The Barclibor scandal doesn’t seem to be going away, so it might be productive to try to figure out how much outrage is the right amount of outrage and express it in dollars. You can be all “what a bunch of crooks, with the emails, and whatnot” and sure, but there are lots of crooks in the world and for you to expend your energy being mad about particular crooks should require a considered judgment as to whether they are petty crooks or massive, massive crooks. And despite the $800 trillion notional size of the market they were monkeying with, the range of answers given to this question is unusually broad, from a dismissive “it’s still not clear just what the big harm was in the Libor scandal” to a mouth-foaming “this is the mega-scandal of mega-scandals.”
So start with the question of who got hurt by the basic horse-trading fixing where Barclays increased its fixings to make money on its contracts: derivative trader called submitter, said “hey [raise | lower] me some Libor because I have some contracts fixing today,” and the submitter did in exchange for champagne or just a manly pat on the ass. Here who got hurt is sort of messy and boring: you got hurt if you borrowed floating-rate money, or paid floating on a swap, and Barclays pushed your relevant Libor up on a fixing date for your contract; and you got hurt if you lent floating-rate money, or paid fixed on a swap, and Barclays pushed your relevant Libor down on a fixing date for your contract. And in expectation probably neither happened, for you personally.
More relevantly, you get the very strong sense from the Barclays emails that the traders manipulating Libor often thought they were shooting against other banks doing equal and opposite manipulations, so it’s not clear that it worked. In fact in some sense you have to hope that they were right and this was a systemic problem: if it was just Barclays then they actually manipulated rates,* while if it was everyone then probably no one managed to manipulate rates for their own advantage – unless there was some systemic reason for the Libor submitter banks to manipulate Libor in one direction prior to the financial crisis, on which more later.
The second question is who got hurt by more systemic fixing where Barclays – and maybe others – and maybe at the BoE’s oblique suggestion – systematically pushed their Libor submissions down to make themselves appear healthier than they were. This struck me as potentially a bigger deal (dollarswise) yet somehow more forgivable, and The Economist is with me: Read more »
While most offspring are typically not available for comment following the resignations, voluntary or otherwise, of their banker dads (lookin’ at you, Jimmy Cayne, Jr.), earlier today prolific Tweeter Nell Diamond had this to say to the Brits who have been cheering her father’s departure: “George Osborne and Ed Miliband you can go ahead and #HMD.” Read more »
Good lord are these Barclays settlements juicy. Basically every day for two years one Barclays trader or another would send an email to their Libor submitter saying “hey let’s commit crimes, tons of crimes, hahahaha” and then they did. In pathetically colorful language:
Trader C requested low one month and three month US dollar LIBOR submissions … “If it’s not too late low 1m and 3m would be nice, but please feel free to say “no” … Coffees will be coming your way either way, just to say thank you for your help in the past few weeks”. A Submitter responded “Done … for you big boy”.
on 5 February 2008, Trader B (a US dollar Derivatives Trader) stated in a telephone conversation with Manager B that Barclays’ Submitter was submitting “the highest LIBOR of anybody [...] He’s like, I think this is where it should be. I’m like, dude, you’re killing us”.
Or tons more, but I found this one particularly poignant:
Submitter: “Hi All, Just as an FYI, I will be in noon’ish on Monday [...]”.
Trader B: “Noonish? Whos going to put my low fixings in? hehehe”
Submitter: “[...] [X or Y] will be here if you have any requests for the fixings”.
Like … Trader B was kidding right? I mean, in this one single case? He was making a joke about how he was constantly asking for low fixings and the submitter took him seriously? When you joke around about committing fraud and people take you seriously, that’s maybe a sign you should stop committing so much fraud. Read more »
The atmosphere at the [shareholder] meeting was hostile from the start and the speeches were repeatedly interrupted by hecklers. Bob Diamond was booed as soon as he stepped on the stage to take his seat, and when Chairman Agius said Barclays had “made progress” over the last two years in accepting that “remuneration levels across the industry have to adjust to the new reality,” the audience burst into laughter. But Mr. Agius defended Mr. Diamond’s £6.3 million ($10 million) pay for 2011, saying he met almost all his targets in a difficult market environment. Alison Carnwath, who is chairwoman of the remuneration committee on the board, also defended the pay decisions but acknowledged that it was “clear that this view is not shared by all shareholders.” [Dealbook]
In an effort to strike a balance between being competitive and responsible, Bob Diamond will only receive 6.3 million pounds ($10 million) for his work in 2011, down from $9 million in 2010. Technically, his total package amounts to 17 million pounds ($26.9 million), but that includes stuff from previous years. [Reuters]
Cuts are said to have gone down in Bob Diamond’s den yesterday. Read more »
Katrina Darling…who still holds down a banking job at Barclays in London, will make her first stateside appearance at SoHo nightclub W.I.P. on March 13. She’ll perform her trademark saucy “God Save the Queen” routine during W.I.P.’s Tuesday night Dropout party run by Lyle Derek and Noah Valentyn. Darling said she’s had no backlash from the royal family to her “God Save the Queen” act, and they are welcome to watch her perform: “I’d be happy for them to, but if they don’t, it’s not the end of the world.” Darling, who’s also a model and working on a lingerie line, has been performing since she was 18. She said, “I take my clothes off, but I don’t give away anything that should be kept for someone else.” While much attention has gone to her burlesque career, Darling has worked at Barclays for a year, in private-wealth management. “They know that I do this on the side,” she said. “Everybody is really supportive.” [NYP via BI]
The mood: less than enthused. Read more »
Bonus conversations are said to be going down at Barclays Capital this afternoon, after the close. So, no details yet, but in the meantime, a few things to consider: Read more »
The bonus is you get to keep your job: Read more »