Counterparties: King vs Geithner vs Barclays

By Ben Walsh
July 17, 2012

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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,” 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. – Ben Walsh

On to today’s links:

New Normal
“Everyone Only Wants Temps”: Inside America’s new perma-temp labor boom – Mother Jones

Goldman Sachs is about to launch a bank (for rich people and corporations) – WSJ
Goldman’s earnings: Success is doing less worse than expected – Reuters
Goldman’s 2nd quarter earnings release – Goldman Sachs

One day before announcing earnings, JPMorgan told regulators that its traders might have hidden losses – Reuters

Romney is freaking out about the Bain attacks; the US public not so much – NYT
What’s Romney hiding in his tax returns? – Businessweek

12% of Chesapeake’s employees have golden parachutes that kick in if the company changes hands – Reuters

Plutocracy Now
Sheldon Adelson investigated for violations of the Federal Corrupt Practices Act – ProPublica

Not-So-Small Government
US economic data is now guarded with “launch-code secrecy” – NYT

Financial Arcana
You can mitigate liquidity risk or credit risk, but you can’t do both – Deus Ex Macchiato

Data Points
5-year Treasury yields hit record lows – Sober Look

Stuff We’re Not Linking To
“A mini-industry of blogs, Web sites, books and consultants now helps them prepare for sorority recruitment” – NYT


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A ‘falling-out among thieves’ can have a high entertainment-value for those not at risk from the exercise, as JPM has demonstrated to some degree and will do more so in the near future, IMO. A ‘falling-out among bureaucrats’ has the potential to be even more spectacular, and we see the first glimmers of that already.
** gets popcorn ready to pop **

That BoE/FSA crew appears to embrace the principle that ‘truth is whatever lie happens to be most convenient at the moment’ – a technique employed to excess by one Bill Clinton whenever the chips were down; Hilly too. The Limeys are blessed to be facing a panel of legislative inquisitors that includes not one competent cross-examiner among them. Lucky Limeys they are, for the solons could remedy that by engaging a pro to drag the truth out of the witnesses. No risk of that though – for it would mean less face-time on camera for the preening pols; can’t have that (on either side of the Atlantic), can we?

And Barclays’ – IMO they have done little/none of the fraudulent finger-pointing, and come out of this looking better on the merits than any of the others IMO. Not that it matters – Barc/BD is the designated piñata in this kabuki performance. That’s OK – to some extent they have it coming – and so do we, the public, for allowing the inquiry to proceed as it has and will.

Posted by MrRFox | Report as abusive

Fleix a great read .. I am just wondering bot the future of banking industry ..

Posted by sandeepY | Report as abusive

Using Occam’s razor, the most logical conclusion is that every banking regulator and banking executive is a lying liar.
But I am a fear that it is actually worse. These people are so divorced from reality that they jump in front of WHATever happens and reimagine it (Subprime is contained, QE is a success, things will be all right…)
Its bad when they drop bombs on you – it is worse when they believe they are dropping flowers.

Posted by fresnodan | Report as abusive

Everything is very open with a really clear clarification of the issues. It was truly informative. Your website is very helpful. Many thanks for sharing!

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