Jim Armitage: Barclays wants a scrap over this ‘scandal’ just as JPMorgan is set to pay up
It’s never easy to be sympathetic with Barclays, let’s be honest. Clearly, this is a bank which has behaved appallingly in the past, whether in rigging Libor, mis-selling PPI, or allegedly using funny methods of securing billions of bailout money from the Qataris.
It’s simple to take the view that banks, and bankers, are an evil lot and every time they get nobbled and fined they’ve been got bang to rights.
But something smells different about this latest fine against Barclays from the US – or at least, in the bank’s response to the charges.
For newcomers to this latest “scandal”: Barclays stands accused by the US Federal Energy Regulatory Commission (Ferc) of rigging the Californian electricity markets between 2006 and 2008. The allegation is that it manipulated the price of power in order to boost the profits from derivative positions that it had in place. The fine, confirmed this week, is for $453m (£297m).
Deutsche Bank faced similar charges and offered to pay up in January. A measly $1.5m fine ensued.
Barclays has a track record of doing the same: fess up, pay the fine and move on. Even when doing so gets a big dollop of manure poured over your head by the serried ranks of Westminster and Fleet Street.
The trend of accepting responsibility has been particularly marked under the new chief executive, Antony Jenkins (known internally as AJ), who is still able to exercise the new broom’s prerogative of kitchen sinking all the evils of the past and blaming previous management.
But not so the Ferc allegations.
Barclays will, he says “vigorously defend” his predecessors on this case.
“We strongly disagree with the allegations... against Barclays and its former traders” (note that “former”). “We believe our trading was legitimate and in compliance with applicable law,” he says, adding the order is “a one-sided document”.
“See you in court, suckers,” he concludes. OK, that last one was my paraphrasing, but is effectively what he means when he declares that, in a federal court, the regulator will have the “burden” of proving its allegations against Barclays’ counter arguments.
It’s fighting talk. Particularly amid reports last night JPMorgan is close to settling for far more.
Sources at Barclays are uncharacteristically vehement in their dismissal of the charges, too. Sure, they say, there is evidence of dumb things said by traders in emails. And yes, the statements are really stupid: “You going to have fun with the index all month?”, “Crazy. I love it” . They don’t look good. But the bank will argue in court that this was just trading-room bravado, and that the Ferc has no serious evidence that proves the traders actually acted on their emailed boasts – no proof that they manipulated the prices. They will argue that the size of the punishment is bonkers, too: a $453m fine for $35m in allegedly wrongful profits.
Barclays will be aware you don’t generally take on US regulators and win. Likewise, you wouldn’t generally back a bank in any case heard in a federal courtroom.
So either AJ is naive, or sure of his case.
Beijing’s new boss puts boot into ‘gift’ givers
The Chinese government was in sabre-rattling mode yesterday.
I use the metaphor advisedly: speaking of the GlaxoSmithKline affair, The People’s Daily, a mouthpiece for the government, said that China must “lift a sharp sword to pierce the improper, even illegal, costs behind rising drug prices”. Other industries must watch out, too, the paper said. Bribery will no longer be tolerated. Seasoned China watchers observe all this and smile behind their sleeves. The truth of the matter is that bribery – under the pseudonym of “gifting” – is as endemic in the country as rice and noodles. Gifts oil the deals in China like they do across the developing world. And as the country’s economy has grown during the liberalisation years, so has the size of the gifts.
But, with the arrival of the new premier, Xi Jinping, last year, that is changing. One of his first acts was to condemn the corruption and lavish lifestyles of state officials, much to their annoyance.
One official, Yang Dacai, known locally as “Brother Watch”, was even sacked as his penchant for expensive wristwatches came to the attention of those higher up the administration.
Cue sales warnings last autumn from the purveyors of luxury presents like Burberry, LVMH, Richemont and the Swatch group – owner of the expensive watch brands Omega and Breguet.
Now, with the state media back on the march against corruption, luxury companies fear the clock is ticking once again for China’s lucrative gifts market.
Plenty of hope in OBR’s 50-year forecasts
When it comes to phoney sciences, it’s hard to say which is the more inexact, futurology or economics.
In the Office for Budget Responsibility’s report yesterday, we had a mixture of the two.
The OBR, through no fault of its own, has been tasked with, every year, creating a bunch of economic forecasts stretching out 50 years ahead. If you are sceptical of such an exercise, you are right to be so. However, there was some hope for us all in yesterday’s instalment of this annual pin-and-blindfold game. Particularly those who pride ourselves as being “deficit deniers”.
The OBR said that, to reach the stated target of reducing the national debt to 40 per cent of GDP by 2062-63, all we have to save is 1.2 per cent of GDP – a measly £19bn in current money.
Given that the deficit is currently running at £120bn, and this year alone, the Government will be cutting the structural deficit by £10bn, it doesn’t sound too scary, does it? Perhaps we can keep our welfare, NHS and libraries after all.
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