Counterparties: King vs Geithner vs Barclays
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Testifying before Members of Parliament today, governor of the Bank of England Mervyn King added another layer of uncertainty to the “Liebor” scandal. BoE deputy governor Paul Tucker already strongly rejected Barclays’ indirect but unmistakable assertion that he asked the bank to lowball Libor submissions. On Monday, Jerry Del Messier, Barclays former COO, testified that he thought he was an instruction from Bob Diamond to lowering Libor submissions. That, Del Messier said, “did not seem an inappropriate action given this was coming from the Bank of England”.¬†King hit back at Del Messier’s interpretation of events, saying Barclays execs were in a “state of denial” about the true nature of their conversations with regulators.
King then went further, addressing¬†documents released by the New York Fed last week showing that Tim Geithner, then President of the NY Fed,¬†had been aware of potentially improper Libor submissions and emailed a set of reform recommendations to King in 2008. (And it turns out that these were basically¬†carbon copies of banking industry recommendations.)
The NYT’s Mark Scott writes that King¬†rejected the notion that the BoE had been tipped off¬†to rate rigging:
Mr King said the correspondence with Mr. Geithner, who is now the United States Treasury secretary, did not represent a warning about potential illegal activity related to Libor.
“At no stage did he or anyone else at the New York Fed raise any concerns with the Bank that they had seen any wrongdoing,‚ÄĚ Mr King told the parliamentary committee on Tuesday. “There was no suggestion of fraudulent behavior”.
Nor, according to King, did the Fed share the documents suggesting improper rate submissions with the BoE. Nor, according to King, was there ever a suggestion that Libor itself had been impacted. Despite King’s comment that he “doesn’t like firearm analogies”, his testimony today was a direct shot at Tim Geithner. ‚Äď Ben Walsh
On to today’s links:
Goldman Sachs is about to launch a bank (for rich people and corporations) ‚Äď¬†WSJ
Goldman’s earnings: Success is doing less worse than expected ‚Äď¬†Reuters
Goldman’s 2nd quarter earnings release ‚Äď¬†Goldman Sachs
Stuff We’re Not Linking To
“A mini-industry of blogs, Web sites, books and consultants now helps them prepare for sorority recruitment” – NYT