James Moore on the Libor scandal: Instant analysis
The Independent's Deputy Business Editor, James Moore, with live coverage of today's Treasury Select Committee as Bank of England deputy governor Paul Tucker faces Libor accusations
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
Monday 09 July 2012
16.45: The infamous conversation with former Barclays boss Bob Diamond was not one Bank of England deputy governor Paul Tucker made a note of, he says kicking off this afternoon’s hearing of the Treasury Select Committee. “I wish I had,” he said. I’ll bet. Mr Diamond did make a note, and what he wrote appeared to show Mr Tucker endorsing Libor fixing. Mr Diamond didn't think that, but his number two Jerry del Missier did.
16.48: Andrew Tyrie wants to know if the note accurately reflected the conversation with Mr Tucker. Not completely says Mr Tucker. Oh ho. “I think the last sentence gives the wrong impression. It should have said something along the lines of are you the senior management at Barclays overseeing the day to day operations.” Of traders etc to they don’t “tip you off a cliff”. Mr Tucker refutes any suggestion it endorsed fixing Libor. “Absolutely.”
16.58: Pat McFadden (Labour) wants to know if any Government minister (during the last Labour Government) ever encouraged Tucker to lean on a bank to lower Libor. No, says Mr Tucker. Bad Luck George Osborne, that's your recent line of attacks on Ed Balls (singled out by name by McFadden) blown. Tucker says he wasn't playing fast and loose with Libor. This is getting interesting.
17.19: The Conservatives’ Michael Fallon asks a rather good question. Messrs Tucker, Diamond and Del Missier are all very intelligent. But Mr Tucker was misinterpreted the latter two. Doesn’t this worry Mr Tucker? (He doesn’t add at a time of global criss, but he could have). Mr Tucker demurs and argues that Bob Diamond didn’t misinterpret him. He just wanted to be clear Diamond and Co were fully in command of what was going on at their various desk, prompted by Barclays submitting very high Libor rates. Mr Diamond knew this. Now this is interesting. At the time, Mr Tucker says he wasn’t surprised that Lloyds and RBS were submitting lower (Libor) rates than Barclays - because they were getting help from the Government and the Bank of England which made them a very good. Meanwhile HSBC was seen as being rock solid. So perhaps there is a good reason the Libor submissions of all three were lower than Barclays. That would make Mr Diamond’s implication that other banks were playing fast and loose with Libor, submitting unrealistically low rates, wrong. Is that what Mr Tucker is saying here? That’s most interesting, if you think about it.
17.36: "“This is a cesspit," says Mr Tucker, who says any market in the City based on submissions (but not transactions) by banks needs investigating because they don't work. He's giving the impression that he's boiling and just wants to shout at MPs: "Oh you bloody idiots. Don't you get it?"
17.54: So did the Bank of England demand Bob Diamond's resignation? Mr Tucker won't say, arguing that the committee should ask when he appears again with his boss, Sir Mervyn King. Mr Tucker wasn't part of conversations about Mr Diamond's future (he seems to be saying) but the Court of the Bank was clear that "absolutely decisive action was needed to start a new chapter". Which looks like a fairly big indication that Sir Mervyn might well have called for Mr Diamond to quit. "There was great concern that trust has to be re-established in banking. This is different from safety and soundness. This is now can we now trust the honesty of core wholesale markets. That has to be addressed fast. I would have wanted regulators to make clear to Barclays that they neeed to take decisive action," he says in response to the question: Did he think Diamond was right to go. In other words, yes. But he won't quite say that. Given that Mr Tucker is here because of the misinterpretation of conversation, shouldn't he simply spell it out?
17.58: Libor was used to determine the price for the cheap funds banks got from the Bank of England under the special liquidity scheme: "We would absolutely not have done that if we thought lowballing was going on."
So banks might well have got money cheaper than they ought. Cheap money they used to generate very nice returns, it should be said. There more you dig into this, the worse it gets.
18.18: Some very testy exchanges between first Mark Garnier and then Andrew Tyrie and Paul Tucker over the minutes of meetings about Libor on15 November 2007. Mr Tyrie says there "appears to be an indication of low balling about which nothing was done".
Tucker denies this flatly. He and his colleagues felt the market for interbank lending was "malfunctioning" not that there was any dishonesty going on. Tyrie says this: "Doesn't look good." No kidding. Mr Tucker is glowering again. Oh dear.
18.22: Headbanger alert: Labour’s John Mann is very cross about the fact that the e-mails published by the Bank of England (today) about conversations between Mr Tucker and Government officials weren't published before. Weren't, in fact, published prior to last week’s hearing with Bob Diamond. Mr Tucker said the Bank had received a Freedom of Information request from Mr Mann and published them as quickly as possible. Mr Mann then gets an especially fierce glower.
18.30: Here's what Mr Tucker thinks should be done in the wake of what has gone on: "I think extending the scope of criminal sanctions is very important. There have been some measures about the pay of the top people but actually i think there is probably an issue of the structure of pay. It has probably been too easy to get rich quick. it is hard not to ask the question should remuneration at desk level factor in compliance breaches and enforcement." No kidding. I almost feel like fixing Mr Tucker with a steely glare here because he really is statin' the bleedin' obvious.
18.51: We're at the end now. Question of the day from Andrew Tyrie: "You've said that you encouraged Bob Diamond to take special notice of what was going on in his Treasury Department. Were you surprised that he didn't see what was going on?" Answer of that day from Paul Tucker: "What I'm surprised by is that the compliance people and the supervisors didn't identify this and elevate it upwards." And that's that.
What this tells me is that despite some exhaustive investigations we haven't really, yet, got to the bottom of this. But it doesn't speak well of the day to day management of Barclays whichever way you look at it.
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