Diamond may be questioned in Washington over rate-fixing scandal

Heat rises on former Barclays boss - with Del Messier set to appear before MPs

Bob Diamond, the former Barclays chief executive, could be called to Washington to answer questions to Congress about the Libor fixing scandal, it was reported last night.

US politicians in the Senate Banking Committee and the House Financial Services Committee were yesterday reportedly considering summoning Mr Diamond to testify before them.

Senator Tim Johnson, chairman of the banking committee, said his panel would ask Federal Reserve chairman, Ben Bernanke, and Treasury Secretary, Timothy Geithner, about the scandal at hearings before the summer recess in August.

"I am concerned by the growing allegations of potential widespread manipulation of Libor and similar interbank rates by some financial firms," Mr Johnson said on Tuesday.

In London next Monday, Bob Diamond's one-time number two at Barclays will appear before MPs in a hearing that could see some of the most heated exchanges yet over the Libor interest rate-fixing scandal.

Jerry del Missier quit as Barclays' chief operating officer hours after Mr Diamond stepped aside last week amid public fury over the bank's conduct. He allegedly instructed traders to manipulate Libor rates down believing he was acting on instructions from Paul Tucker, deputy governor of the Bank of England.

That followed the circulation of a note by Mr Diamond of a conversation he had with Mr Tucker during which the latter said there was concern in Whitehall at Barclays submission of high Libor rates. Mr Diamond said he did not interpret the conversation in the same way as Mr del Missier.

The Financial Services Authority made clear when Mr Diamond was appointed that it wanted him to closely supervise the Mr del Missier, who took over the running of Barclays Capital following his boss's promotion.

The US Justice Department is already investigating the scandal while city and state pension funds have launched legal action, claiming their investments suffered from the manipulation of Libor rates. Barclays was fined £290m by regulators in the UK and US over allegations it manipulated Libor last month. More than a dozen other banks are being investigated for their roles in setting Libor rates.

White-collar crime expert William Black, Professor of economics and law at University of Missouri Kansas City, said US action would soon escalate the scandal.

"We have very tough disclosure laws. We've already seen how horrific these people's emails can be, there's going to be a lot more where that came from," he told The Guardian.

Wayne State University law professor Peter Henning said the scandal had the potential to become "the signature financial fraud of the meltdown."

The Justice Department's fraud division was looking after the case, not the anti-trust division, he said.

"They are looking at this as a fraud case. That's much more serious for any individual involved. Given the amounts of money we are discussing, there could be serious jail time if anyone is convicted," he added.

Around 45 per cent of US mortgages are tied to Libor rates, and cities including Baltimore are claiming they have had to cut essential services as a result of losing money on investments tied to Libor.