Yesterday Citi sued Barclays over an indemnity that Barclays gave Citi during the collapse of Lehman Brothers, and while, yes, the lawsuit is boring in the way that only lawsuits over indemnities can be, I’m nonetheless going to tell you about it under the heading “laugh at Citi doing stupid stuff.” The stupid stuff here is roughly:
Citi was the clearing bank for Lehman Brothers FX trades, with gross exposures in the tens of billions of dollars.1
Lehman ran into some trouble in September 2008, as you may have heard.
On September 9, 2008, one week before Lehman’s bankruptcy filing, Citi decided it might be a good idea to get some security for its Lehman FX clearing exposure, in the form of getting set-off rights against $2 billion that Lehman Brothers Holdings (the public parent company) had on deposit at Citi.
On September 15, 2008, after Lehman Brothers Holdings had filed for bankruptcy, Citi decided that it might not be a good idea to continue extending credit to Lehman Brothers Inc. (the non-bankrupt broker-dealer subsidiary) and so terminated its FX clearing arrangement.
Lehman Brothers Inc. begged Citi to reconsider, and Citi agreed to provide basically two more days of clearing (through September 17) in exchange for $1 billion of new collateral posted by Lehman.
Lehman Brothers Inc. continued to not pay Citi amounts that it owed.
So Citi again stopped clearing for Lehman.
This time Barclays, which had agreed to purchase the Lehman U.S. broker-dealer operations, begged Citi to reconsider, and Citi agreed to provide basically two more days of clearing (through September 19) in exchange for $700mm in new collateral posted by Barclays.
Lehman Brothers Inc. again continued to not pay Citi amounts that it owed, and was placed into SIPC liquidation on September 19.
Citi again stopped clearing for Lehman, for real this time, and closed out its positions at a loss of something like $1,260mm.
It set off $1bn of these losses against the collateral posted by Lehman.
Then Barclays called Citi, in October 2008, and asked if it could have its $700mm of collateral back.
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.3Read 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]