This Libor-manipulation story grows crazier with each
passing minute. We have officially disappeared now down the rabbit-hole
of the international financial oligarchy.
In the email, Diamond essentially tells the other two
execs that he has been given permission by Tucker – encouraged, actually
– to rig Libor rates downward. What’s even worse is that Diamond’s
email suggests that Tucker was only following orders, i.e. that Tucker
had received phone calls from "a number of senior figures within
Whitehall" – that is, the British government – expressing concern about
Barclays' high Libor rates. Tucker in this version of events was acting
as a middleman for the British government, telling Diamond to fake his
borrowing rates in order to preserve the appearance of financial
stability, for the good of Queen and country as it were.
Again: Libor, the London Interbank Exchange Rate, is
the rate at which banks borrow from each other. A huge percentage of the
world’s variable-rate investments are pegged to Libor.
When Libor rates
are high, it suggests that the banks’ confidence in each other is low,
and high Libor rates are generally an indicator of shaky financial
health among the banks. If the banks manipulated Libor, they did it to
make themselves look healthier, but this had the consequence of
affecting hundreds of trillions of dollars’ worth of financial products
worldwide.
During the crash of 2008, governments understandably
would have been concerned about high Libor rates – high rates and a lack
of confidence in banks threatened economic stability – but the notion
that governments would have encouraged banks to fake those rates would
have been beyond unthinkable even a decade ago.
Back to the email. Diamond’s version of the
conversation with Tucker, if true, is mind-blowing. To paraphrase,
Diamond said that Tucker started off by asking Diamond why other banks
were reporting such low borrowing rates relative to Barclays.
Diamond apparently deadpanned that his bank’s problem
was that it was reporting the real numbers, while all the other banks
were lying. "I asked [Tucker] if he could relay the reality, that not
all banks were providing quotes at the levels that represented real
transaction," Diamond wrote.
Tucker then steered Diamond to crime using the
painfully oblique manner of an English gentleman trying to engage a
prostitute without using any dirty words. He told Diamond that "while he
was certain [Barclays] did not need advice,” the bank did not
necessarily need to report such high rates all the time. Tucker put it
this way: “It did not always need to be the case that [Barclays]
appeared as high as [it has] recently."
This email amazes for a few reasons. One, it
suggests that Barclays, which is currently carrying the standard in the
LIBOR-manipulation scandal, was actually bringing up the rear -- that
all of the other banks were in on it, and Barclays only attracted the
government's notice because they were last.
The second is the apparent revelation that Tucker
was acting on orders, or at least suggestions, from Whitehall. If
nothing else, this is an awesome piece of political jungle defense by
Diamond, tossing a hand-grenade into the seat of Her Majesty's
government minutes before he's supposed to be grilled by parliament.
This revelation is almost certain to inspire an Aldrich-Ames-style
manhunt for the Whitehall figures responsible for this alleged
communication to Tucker. And if this turns out to be true? Wow.
Of course, right now, we only have Diamond's word
that it is, and under normal circumstances his word should mean less
than nothing. The disgraced ex-CEO, who last year infamously said it was
time for banks to stop apologizing, will likely now replace Jamie Dimon
(who replaced Lloyd Blankfein, who replaced Angelo Mozilo, etc.) as the
reigning hateable-white-guy Face of World Financial Corruption, so
he'll have a difficult time if this whole thing comes down to a test of
his public credibility.
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