Counterparties: Barclays gets Tuckered
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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
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