Counterparties: Barclays gets Tuckered

By Ben Walsh
July 9, 2012

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Five days after Bob Diamond testified before members of Parliament on the LIBOR scandal, Bank of England deputy governor Paul Tucker had his turn today. He took aim at Barclay’s less-than-subtle insinuation that in 2008 he all but asked the bank to submit artificially low rates. Tucker told the House of Commons that he was only warning Barclays not to spook the market by indicating it would borrow at elevated rates: “I was plainly talking about their money market activity”.

That conversation, Tucker said, came the day after Barclays refused to accept fresh capital from the UK government and he wanted to understand what the bank’s plan to instill confidence was, exactly. Tucker went on to say that he had similar conversations with non-LIBOR submitting financial firms. “Absolutely not” was Tucker’s immediate reply when asked if he or any other government official ever pressured banks to lower their LIBOR submissions. (Tucker’s full testimony is available here.)

As Felix noted earlier, what Tucker “meant … is that Barclays should do whatever it took to improve its reputation with other banks, so that they would lend to Barclays at lower rates. And yet the corrupt Barclays operation, including Jerry del Missier, reckoned that it would be easier to just go back to their old sordid ways, and nobble the Libor fixings instead”. That culture of deception has caught the eye of EU regulators, who are now readying their response to the scandal:

Michel Barnier, the EU commissioner overseeing financial services, will amend reforms to EU market abuse rules so that potential “loopholes” are closed and criminal sanctions specifically cover tampering with indices such as Libor and Euribor. Mr Barnier called the falsification of such benchmark rates a “betrayal” with potentially “systemic consequences”.

Holman Jenkins thinks the parsing of emails and secondhand misinterpretations of phone calls is just the latest evidence of the too-big-to-fail problem: No central banker or regulator has wanted to pull back the curtain and expose the continuing failures of large financial systems. That’s as big a problem as bankers behaving badly. – Ben Walsh

On to today’s links:

Patents: a multibillion-dollar business that’s less and less about invention – WSJ
“10% of Medicare beneficiaries who received hospital care accounted for 64% of the program’s hospital spending” – WSJ

After a crisis, we feel the need to “maintain the illusion that the world is understandable” – Guardian

EU Mess
Things look even bleaker after another pointless EU summit – Forbes
Greeks underreported €28 billion in income in 2009, enough to cut the deficit by a third – WSJ

New Normal
Credit scores as de facto segregation – WaPo

Tax Arcana
Obama to propose a one-year extension of Bush tax cuts for Americans earning under $250k – NYT
Investors are really not worried about the fiscal cliff at all – Business Insider

Moving Your Money
Racehorses: an attractive investment opportunity (for drug cartels laundering cash) – WSJ

Long Reads
Amazon, the vampire squid of ecommerce: “People complain about conflicts of interest. But you still have to do business with them” – FT

Day trading is the hot new way (again) to boost retirement funds – LAT
“An adjunct professor at a third-tier school hawking an overpriced get-rich-quick scheme with clever slogans? Don’t miss this” – Gawker

Must Read
Albrecht Muth and Viola Drath: odd couple and D.C.’s latest social Ponzi schemers – NYT

Old Normal
NYC before AC, where wearing shorts instilled fear of arrest for indecent exposure – New Yorker

Primary Sources
The Bob Diamond-Paul Tucker emails – John Mann MP

Romney donor: “I don’t think the common person is getting it … the baby sitters, the nails ladies” – LAT

“The newspaper industry looks a lot like, well, steel, autos and textiles” – NYT

Gabriel García Márquez’s writing career ended by dementia – Guardian


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Ben, if you believe that’s what Paul Tucker actually meant, I will sell you the NYC-area bridge of your choice, with the exception of the Brooklyn Bridge, which your colleague Felix purchased last week from a certain BofE deputy governor.

Posted by realist50 | Report as abusive

Re: Oxpeckers – >>great journalism, on any platform, is the one sure hedge against irrelevancy.

And the real problem with the newspaper industry is that the NYT has deluded itself into fundamentally believing this.

Posted by Curmudgeon | Report as abusive

@BenWalsh – It’s a good thing you’re not a girl, Benny, or you’d be pregnant all the time. I don’t know what you’re doing with this matter besides trying to rehabilitate/excuse Felix’ credulity of last week. Nor do I know what testimony of Tucker you are seeing to justify your conclusions in this piece.

Each side (Barc and the BoE) is using the prior/subsequent ‘sins’ of the other in an effort to deflect attention from its own embarrassing conduct. Barclays’ has ‘fessed-up’ to its traders’ clipping points for profit in the period prior to the crisis. The Bank can’t find the strength of character to admit that it (quite properly IMO) sought a coordinated reduction of Libor at the height of the crisis, in a perfectly reasonable effort to calm markets and reduce rates for borrowers on the tons of loans tied to Libor. Denying the obvious doesn’t score any points with anyone – except the Reuters writing crew apparently. The events speak for themselves – loud and clear – when one looks at the record, as depicted here – tail/2012/07/daily-chart-3

Posted by MrRFox | Report as abusive

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