Barclays

Yesterday the Federal Energy Regulatory Commission ordered Barclays and four of its traders to pay $488 million for manipulating energy prices by doing basically this:

  • (1) Buying electricity with medium-term swaps,
  • (2) Selling electricity with short-term forward contracts, and
  • (3) Buying electricity in the spot market.

And vice versa (switching buys and sells). The idea is that since the swaps in step (1) settled based on the spot price in step (3), Barclays can manipulate the value of its swaps arbitrarily high by just overpaying in the spot market. Like, buy 100 whateverowatts of swaps at $1 per WW, then buy 5 WWs physical, pushing up the price to $3/WW, and you’ve spent $15 (5 WW physical x $3/WW) to make $200 (100 WW swap x [$3 - $1]).

This is nonsensical on first principles, though that doesn’t make it wrong; lots of true things are nonsensical on first principles; that’s like a feature of first principles. When you lay it out like that, though, you can see the oddity, which is that FERC thinks step (3) (buying physical) pushed up the price, but thinks step (2) (selling like next-day electricity) did not push down the price. If this worked then you could replicate it in any market, like: Read more »

  • 28 May 2013 at 4:40 PM

Layoffs Watch ’13: British Banks Are Number One!

When it comes to telling employees to take a long lunch and not come back. Read more »

  • 23 May 2013 at 4:49 PM

Bob Diamond Eases Back Into Things

With all the money he’s saving on London hotel rooms and taxi fares and donations to his alma mater, Bob Diamond is going back into business with some old friends. Read more »

Diamond talked the situation through with Jennifer, his wife of 26 years. “What is the best thing right now I can do for the firm?” he asked. His answer: “Step aside and shut up.” His daughter, Nell, a recent graduate of Princeton, wasn’t quite so discreet. The morning after Diamond announced his resignation, she tweeted: “George Osborne and Ed Miliband you can go ahead and #HMD” — referring to a slang term that can’t be reprinted in these pages. (Google it.) She immediately called her father. “ ‘Dad, I think I did something really bad. I think I’m in trouble,’ ” Diamond recalled her saying. He told her: “Sweetie, I love you. That’s so nice. I think we’re probably all in trouble.” [NYT, earlier]

Rich Ricci, the boss of Barclays’ investment bank who collected $26 million in deferred bonuses last month, is leaving the scandal-hit bank as its new chief executive seeks to cut back executive pay and repair its image. The American-born Ricci, a star performer at Barclays known for his love of horse racing, was a key lieutenant of Bob Diamond, the former chief executive who left Britain’s third largest bank last year after a Libor interest rate rigging scandal…Speculation intensified that Ricci, 49, who is estimated to have earned at least 80 million pounds ($122 million) from his 19 years at Barclays, would go after CEO Antony Jenkins failed to publicly back him when he unveiled a new strategy in February. “It’s part of the ongoing cultural revolution at Barclays,” said Simon Maughan, analyst at Olivetree Securities. [Reuters, related]

Here you can read an independent review of how Barclays lost its way and I submit to you that the fundamental problem was grammar:

In 2005, John Varley launched the Group’s five Guiding Principles – ‘customer focus’, ‘winning together’, ‘best people’, ‘pioneering’ and ‘trusted’ – demonstrating intent to oversee the Group through one set of values. (Section 8.14)

Are your five Guiding Principles nouns or adjectives?1 None can say. Even 30 Rock’s six sigmas were more grammatically consistent. If your five guiding principles are clearly just some mismatched words that someone wrote down and never edited, and that no one could actually use in a sentence, then: they’re not guiding anyone.2

And they didn’t. The lack of a shared understanding of values across Barclays spawned this chart, which might be my favorite thing ever:

Other than that though the report is kind of boring.3 Read more »

£100 million bank boss Rich Ricci has been accused of being ‘out of touch’ after entering race horse Fatcatinthehat into the Cheltenham Festival. The Barclays investment banker, who always wears his signature trilby while racing, cashed in £9.7 million of shares bonuses last year, earned £44 million of pay and perks in 2010 and is set to pocket up to £6 million in deferred shares bonuses this year. Labour have accused the 49-year-old of being ‘out of touch’ with the plight of ordinary, hardworking people after choosing such an insensitive name. Labour MP John Mann said: ‘It’s an insult to every taxpayer and small business in the country. And it shows just how out of touch these bankers are.’ [...] Ricci and his wife of 12 years Susannah, 49, have reared 30 horses with champion trainer Willie Mullins, winning £588,125 in prize money this season alone. They have entered a total of eleven horses to the meeting which starts tomorrow. He is famous for his trademark trilby and extroverted choice of tailoring when he appears at the races. Fat cat in the hat won his last race and is 12-1 third favourite to win Wednesday’s Fred Winter Juvenile Hurdle for a £75,000 prize. [DM]