Lehman was biggest risk of my life, says Diamond

John Varley, the chief executive of Barclays Bank, said that pursuing the acquisition of Lehman Brothers at the height of the financial panic in 2008 led to "the riskiest week" of his life.

Recounting negotiations in the days before and after the bankruptcy of the Wall Street investment bank, Mr Varley said it had been impossible to tell for certain what Lehman's assets or liabilities might be worth, which was why Barclays insisted on numerous conditions before agreeing to purchase the company's US operations at a knock-down price.

The British banking boss appeared yesterday in a Manhattan bankruptcy court to answer allegations that Barclays kept important information about the acquisition secret from the judge who approved the deal, less than five days after Lehman Brothers filed for Chapter 11 bankruptcy protection in September 2008.

The claims are being made by the trustee and estate of Lehman Brothers, the rump of the business that Barclays did not buy and which is being wound down to recoup some money for creditors. They want Barclays to pay more than $11bn extra for the business, which quickly proved profitable.

The hearing provided new insights into the chaotic, high-stakes decision-making at major banks during the credit crisis, and into the boardroom discussions at Barclays, which codenamed the acquisition of Lehman Brothers "Project Long Island" after the New York region. Barclays itself was codenamed "Baltimore" in internal documents.

Mr Varley said Barclays made every effort during the talks to ensure the deal would be positive for shareholders, but "the numbers were frustratingly imprecise during the week". He added: "The only circumstances in which I would be able to look our regulators in the eye – and for that matter, to look shareholders in the eye – were if we were to protect our capital ratios in a transaction like this."

Among the allegations is that Barclays unfairly negotiated a lower price for Lehman's trading assets. Mr Varley was asked if they were marked down from the price at which they were carried on Lehman's books on the Friday before its bankruptcy. "Of course they were," he said. "The markets were collapsing. The marks were made on Friday night. By Monday morning they were irrelevant. We were seeking to establish the contemporary value of the assets we were seeking to acquire."

Barclays reported a $4.2bn gain on the Lehman acquisition in its annual accounts just five months later, but Mr Varley said the gain was not "forecastable or bankable" at the time. Asked why he told analysts at the time of the acquisition in September that the deal had been "derisked", he said it had been made less risky. "Was it still a risky transaction? This was the riskiest week of my life," he added.

Earlier, Bob Diamond, the head of Barclays' investment banking division, Barclays Capital, said the company's board members had been haunted by the fear they were missing important risks in the deal. Barclays was the only bidder for Lehman after Bank of America pulled out of talks that weekend, he said. "We had to step back when BofA walked away from doing a deal for Lehman at a small amount of cash, perhaps less than $1bn, and instead did a deal for Merrill Lynch at $50bn," he told the court. "What had they seen in due diligence, in the incredible lack of information and the misinformation?"

Mr Diamond gave a vigorous performance on the stand – almost six hours over two days – and during Monday's hearing more than once was reprimanded by Judge James Peck for giving "evasive" answers. "I think this is a witness that needs to have the leash held tightly," the judge said.

News
Ian Thorpe had Rio 2016 in his sights
people
Sport
world cup 2014A history of the third-place play-offs
News
Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer Tommy was last surviving member of seminal band
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

PROMOTED VIDEO
Sport
The Mexico chief finally lets rip as his emotions get the better of him
world cup 2014
Voices
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
Life and Style
Several male celebrities have confessed to being on a diet, including, from left to right, Hugh Grant, Benedict Cumberbatch and Ryan Reynolds
...and the weight loss industry is rubbing its hands in glee
News
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Arts and Entertainment
'Eminem's recovery from substance abuse has made him a more potent performer, with physical charisma and energy he never had before'
arts + entsReview: Wembley Stadium ***
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice