Barclays wants all its employees to learn that they never, ever should try to rig Libor again. To that end, the top executive at Barclays’ investment bank is appearing in a film about the lessons the bank has supposedly learned from the Libor scandal. And all Barclays employees are expected to watch the video. The video runs about 12 minutes. It begins with Rich Ricci, the chief of Barclays’ investment banking arm, explaining that because the topic of Libor is so complex, he is going to read from a teleprompter, according to a person who has seen the film. Ricci states that he wants to make sure he gets it right “in the interests of transparency,” the person said…An employee explained that Ricci plans to meet with British regulators next month and wants to be able to claim that “every single person at the firm has seen it.” [NetNet]
Bob Diamond Lieutenant Jerry Del Missier Ended Up Faring A Bit Better In The Parting Gifts Department Than The BossBy Bess Levin
The bad news is that former Barclays chief operating officer Jerry del Missier is still out of a job and it may be some time before he gets a new one, on account of “investigations conducted by American and British authorities [demonstrating] he was a central figure” in the scandal du jour and “asked other bank officials to lower the firm’s submissions to Libor.” The good news is that Jer is still (probably) getting paid, unlike some people he knows. Read more »
Tim Geithner Dealt With Libor Manipulation By Writing Strongly Worded Letters And Then Lending Billions Of Dollars At Libor-Based RatesBy Matt Levine
Tim Geithner had a nice chat with Congress about Libor in a theoretically unrelated hearing today, and since Congressional hearings are mostly about restating everyone’s pre-existing prejudices I figured I’d lay out my Libor hobbyhorses:
- Nobody really has ever been all that troubled by the fact that banks manipulated Libor to make themselves look like they could borrow in 2007-2008, while everyone is at least acting all shocked shocked that banks manipulated Libor to juice derivatives profits, but that contrast is awkward because in a certain light those are the same activity, so everyone has to look all horrified by stuff they were obviously cool with four years ago.
- Everybody knew that banks understated Libor in 2007-2008. Like, you could compare Libor to market borrowing rates and CDS and stuff, and people did, and noticed it was wrong. Also remember that Barclays, while they were manipulating Libor, were also emailing all their clients every day to remind them that Libor was being manipulated.
- The effect/harm/liability of Libor manipulation has to be determined in expectation and if everyone knew it was being manipulated then they were presumably charging a higher spread to Libor when dealing with banks.
Geithner’s testimony won’t change my mind: now he has to look all grim about Libor manipulation, while back in the day he “treated it as a curiosity, or something akin to jaywalking, as opposed to highway robbery.”
Before anyone takes to Twitter to give the UK a piece of her mind, though, breathe easy: the misconduct is related to funds used to pay for breast augmentations and other cosmetic enhancements and could even take some of the heat off of Bob Diamond et al, who’ve yet* to be accused of using customer money to finance their liposuction. Read more »
Barclays ex-chief operating officer, Jerry del Missier, contradicted Robert Diamond, saying his former boss told him to submit artificially low Libor rates, and blamed compliance managers for failing to act. Del Missier, 50, told Parliament’s Treasury Committee today that he received an instruction from Diamond, then chief executive officer, that he took to have come from the Bank of England. He said he then “passed the instruction along” to Mark Dearlove, head of the bank’s money-markets desk, to lower its contributions for the London interbank offered rate… [Bloomberg, related]
Barclays Is ‘Truly Sorry’ It Got Caught Manipulating Libor Though Not Sorry Enough To Make Amends In PersonBy Bess Levin
An ad in the paper will have to suffice. Read more »
The Barclibor scandal waits for no man; the municipal borrowers have had their day in the sun and now we move on to the New York Fed’s disclosures about what it knew when. Short version: everything, immediately! Here is a thing that a Barclays trader told a NY Fed economist in April 2008 (omitting the economist’s “Mm hmm”s and “Yeah”s*):
[Barclays]: Dollar, Dollar LIBORs do not reflect where the market is trading which is you know the same as a lot of other people have said. Um, wha-, it depends on which part of the curve you’re looking at. Um, currently, we would say that in the three months, um, if we as a prime bank had to go in the interbank market and borrow cash, it’s probably eight to ten basis points above where LIBOR is fixing. If, if, if we had to go in the market and properly borrow money, it would be about eight to ten above and in the one year it would probably be about twenty basis points in the market.
[Fed]: And, and why do you think that there is this, this discrepancy? Is it because banks maybe they are not reporting what they should or is it um …
[Barclays]: Well, let’s, let’s put it like this and I’m gonna be really frank and honest with you.
[Fed]: No that’s why I am asking you [laugher] you know, yeah [inaudible] [laughter]
[Barclays]: You know, you know we, we went through a period where we were putting in where we really thought we would be able to borrow cash in the interbank market and it was above where everyone else was publishing rates. And the next thing we knew, there was um, an article in the Financial Times, charting our LIBOR contributions and comparing it with other banks and inferring that this meant that we had a problem raising cash in the interbank market. And um, our share price went down. So it’s never supposed to be the prerogative of a, a money market dealer to affect their company share value. And so we just fit in with the rest of the crowd, if you like. So, we know that we’re not posting um, an honest LIBOR. And yet and yet we are doing it, because, um, if we didn’t do it it draws, um, unwanted attention on ourselves.
I don’t know how to take the laughter at the Barclays trader’s promise to be honest with her. It’s not like they were being dishonest with anyone else (except BBA!). Here are things that Barclays’ money markets desk sent out in client commentary, copying the World Bank, ECB, and New York Fed: Read more »