LIBOR Banking Scandal Deepens; Barclays Releases Damning Email, Implicates British Government

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Quote Matt Taibbi:LIBOR Banking Scandal Deepens; Barclays Releases Damning Email, Implicates British Government

This Libor-manipulation story grows crazier with each passing minute. We have officially disappeared now down the rabbit-hole of the international financial oligarchy.

Former Barclays CEO Bob Diamond is testifying before parliament in London today, and that's sure to bring some shocking moments. But there's already been one huge stunner. In advance of that testimony, Barclays released an email from October 29, 2008, written by Diamond to then-Chairman John Varley and COO Jerry del Messier (who also stepped down yesterday). The email from the CEO to the other two senior Barclays execs purports to detail the content of the conversation Diamond had with Bank of England deputy governor Paul Tucker that same day.

In the email, Diamond essentially tells the other two execs that he has been given permission by Tucker – encouraged, actually – to rig Libor rates downward. What’s even worse is that Diamond’s email suggests that Tucker was only following orders, i.e. that Tucker had received phone calls from "a number of senior figures within Whitehall" – that is, the British government – expressing concern about Barclays' high Libor rates. Tucker in this version of events was acting as a middleman for the British government, telling Diamond to fake his borrowing rates in order to preserve the appearance of financial stability, for the good of Queen and country as it were.

Again: Libor, the London Interbank Exchange Rate, is the rate at which banks borrow from each other. A huge percentage of the world’s variable-rate investments are pegged to Libor. When Libor rates are high, it suggests that the banks’ confidence in each other is low, and high Libor rates are generally an indicator of shaky financial health among the banks. If the banks manipulated Libor, they did it to make themselves look healthier, but this had the consequence of affecting hundreds of trillions of dollars’ worth of financial products worldwide.

During the crash of 2008, governments understandably would have been concerned about high Libor rates – high rates and a lack of confidence in banks threatened economic stability – but the notion that governments would have encouraged banks to fake those rates would have been beyond unthinkable even a decade ago.

Back to the email. Diamond’s version of the conversation with Tucker, if true, is mind-blowing. To paraphrase, Diamond said that Tucker started off by asking Diamond why other banks were reporting such low borrowing rates relative to Barclays.

Diamond apparently deadpanned that his bank’s problem was that it was reporting the real numbers, while all the other banks were lying. "I asked [Tucker] if he could relay the reality, that not all banks were providing quotes at the levels that represented real transaction," Diamond wrote.

Tucker then steered Diamond to crime using the painfully oblique manner of an English gentleman trying to engage a prostitute without using any dirty words. He told Diamond that "while he was certain [Barclays] did not need advice,” the bank did not necessarily need to report such high rates all the time. Tucker put it this way: “It did not always need to be the case that [Barclays] appeared as high as [it has] recently."

This email amazes for a few reasons. One, it suggests that Barclays, which is currently carrying the standard in the LIBOR-manipulation scandal, was actually bringing up the rear -- that all of the other banks were in on it, and Barclays only attracted the government's notice because they were last.

The second is the apparent revelation that Tucker was acting on orders, or at least suggestions, from Whitehall. If nothing else, this is an awesome piece of political jungle defense by Diamond, tossing a hand-grenade into the seat of Her Majesty's government minutes before he's supposed to be grilled by parliament. This revelation is almost certain to inspire an Aldrich-Ames-style manhunt for the Whitehall figures responsible for this alleged communication to Tucker. And if this turns out to be true? Wow.

Of course, right now, we only have Diamond's word that it is, and under normal circumstances his word should mean less than nothing. The disgraced ex-CEO, who last year infamously said it was time for banks to stop apologizing, will likely now replace Jamie Dimon (who replaced Lloyd Blankfein, who replaced Angelo Mozilo, etc.) as the reigning hateable-white-guy Face of World Financial Corruption, so he'll have a difficult time if this whole thing comes down to a test of his public credibility.

But we already know that this Tucker-Diamond conversation did in fact take place, and that LIBOR was discussed.

Anyway, more on this after the testimony...

See Article.

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Karolina
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Crime of the Century

Quote Robert Scheer:

Forget Bernie Madoff and Enron’s Ken Lay—they were mere amateurs in financial crime. The current Libor interest rate scandal, involving hundreds of trillions in international derivatives trade, shows how the really big boys play. And these guys will most likely not do the time because their kind rewrites the law before committing the crime.

Modern international bankers form a class of thieves the likes of which the world has never before seen. Or, indeed, imagined. The scandal over Libor—short for London interbank offered rate—has resulted in a huge fine for Barclays Bank and threatens to ensnare some of the world’s top financers. It reveals that behind the world’s financial edifice lies a reeking cesspool of unprecedented corruption. The modern-day robber barons pillage with a destructive abandon totally unfettered by law or conscience and on a scale that is almost impossible to comprehend.

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Both Citigroup and JPMorgan Chase were reported by The Wall Street Journal years ago to be suspected of rigging the Libor interest rate. The leaders of those banks, despite such media exposure, clearly remained confident enough to continue on their merry way.

The sad reality is that they will probably get away with it. The world of high finance is by design as obscure and opaque as the bankers and their political surrogates can make it, and even this most recent crack in their defense of deception will soon be made to go away.

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.ren
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Quote .ren:Crime of the Century
Quote Robert Scheer:Both Citigroup and JPMorgan Chase were reported by The Wall Street Journal years ago to be suspected of rigging the Libor interest rate. The leaders of those banks, despite such media exposure, clearly remained confident enough to continue on their merry way.

The sad reality is that they will probably get away with it. The world of high finance is by design as obscure and opaque as the bankers and their political surrogates can make it, and even this most recent crack in their defense of deception will soon be made to go away.

That is why it is crucial to pass the Glass-Steagall here in the USA. Hopefully we still have enough Congress-people who have not sold their souls and votes to the Empire. If Glass-Steagall is passed here, other nations will follow immediately.

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Karolina
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Nov. 3, 2011 7:45 pm

How many more scandals do you need before you declare the financial system corrupt?

DynoDon
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Jun. 29, 2012 10:24 am

It has been declared corrupt.

Now that it is crumbling in plain view—we have the moment to start cleaning it up.

The alternative is global financial chaos, and thermo-nuclear war to make certain that no other nation or nations, are able to become the rulers of a new global Empire.

And yes, the people who have been doing much running of the world since the Middle Ages, would rather take everybody else down with them, than see themselves "reduced" to being a part of — the dreaded common folk.

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Karolina
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Nov. 3, 2011 7:45 pm

This is unbelievable.

When do we start holding these bankers accountable.

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JoyceFinnigan
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Open Floodgates on Calls for Glass Steagall in Britain
July 6, 2012 • 7:08AM

The scandal of Barclays bank manipulating the LIBOR interest rate is generating more calls for Great Britain to implement a Glass-Steagall separation of retail and investment banking. In a news article following up its July 4 editorial call for "a formal Glass-Steagall," the Financial Times reports, that British Chancellor of the Exchequer George Osborne "is under mounting pressure to force British banks fully to split their investment arms from retail banking operations.... MPs from all sides have lined up to call for such a split, modeled on the U.S. Glass-Steagall Act of the 1930s."

These calls are evidently more numerous than reported in detail in the British press. Many explicitly say that so-called ringfencing between investment and retail banking as proposed in the Independent Banking Commission report, aka the Vickers Commission, does not go far enough.

The new calls come from Members of Parliament, including Andrea Leadsom, a Conservative member of the Commons Treasury Committee and a former banker at Barclays. In a Financial Times commentary, she writes: "The issue of a complete separation of retail and investment banking should also return to the agenda. .... It is right that the government should be the ultimate guarantor of retail deposits. But that guarantee should not extend to high-risk transactions."

Pat McFadden, a Labour member of the committee, which questioned former Barclays CEO Bob Diamond, said: "Through Bob Diamond's actions this [full bank separation] has been brought back on to the agenda. The question is whether the culture in hard riding investment banking sits easily with retail banking, which hopefully should be more boring."

In an interview on July 4, Channel 4 News asked Lord Myners, former Financial Services Secretary in the government of Gordon Brown, whether the Vickers ringfencing was sufficient? He replied, "I think the evidence of the last few weeks [is illustrative], and Diamond himself said that many of the problems that emerged in Barclays were within the ring fence as envisaged. Now the government has already diluted the ring fence that was proposed by Vickers, but the ring fence doesn't go far enough. We need to go to what is known as a Glass-Steagall model, which is a complete separation." Myners is currently on the board of RIT Capital Partners PLC, an investment fund chaired and sponsored by Lord Jacob Rothschild, and is Chairman of the Guardian Media Group, publisher of The Guardian and The Observer newspapers.

Meanwhile Ben Chu, Economics Editor for the Independent, wrote yesterday in his Independent blog "Eagle Eye" under the headline, "Split Up the Banks — and Do It Properly," wrote that the Barclays scandal "makes the case overwhelmingly for a full separation of retail and investment banking, not the half-way house that the government is implementing. ... The ring-fencing system proposed by the Vickers Commission relies on these individuals to respect a division of banking functions laid out by Parliament: Does anyone seriously believe that a system that depends largely on the good faith of investment bankers will be sufficient to protect savers and taxpayers from future banking crises? Does anyone seriously think that it is a good idea to give these individuals any role whatsoever in guarding the savings of the ordinary public?"

He also refers to John Kay's FT commentary on July 4, that "There are two main arguments for splitting the utility of retail banking from the trading casino. One is to stop croupiers gambling with house money; the other is the incompatibility of trading and banking cultures. The Vickers Commission on U.K. banking reform addressed the first. It is time to turn to the second."

Last but not least, Auke Lont, CEO of Norway's electric power network manager Statnett, in a letter published in the July 3 FT writes: "We should, therefore, have no illusions. Chinese walls did not and will never exist in universal banking. The only robust and workable solution is a complete structural separation between commercial and investment banking. Vickers should go back to work."

Chancellor Osborne, just like Treasury Secretary Geithner and Obama in the United States, is reported by the FT as trying hard to force the opposite conclusion, that now the government should "really implement" the Volcker Ru... — sorry, Vickers Commission. Vickers implementation was scheduled for 2019, even later than Volcker; both can be thrown in the trashbin now.

See Article.

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Karolina
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Nov. 3, 2011 7:45 pm

Your answer is in your question. Isn't it obvious the financial sector is in control - the lack of change and proscecution shows you the answer.

DynoDon
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Jun. 29, 2012 10:24 am
Quote Jeffrey Steinberg:It is almost impossible to overstate the strategic significance of the fact that an important group within the top echelons of the British Establishment have come to the conclusion that Glass-Steagall is the only survival option open to them. The July 3 Financial Times editorial endorsement of Glass-Steagall has been followed, over the past 48 hours, by a series of further endorsements by leading figures, from Peter Hambro, of the old British merchant banking family; to Lord Myners, former Financial Services Secretary in the Gordon Brown government and a Rothschild-sponsored banker; to Terry Smith, a leading City banker who had called for a return to Glass-Steagall at the time of the September 2008 Lehman Brothers and AIG blowout. In Italy, the newspaper of record, Corriere della Sera, came out Friday with a big push for Glass-Steagall by leading financial correspondent Massimo Mucchetti, who is known to have, in the past, been close to Romano Prodi and the De Benedetti interests.

>-------------------------------<

"London has delivered a shot across the bow, and we are the world leaders on Glass-Steagall," LaRouche declared on Friday. "A group of responsible people in Britain has decided that the fate of everything that is important to them requires an immediate Glass-Steagall reform."

>-------------------------------<

The LIBOR rigging scandal now also opens another flank. Today, the British Serious Fraud Office (SFO) announced a criminal investigation into the fixing of the rates that determine virtually all adjustable-rate mortgage and credit card rates worldwide. The investigation will be coordinated with law enforcement agencies in the United States, Japan, and throughout continental Europe. This is potentially the Pecora Commission, but on a global scale, that was so ferociously suppressed in 2008. The LIBOR scandal is so big, and involves so many of the worst of the trans-Atlantic banks, that it cannot be suppressed. Bankers are going to be frog-marched off to jail over this.

There is one other critical dimension of this picture that cannot be overlooked or underestimated, and that is the role of Russia and President Putin in foreclosing the option of a limited war. The fact that Putin and the Russian generals have repeatedly warned that any move for regime change in Syria or Iran could lead to a thermonuclear war of extinction, has meant that the British bluff has been called. The combination of the Russian resolve, and the war-avoidance actions by U.S. military leaders, from the Chairman of the Joint Chiefs of Staff, General Martin Dempsey, on down, has thrown off the timetable for war, that had been set last year. The option of wars in Syria and Iran, following closely on the heels of the overthrow and assassination of Qaddafi in Libya, has been stopped so far. As the result, the rate of collapse of the trans-Atlantic financial system has raced ahead of the war preparations, to the point that any kind of strategic confrontation is now much more difficult, if not impossible.

Read Article.

Here's another article explaining this group of newly Glass-Steagal British.

All we can do is keep watching and see what happens.

Karolina's picture
Karolina
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Nov. 3, 2011 7:45 pm

Chris Hayes has a discussion on Libor. Diamond is a big Romney fundraiser, so contributions will probably increase.

Part 2, the corruption spreads. UBS and Phil Gramm's bank are just the tip of the iceberg. Barkley's squeeled and the house of cards is falling.

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douglaslee
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Jul. 31, 2007 4:01 pm

Wow, I bet this will mean that the big banks will need a few hundred billion more from the govt, to make their life easier.

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Phaedrus76
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Sep. 14, 2010 8:21 pm

British Elites' Calls For Glass-Steagall Invoke FDR
July 8, 2012 • 10:54AM

Two of the many more calls for Glass-Steagall emanating from Britain in the aftermath of the Barclays LIBOR scandal, invoke the model of Franklin Roosevelt. In the first, Oxford physics Prof. Gerald Elliott, in a letter to the editor published in the Independent, suggests that Labour Party leader Ed Miliband announce that, as prime minister, he would at once bring in a British version of the Glass-Steagall Act. "When I lived in and worked in the U.S. in the 1960s, I could forget about runs on the bank, because the 1933 Roosevelt legislation ensured that the local bank where my salary resided could not speculate with my dollars," Elliott writes. "It also ensured that my local bank would have funds available to offer me a mortgage; it also had funds to support local industry." He notes that the bankers would not enjoy these restrictions on their "freedoms," and that Miliband would have to admit that Gordon Brown may have gotten it wrong, but "The prestige of Roosevelt is palpable and the history of the 70-plus years of financial stability after the Depression is compelling."

Equally interesting is the Daily Mail's Dominick Sandbrook's call for Glass-Steagall. Though couched in Tory nostalgia for the old Empire, he also invokes FDR as a "good model" to follow. "When he became U.S. President in 1933, the economy was in ruins and there seemed a genuine chance that an anti-capitalist demagogue might capture the imagination of the American people.

"Roosevelt's historic contribution was to rekindle ordinary people's faith in capitalism. As soon as he took office, he passed the Glass-Steagall Banking Act, limiting excessive bank speculation and effectively insuring most people's bank deposits. A year later, he set up the Securities and Exchange Commission (SEC) to end the culture of corporate abuses in the stock market.

"Not surprisingly, there were howls of outrage from Wall Street. But in the following decades, many of its excesses having been eliminated, Western capitalism boomed, allowing ordinary Americans to enjoy the new comforts of an affluent society."

Liam Halligan, in a July 7 column in the Daily Telegraph, doesn't invoke FDR, but does note that "Finally, a head of steam is building" for a proper division between investment and commercial banking, and proceeds to list the names of prominent bankers and economists who have joined the call for the Glass-Steagall reform of British banking. Among them are former Citigroup chairman John Reed; former Labour City Minister Lord Myners; Professor John Kay, "one of the U.K.'s few world-class academic economists, backs Glass-Steagall;" as does Terry Smith, "a City businessman with a well-deserved reputation for being proved right on the big financial issues"; and the late Sir Brian Pitman, "one of the legends of U.K. retail banking, used his last ever newspaper interview ... to make the case for Glass-Steagall."

Finally, Financial Times columnist Matthew Vincent, in a column posted on July 6, caustically takes down the investment bankers' arguments against Glass-Steagall. "'We will be less able to compete.' Good—competition has done nothing for customers. 'It will damage London as a financial center.' No, it won't—it will just make houses more affordable. 'We won't be able to attract the talent.' I'm sure you will, if you hang around the gates of Ford Open Prison long enough." Ford Open Prison, Wikipedia tells us, is notorious for easy escapes of violent criminals.

See Article.

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Karolina
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Nov. 3, 2011 7:45 pm
Liam Halligan Gives Strategic Message on
Glass-Steagall Move in Britain

July 9, 2012 • 7:01AM

The July 7 column for Glass-Steagall in the London Telegraph by Prosperity Capital Management chief economist Liam Halligan, was notable for giving a strategic account of the turning point in history now arrived. Halligan also, like Lyndon LaRouche, makes clear that the Glass-Steagall policy will take away a lot of power — and a large amount of "big money" — from bankers on Wall Street and in the City of London.

Entitled, "Liborgate could trigger crucial banking reform," Halligan's long column calls for mobilization for a new policy. "Finally, the British political classes are starting to get it. Finally, a head of steam is building. Over the past week, calls to impose a proper division between investment and commercial banking have become louder, more authoritative and part of mainstream debate. Pressure for the introduction — or reintroduction — of this crucial split could soon become irresistible, however much the politicians wiggle and the investment bankers deceive.

"Until now, its been mainly nerds like me who have advocated a full Glass-Steagall separation. Given the vested interests that would lose from this change, we've been lampooned for our hot-headed views.

"Yes, our message is awkward. Life would become difficult (and less lucrative) for a lot of powerful people, were we to prevail. Yet we Glass-Steagallers are right. We have history, logic and common sense on our side. And now — thanks to Barclays ex-CEO Bob Diamond, and Liborgate — we also have political momentum.

"The global economy faces grave dangers. On Friday, Spain's 10-year sovereign bond yield went back over 7pc. Italian yields topped 6pc. The main reason, of course, was fresh doubt over the supposed break-through at last weekend's Rome summit. After repeated attempts to stabilise the eurozone, the inevitable political backlash among the region's solvent Northern members is also coming into view.

"When they meet in Brussels [July 8], eurozone finance ministers will once again spin and posture, as they try to agree the terms of a 100bn (£79.3bn) bail-out for Spain's debt-soaked banks. That's before they consider Greece (and now Cyprus).

"Back in the U.K., meanwhile, Liborgate seems to have caused the first tremors in what all responsible people must hope is a political earthquake...."

Halligan then reviews all the prominent Britons who have suddenly come out calling for Glass-Steagall, and demands that Liberal or Labour MPs introduce it immediately: "This split needs to happen and someone needs to get it done. There really is no alternative."

For the full column, click here.

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Karolina
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