Veritas: Fireworks on the Fourth of July
While most of his compatriots celebrate US Independence Day, Bob Diamond will be setting off his own fireworks in front of the UK Treasury Select Committee, which has summoned him to account for Barclays’ role in fixing the Libor rate on various occasions between 2005 and 2008.
Diamond, who quit as Barclays CEO yesterday, is clearly in combative mode, and has already implicated, by releasing notes of meetings and phone calls made in 2008, the deputy governor of the Bank of England, Paul Tucker. The suggestion is that the Bank was complicit in Barclays’ lowering the submissions which determine the final Libor rate.
The UK Chancellor at the time, Alistair Darling, whose party is now in Opposition, was predictably scornful of Diamond’s attempt to implicate the Bank of England. But the problem is that public opinion is just as sceptical of the words of politicians as they are of bankers.
The case simply confirms what they suspected all along: that the City’s bankers are a greedy, deceitful bunch, wildly overpaid and largely incompetent. With new revelations of mis-selling of swaps-related products to small businesses, banker-bashing has reached new heights. But so has public conviction that government officials collude with the financial elite.
The case is now far greater than the misdoings of one individual, even such a powerful one as Diamond, already described by a former British minister as “the unacceptable face of capitalism”. With this case, the City of London is fighting for its reputation, and the financial establishment will try to close ranks to protect that status.
As the details emerge, it is apparent there is probably more than one villain. For a start, Barclays is merely the first bank to be publicly sanctioned. It described being the target as “ironic”, given it was the first to settle with authorities over Libor.
In the UK, HSBC, the Royal Bank of Scotland and Lloyds are also in the frame. But all the banks on the panel between 2006 and 2008 are believed to have received at least an informal ‘request for information’, the first step in an investigative process. Other panel members include the Bank of America, Citibank, Credit Suisse, Deutsche Bank, JPMorgan Chase, Rabobank, Bank of Tokyo-Mitsubishi, Norinchukin Bank and West LB.
The global implications of the case are emerging. In Canada, a probe by the Competition Bureau will continue, despite settlements reached by US and British authorities with Barclays, an official said on Wednesday. Other authorities continuing investigations include the European Commission and Japan’s Financial Supervisory Agency. In the US, the SEC, the Commodity Futures Trading Commission and the Department of Justice are involved.
Swiss Bank UBS revealed the existence of a probe in its annual report. But in Q1 financial results released earlier this month, the Royal Bank of Canada mentioned no such action.
The scalps of Barclays’ Diamond, and his chairman Marcus Agius, who also heads the British Bankers Association (BBA) which publishes the Libor rate, are unlikely to be the last. The BBA, mindful of the public and political outrage, has cancelled its summer Fourth of July party scheduled for tonight. But there will be fireworks before the day is out.