.

Although this news has just broken, and I’m sure there will be a ton more commentary in the next few hours, I suspect the proximate cause is that Diamond’s attempts to defend the rigging of Libor during the crisis as being tacitly approved by the Bank of England was not going to fly.

.....(cont'd)

Magpie · **Posted:** Tue Jul 03, 2012 8:28 am

Not looking good for Diamond Bob.

The Feds are taking an interest.

dailymail wrote:

The FBI is investigating 14 Barclays traders at the heart of the Libor-fixing scandal, it emerged yesterday.

Although much of the immediate political fallout over Barclays has occurred in the UK, the US could become the main legal arena for the scandal, with financial and custodial punishments dwarfing those imposed elsewhere.

The City of Baltimore has already launched a class action suit and the brokerage firm Charles Schwab has brought a lawsuit in California.

yoganmahew · **Posted:** Tue Jul 03, 2012 8:38 am

So long, farewell, auf wiedersehn...

And for the Diamond geezer...

johnnyone234 · **Posted:** Tue Jul 03, 2012 8:42 am

It sounds like there will be many many to follow him

yoganmahew · **Posted:** Tue Jul 03, 2012 8:45 am

Some background posts here: viewtopic.php?f=19&t=7579

grumpy · **Joined:** Jun 9, 2008 **Posts:** 5058

johnnyone234 · **Posted:** Tue Jul 03, 2012 9:55 am

looks like the BOE are flexing some underworked muscles

Quote:

First, a tip for Bob Diamond’s successor as chief executive at Barclays: Don’t threaten the Bank of England. It will get you deported.

Quote:

Without doubt, this was the trigger:

Bob Diamond is threatening to reveal potentially embarrassing details about Barclays’ dealings with regulators if he comes under fire at a parliamentary hearing on Wednesday over the Libor rate-setting scandal, according to people close to the bank’s chief executive.

“If he is attacked, he will fight back,” said one person familiar with preparations for the Treasury select committee hearing. Such a confrontational tactic could aggravate the fraught relations between the bank and the authorities after Barclays paid £290m to settle an investigation by UK and US regulators over the bank’s involvement in manipulating key interbank lending rates.

There were already overt threats to drag Paul Tucker, a leading contender to take over from Sir Mervyn King as BoE governor, in to the mire by suggesting that his unit somehow condoned fantasy Libor quotations.

But that’s not the point. You just don’t threaten the Bank. The City of London is not some sort of financial democracy. It is a hierarchy. It is not Capitol Hill; political brawling is prohibited.

http://ftalphaville.ft.com/blog/2012/07 ... rclays-pb/

ex-Patrick · **Posted:** Tue Jul 03, 2012 10:09 am

I'd like Rob Brydon to play him in the telefilm.

roc · **Joined:** Aug 22, 2008 **Posts:** 2855

Was it not necessary to make some intervention in LIBOR rates to mitigate the financial crisis? Back in 2007/8 when LIBOR rates started going sky high due to banks not trusting each other, did this fact not introduce a potentially catastrophic dynamic with regard to the potential of the whole western economic system to go down the tubes?

It seems to me that interventions were necessary across the board in the name of crisis management. It seems to me that in a lot of the conversation about what ought to be done etc (eg. allowing companies to fail), there is this assumption that we ought to treat everything as if there was/is no crisis. ie. Just let the system do what it is designed to do.

But the primary fact in my mind when it comes to current analysis is that the system has failed badly and incontrovertibly. It is still in a state of failure, although it is much improved than it was in 2007/8. Yet, there are all these calls to just let the system work as normal, even though it is in this state?!

No doubt there has been some (or a lot) of corruption tied up with this failure. No one disputes that. But it is important to separate this aspect from the other aspect which consists of necessity in terms of repairing the system so that it can be allowed to work on its own again, without encompassing the high probability of continuing and worsening failure.

yoganmahew · **Posted:** Tue Jul 03, 2012 11:07 am

roc wrote:

Was it not necessary to make some intervention in LIBOR rates to mitigate the financial crisis?

Arguably, yes during the peak of the crisis.

The issue, though, is that before then and since then Libor and Euribor have been manipulated for profit.

roc · **Joined:** Aug 22, 2008 **Posts:** 2855

yoganmahew wrote:

roc wrote:

Was it not necessary to make some intervention in LIBOR rates to mitigate the financial crisis?

Arguably, yes during the peak of the crisis.

The issue, though, is that before then and since then Libor and Euribor have been manipulated for profit.

Yes. I wonder was there some degree of sanction by the authorities, since there was a need there (originally and/or continued), and perhaps they thought they could trust the banks to exercise their judgement on the issue.

Homeboy · **Joined:** Jun 5, 2008 **Posts:** 1406

yoganmahew wrote:

The issue, though, is that before then and since then Libor and Euribor have been manipulated for profit.

And it's not a victimless crime.

yoganmahew · **Posted:** Tue Jul 03, 2012 11:31 am

roc wrote:

yoganmahew wrote:

roc wrote:

Was it not necessary to make some intervention in LIBOR rates to mitigate the financial crisis?

Arguably, yes during the peak of the crisis.

The issue, though, is that before then and since then Libor and Euribor have been manipulated for profit.

Yes. I wonder was there some degree of sanction by the authorities, since there was a need there (originally and/or continued), and perhaps they thought they could trust the banks to exercise their judgement on the issue.

I doubt there was a sanction in 2005/6/7...

The LIBOR scandal

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