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Barclays Libor Scandal: Reports Regulators Knew; Time for Independent Investigation and Eliot Spitzer

Posted by Larry Doyle on July 3, 2012 11:06 AM |

When the proverbial “you know what” has hit the fan on Wall Street over the last few years, the defense of those occupying executive offices has consistently been, “the regulators were all over the firm and did nothing.”

With the industry in full defense mode over the fallout from the Libor price-fixing scandal, we catch a strong and overpowering sense of this stench filtering into the public domain once again. Bloomberg highlights as much in a short must-view video clip, Bad Bankers May Face Criminal Charges,

“Fraud is a crime in ordinary businesses, why shouldn’t it be so in banking?” 

I would not doubt for a second that the Federal Reserve, U.S. Treasury, the Office of the Comptroller of the Currency, the SEC, the CFTC, and FINRA were all very much aware that Libor was being manipulated throughout the peak of the financial crisis in 2008.

Why wasn’t anything done? Market manipulation at that point in time was deemed of secondary importance to saving the system.

What system? A system of crony capitalism reflective of a deeply incestuous relationship between Wall Street and Washington.

We will only learn the truth if we have total transparency. Given the size and scope of this scandal, what should happen?

I firmly believe we need an independent investigation overseen by an independent prosecutor with full subpoena powers. I think Eliot Spitzer would be a good candidate for the position.

Let’s see the e-mail exchanges, gentlemen.

The outrage in the UK should be streaming across the pond. I strongly recommend readers view this 80 second clip.

Larry Doyle

Related Sense on Cents Commentary
Barclays Libor Scandal: How Big Will This Get?
Barclays Libor Scandal: Reports Regulators Knew; Time for Independent Investigation and Eliot Spitzer
Barclays Libor “Price Fixing”: Collusion Is Illegal. . .

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • LD: recommended

    Did Barclays receive instructions to intentionally misrepresent the prevailing overnight rate, aka Libor, by none other than the Bank of England? Check this out…

    As one would expect, Barclays (including Bob Diamond and Jerry del Missier) was in close contact with the Bank of England and other Authorities about the liquidity crisis generally. On 29 October 2008, Bob Diamond received a call from Paul Tucker, the Deputy Governor of the Bank of England.

    The substance of that call was captured by Bob Diamond via a note prepared at the time. A copy of that note is appended to this document; it was circulated to John Varley, then Barclays Chief Executive, and Jerry del Missier, then President of Barclays Capital.

    Subsequent to the call, Bob Diamond relayed the contents of the conversation to Jerry del Missier. Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier. However Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep LIBORs so high and he therefore passed down a direction to that effect to the submitters.

    There was no allegation by the Authorities that this instruction was intended to manipulate the ultimate rate. The bank’s submissions had consistently been excluded from the LIBOR calculation.

    The knives are coming out.

    For those who care to read the entire document,

    Supplementary Information Regarding Barclays Settlement

  • coe

    Good riddance to Bobby Diamond and to his right hand man, Jerry del Missier….both, in my humble opinion could also be blamed for some regulatory, markets, and client shenanigans at the time of pressure on Lehman Brothers…not to mention the shameful way they embraced the “culture” of Lehman and its people at the expense of the Barclays’ folks who helped generate the momentum for the Capital Markets business in the USA

    Would anyone be surprised that there were some back door discussions with the Bank of England re the liquidity crunch. Was it that long ago that Salomon Brothers, Citibank, JPMorgan, Goldman and a couple of other key dealers dominated the US Treasury business. If memory serves me, the heads of those businesses were regular shuttle customers meeting with key Fed/Treasury/Administration officials. If those discussions did not cross the line, well then we have a bridge to sell you.

    And what about the municipal bid rigging scandal that seems to skirt one’s consciousness – how do the good people feel in Birmingham, AL?

    Sadly, unless jail time is part of the menu, both Bob and Jerry have extracted so much cash, their families will have generational financial security, while thousands of honorable employees lay twisting in the breeze because of their layoff wisdom!

    Don’t mean to beat on the same drum, but when bankers that are blessed with government deposit insurance and toothless regulators, and they are awarded rock star status in society’s ridiculous rush to the cult of celebrity, and most importantly, bad behavior is rewarded by the absolutely wrong incentives – well, the ending is quite predictable.

    Perhaps someone can measure how Barclays benefitted monetarily by playing games with Libor…maybe that is the only reason they didn’t need to take the government liquidity handout in the crisis…

    BTW, the folks who worked at the Bank of England are human, too…why am I drawn to think back to Nixon and the Watergate scandal…anything can be rationalized if you think you are the smartest person in the room and above the law

  • RB

    Spitzer and a special criminal investigation? Come on..Larry, you don’t really expect such an investigation and any serious prison terms resulting therefrom when the “authorities” are rumored to have been directly involved as well, do you? If so, then perhaps you also still believe in the Easter Bunny and the Tooth Fairy? Diamond has perhaps taken one for the team in having to leave.. but I would bet that is about as far as it is going to go other than a little more public outrage expressed by the “authorities” and politicians. We haven’t seen the rule of law applied to the banking elite in at least a few decades.. no reason to expect that to change now unless the current Administration here in the U.S. feels a little “minor” housekeeping is absolutely essential to enhance chances of re-election to a second term in November.

  • Ron

    Larry,
    Spitzer is nothing more than another political dolt. When he was investigating the record industry for payola, he made sure to snare a few $50,000 a year disc jockies (with families) and parade them out there.

    When it was pointed out that the HUGE and indisputable payola was in Spanish and Black radio, he wouldn’t go within 50 miles of it.

    There was proof that the entire payola system was founded in urban and spanish radio and yet, he went for the low hanging white boys.

  • Jim Wells

    Spot on Larry. The nefarious activities at the Too Big for Their Britches Banks won’t cease until a courageous prosecution results in TV pictures of a mega-bank CEO being led out of a courtroom in handcuffs, on his way to prison.

    Since Barclays has committed to assisting US and UK authorities in investigating LIBORgate, and it is impossible that one bank could have rigged the LIBOR and YenLIBOR single-handedly, here’s my suggestion to our ‘enforcement-shy’ federal financial regulators.

    Offer a blanket deal to US banks. Come forward now, admit guilt, fire the traders involved along with their management hierarchy, have your CEO step down, clawback all their salaries and bonuses, and you will be fined no more than Barclays $450 million. Or, wait to be prosecuted and all the same penalties will be mandated, the minimum monetary fine and jail time will be tripled and any lawsuits from parties affected by the LIBOR manipulation automatically receive class-action status.

  • Stephen S

    Ben Bernake learnt of the fixing in 2008, yet he did nothing, when questioned recently he stated “there was nothing I could do”. Who exactly is he trying to fool? We are talking about one of the most influential members of the Federal Reserve here, he could do nothing? Firstly, he could have advised Mr King in the UK that unless something is done about it, he would release the information to the media. That is but “One” simple threat that most likely would have sufficed, but Mr Bernake chose to do nothing, why? Remember that this particular rate rigging has a huge affect on the US economy, yet he did nothing! Why? One can only conclude there has been some benefit from the manipulation going the Fed’s way. Either way, my own opinion is that he should be charged as an accessory, full well knowing what was taking place, yet made NO intervention to stop the biggest financial crime in history!






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