EXCLUSIVE: Why the global political class lies in fear of the LIBOR scandal

Is Bob Diamond being forced to apologise for something hatched way above his level?

A couple of Torygraph journalists were exchanging tweets this morning about Bob Diamond’s cockup being “only the start” of the LIBOR scandal. It could well be that the time has come for some noisy skeletons to walk out of the Westminster cupboard.

An international investigation into the alleged 2008 Libor manipulation scandal has been necessary pretty much right from the start. Without wishing to seem too obvious here, that’s because what happened was internationally arranged. On April 12th 2011, The Slog reported that Vienna-based asset management concern FTC Capital GmbH – and two funds it operates in Luxembourg and Gibraltar – announced their intention to sue twelve major investment banks. FTC accused the banks of conspiring to artificially depress Libor, and limit trade in Libor-based derivatives from 2006 to 2009. The defendants as listed in the suit were Bank of America Corp, Barclays Plc, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co, Lloyds Banking Group Plc, Norinchukin Bank, Royal Bank of Scotland Group Plc, UBS AG and WestLB AG.

Since then, federal agencies in the US have become intimately involved in what was soon being described as ‘a criminal investigation’. And quickly thereafter, French Establishment paper Le Figaro claimed ‘the [British] authorities suspect that key traders [at Barcap] used [UK] Treasury information via the main branch dealing with the UK Treasury’. At the time, the Barcap investment division was headed by the Barclays CEO today, Bob Diamond.

However, much as I would love to lump every last kilo of smelly silage on the Diamond Geezer for this, it looks like even he was, on this occasion, merely a cog in a much bigger wheel. By time 2011 got under way, the LIBOR manipulation scam was being investigated by every major bourse regulatory body on the planet. And it may well be that the Treasury was willingly providing Barcap with the data it craved as a means of survival.

During the 2008 financial crisis, overnight LIBOR spiked – a sure sign banks were having trouble borrowing money, and didn’t trust each other: there is, after all, no honour among thieves. But the markets heaved a sigh of relief later on, when its rates began to drop. Even the ever pro-Establishment but generally trustworthy Wall Street Journal had doubts about the veracity of that fall at the time. The 2011 FTC suit against umpteen banks around the globe raised the possibility that LIBOR’s decline was simple, coordinated market manipulation: a naked attempt to falsify lending rates in order to save the banks from ruin – and (very much a poor second) boost liquidity in order to help the struggling Western economies.

In short, that it must have been a concerted effort involving several central banks.

Following this morning’s Slogpost, this email content from an as yet uncorroborated but well-connected source:

‘During 2008/9 I worked at a major investment bank which was advising the office of the PM [Gordon Brown] with regard to the developing banking crisis. I was told that No.10 had been calling the UK banks and demanding that they manipulate LIBOR down, as his economics department had determined that if it rose too much it would trigger a recession and he was looking at re-election.”

As ever with McCavity, his concerns (if that account is true) were entirely driven by the tumescent dick in his brain. At the time, however, the British Bankers’ Association (BBA) denied any of it, stating that the BBA ‘observes rigorous standards in our scrutiny and governance of the Libor mechanism, and works with the industry to ensure their continued full confidence in one of its most accurate and reliable benchmarks.’

But in the four years since, the world at large has grown up bigtime about this kind of denial bollocks: it’s heard how the Met Police ‘has nothing to hide’, how Newscorp ‘has a zero tolerance policy towards hacking phones’, and how Piers Morgan can’t remember anything about hacking Heather Mills-McCartney’s phone at all. It’s listened to serial liar Tony Blair tell Parliament he had given them ‘the balanced case’ for war in Iraq, how Gordon Brown ‘hand on heart never contemplated an election in 2008’, and more recently how Jeremy *unt had given ‘full and frank disclosure’ to Parliament in relation to his communications about the Newscorp bid for BSkyB.

FTC Capital’s original 2011 suit alleged that the 12 banks “colluded to suppress LIBOR to make them appear healthier than they were, and take advantage of trading opportunities not available to outside investors……During the most significant financial crisis since the Great Depression, U.S. dollar LIBOR rates submitted by contributor banks did not vary markedly, nor did they increase or decrease sharply. In a market not artificially suppressed, LIBOR rates should have increased significantly during this period. In addition, because different banks were experiencing different levels of severe stress, the banks should have been receiving markedly different borrowing rates.”

OK, now here’s another comment, this time from a former senior Treasury officer, since retired but well known to me for over thirty years:

“There’s no question that on taking office, Cameron and Clegg were briefed fully about [Brown’s intervention]. He’d been screaming at every banker he could find, and not least Mervyn King. Cameron at first saw this as the way to bury Brown and Labour forever, but the people in Threadneedle Street quickly disabused the Coalition of there being any wisdom in that approach”.

Now, it seems to me highly unlikely that, without collusion, a senior investment banker and a former Treasury mandarin would come up with a similar sequence of events, and the better informed of the two (undoubtedly the latter Treasury source) would add the global dimension purely on a whim. That latter is a source I knew as a close client in a previous existence, and with whom I’ve regularly worked since 2006.

Why was the ConDemned Coalition warned off destroying the last vestiges of Brown’s reputation for honesty and probity? The answer probably lies as much in the Foreign Office as it does in the Treasury.

But for me, the case raises two massive questions:

1. Where did the LIBOR manipulation scam start?

2. Is this why Bob Daiamond feels able to tell David Cameron and George Osborne to f**k off with such impunity?

Stay tuned: this is a developing story.


101 thoughts on “EXCLUSIVE: Why the global political class lies in fear of the LIBOR scandal

  1. As for the Libor scandal, did we really expect anything different from the scumbags?
    Is this why the ‘Fragrant’ Angela Knight is resigning possibly?


  2. “the BBA ‘observes rigorous standards in our scrutiny and governance of the Libor mechanism, and works with the industry to ensure their continued full confidence in one of its most accurate and reliable benchmarks.” Well that’s one great fat lie that met with an IED on the road the hell.


  3. She would on;ly have been involved in the later stages. It got underway under her predecessor who left in late 2008 I believe.


  4. This has Turbo Tax Timmys fingerprints all over it.
    Both in his position as head of the New York Fed.and
    then as Treasury Secretary.
    Funny how Barclays got pole position on Lehman’s carcass.
    Quid pro quo anyone ?
    JW Keep digging,this stinking pile is a lot,lot deeper.


  5. The wonderful irony of LIBORGATE is that it is so reminescent of the reinsurance scams at Lloyds,which involved a substantial redistribution of wealth.Who saved Lloyds?Step forward Sir David Rowland and Ron Sandler,who were seen off the premises,later, at NatWest by ‘Sir ‘ Fred Goodwin.I wonder what the Rothschild father in law of the Barclays chairman ,Marcus Agius,thinks .


  6. Diamond’s apparent immunity to the normal forces of right and wrong is caused by two things. First, the ignorance of the political class of what investment bankers really do. It’s not rocket science, but you would think so from the crazy remuneration and great deference paid. OK, we have clever, nimble traders. Big deal. Second, the UK has allowed itself to be lured by the easy money to be had from these skimmers (or that unknown proportion that pay UK taxes) and has become unduly dependent on them. I suppose we might also mention the close social and class ties between the Tories and the City, perhaps a significant additional factor. This will have to be changed and it will be painful. Already the ‘Junckers clique’ have more or less got agreement of the EZ for a transactions tax, aka ‘milk the City of a quite a few tens of €bn a year’. Once the Euro thing is solved, as it may be one day, they will move on us. Only the UK and the Americans really want the skimming banking that we have been tolerating in the name of lower taxes. We tolerate it for the reasons above, but if we want to remain in the EU, that will have to change. It feels as if we are edging ourselves into a rather tight corner between an ever more demanding EU and a ‘rest of the world’ in which we are a bit player.


  7. I have heard Angela Knight being interviewed by the Beeb several times. I can only say that if that is the best the banking industry can offer, God help them.


  8. Inventive but complete fantasy. LIBOR rates stayed well above base rate until 2009 when the BofE started QE. LIBOR only fell because real extra liquidity was handed to the banks in the form of printed cash, thus the risk of lending to the banks fell. No conspiracy required. Sorry.

    I think much more interesting is whether Jerome Kerviel was really a rogue trader as claimed by Societe Generale, or whether he was merely the patsy to protect the rich and powerful at the bank. Seems like the elite in France were prepared to go just that bit further to protect themselves than our dodgy British bankers.


  9. Duh.
    Liquidity is NOT solvency.
    The composite LI(E)BOR rate should have sky rocketed
    if it wasn’t being manipulated on that risk alone..
    Current Sovereign Club Med bond rates are the proof of that


  10. As Winston comments:
    Please tell us, Just Sayin: what does it prove if LIBOR was above base rate? Not being sarcastic, but would really appreciate you explaining this. What JW seems to make little of are the trading profits made based on inside knowledge of and/or manipulation of a rate which is the basis for derivative products to be traded.


  11. London is the centre for fraud and deception,note Lehman failure and AIG and more,all through the London office ,where our regulators either can’t or more like won’t impose regulations already on the books.


  12. Many of the bonuses paid to traders and bankers will be grabbed back or used on lawyers to prevent extradition to the USA and a cell with bubba.


  13. ”….Why the global political class lies in fear of the LIBOR scandal…”

    Don’t make me piss my pants laugh

    We couldn’t give a TOSSER


  14. The responsible merchant banking fraternity take a very dim view of this developing story. If Cameron and Osborne are involved I wouldn’t be suprised at all. When I had to call them both into my study years ago, I used to explain to them that they should not exhibit dishonest behaviour in Windsor Old Town on their afternoons off. They were adept at finding ways to get served in the public houses and were often reported giving false racing tips to the local patrons outside the premises of theTurf Accountant. I made sure that they both dropped their shorts for a damn good caning on the spot.


  15. I think it has more to do with the judicial system. Look across the pond and see the jail terms bring handed down to financial miscreants. Then see what happens here: usually a multi-million pound trial in the trash can before a verdict has even been reached.


  16. Just leaving aside the legalities of this, the problem with Brown trying to keep Libor ‘under control’ was what, exactly? That he was trying to prevent a recession …..?

    ‘Only the start’ probably refers to the fact that (i) many other banks are going to get clobbered, (ii) the yanks may well take the criminal aspect of it a bit more seriously, and (iii) the potential for enormous civil actions could be the trigger for the collapse of the entire banking system?


  17. But after the Industrial Revolution and competitor countries (US, Germany etc.) had caught up on the industrial front, the UK always DID rely on finance (the “City”) to pay its way. The finance was for international trade and it yielded much greater profits than investment in domestic industry. This lack of investment is why UK industry was not competitive and why we increasingly came to rely even more on the City.
    The City has always been a very tight club-effectively controlled by those who controlled it over a century ago.
    The free trade agenda (GATT) was not to create general prosperity (how much of that was there in Victorian and Edwardian times?) but to enrich the financiers.


  18. My alpha is in bullshit but not in cow dung.
    My omega is in bullshit but not in manure.
    My middle is in middle but not in alpha or omega.

    Do you have the answer yet?


  19. Interesting to watch La Knight being interviewed on Ch4 News tonight by Jon Snow. Her usual blustering, ebullient defence of all things banking was completely missing, she was struggling to get coherent words out. She knows how bad this really is and even she’s struggling to to put any of her normal pro-banker spin on it.

    Coming from one who is usually happy to argue that black is white for the benefit of her backers, it’s quite clear that, as more emerges, this is going to get very smelly indeed.


  20. If you must use Latin, please get it right – “Etonius Castratus” – and your point, exactly?
    I fully sympathise – you can’t even give TOSSERs away – I tried and failed…


  21. I think Taibbi mentions the Libor scam in that article. Bill Moyers, who was LBJ’s press secretary, just did an interview with the author of that article. We have Stockton Ca. bankrupt now — largest municipal bankruptcy in US history. And Jefferson county Alabama saw it’s obligation for sewer bonds saloon from 300 million to 3 billion, allegedly due to the same rigging machinations. Notice how low ranking are the men who were prosecuted in the federal case of your link. From what I’ve heard, yes, the Libor scam is certainly related to such events, in the sense that at the very least it effected rates on trillions of dollars worth of such municipal and other debt.

    But as John indicates, many other things were involved.

    However you look at it the fines involved are miniscule compared to the opportunities taken and cashed in on at others expense — hardly anything new there. From another angle it is the asymmetry in enforcement of contract law that is so fundamentally striking and glaringly unfair. The banks demand everything and get it with no adjustments, whereas the contractual obligation to people, municipalities, unions and so on seem to be revocable as can be.


  22. sorry typo — replace ‘saloon’ with ‘balloon’ please.
    More than a typo — typing on laptops is a nuisance — thumbs lingering over the track-pad capacitance units wreak havoc all the damn time. :)


  23. Mudplugger: true but Snow was disgraceful trying to be a mini-Paxman and not allow an answer to his question that didn’t advance his agenda. I think the old fart is losing it and should be sent to the old folks home for those with bad taste in socks! ,


  24. “By far the biggest priority has been to get through this period with as little spillover into the real economy as possible,” Hank Paulson 2008

    In other words we are making up the rules as we go along and those who can react faster to the new situation can make a fortune. Insider trading big time.


  25. This is all getting very confusing do all these banksters have similar names? First we had the lovely Jamie Dimon who lost his bank a small fortune in dodgy trades and now we have the even lovelier Bob Diamond who lost his bank a fortune in fines and reputational damage. Are both of these diamond geysers related?


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  27. I’ve signed as well, but I fear it’s a bit of a blunderbuss. It’s not focused enough to try to nail specific instances of wrongdoing – like the bundling of questionable assets into AAA-graded investment units. I won’t want to be the poor bugger trying to sort out terms of reference for this one…


  28. @Mark: Are we starting to reveal here a new banking family – the Di*mon*s? Just like the red shields before them they stayed in the shadows, learning the ways to power – waiting for their moment…


  29. Between 1799 and 1802, Thomas Jefferson, stated, on more than one occasion that: “’I
    believe that banking institutions are more dangerous to our liberties than standing armies.
    If the American People ever allow the (Private) banks to control the issuance of their
    currency, first by inflation and then by deflation, the banks and corporations that will
    grow up around them will deprive the people of all property, until their children wake up
    homeless on the continent their fathers conquered. The issuing power should be taken
    from the banks and restored to Congress and the people to whom it properly
    belongs….Single acts of tyranny may be ascribed to the accidental opinion of a day, but a
    series of oppressions, begun at a distinguished period, unalterable through every change
    of ministers, too plainly prove a deliberate, systematic plan of reducing us to slavery.”
    Though some bankers may dispute it (well of course they would wouldn’t they) it is
    reported that, on September 1st 1894, the following memo was sent out by the American
    Bankers Association: “We will not renew our loans under any consideration. On
    September 1st we will demand our money. We will foreclose and become mortgagees* in
    possession. We can take two-thirds of the farms west of the Mississippi, and thousands of
    them east of the Mississippi as well, at our own price…Then the farmers will become
    tenants as in England…”
    * Mortgage from Norman French Mort as in Death – Gage as in Grip i.e. Death Grip.
    This was and still is the banking system’s standard starvation in the midst of abundance
    policy which was confirmed by non other than Milton Friedman who said: “The Federal
    Reserve definitely caused The Great Depression by contracting the amount of currency in
    circulation by one-third from 1929 to 1933”. Denis Healey, a former British Secretary of
    Defence and Chancellor of the Exchequer also said: “(Such) World events do not occur
    by accident: They are made to happen, whether it is to do with national issues or
    commerce; and most of them are staged and managed by those who hold the purse
    “It (the Great Depression) was not accidental; it was a carefully contrived
    occurrence. The international Bankers sought to bring about a condition of despair
    here so that they might emerge as rulers of us all…We have in this country one of the
    most corrupt institutions the world has ever known. I refer to the Federal Reserve
    Board. This institution has impoverished the people of the United States and has
    practically bankrupted our government. It has done this through the corrupt
    practices of the money vultures who control it. A superstate controlled by
    international bankers and international industrialists acting together to enslave the
    world for their own pleasure.” – Louis McFadden, D-PA


  30. @Stanbebe
    In a word NO , not even a remote chance but Germany won’t have any money for Italy after tonights hiding in the park.


  31. @Stanbebe
    In a word NO , not even a remote chance but Germany won’t have any money for Italy after tonights hiding in the park.


  32. are libor rates set internationally or country by country. in other words was barclay manipulation uk libor, us libor, both or is there only one?


  33. “A simple case of massive wrongdoing.” Alistair Heath, editor of City A.M. and normally an opening batsman for the city; sounds about right. Nobody above the individual traders and their desk supervisors knew what was happening my arse. Compliance departments?


  34. Only one.
    LIBOR stands for:
    London(UK) inter Bank Offered Rate.
    It (supposedly) means exactly what is says.
    Many loans, in many countries, use it as the benchmark


  35. It is very instructive to watch how quickly and nimbly the UK political class is turning this to it’s advantage. Commentators at sites like the DT are logging on to say ‘good show’ about reimbursements and tax reductions conjured alakazaam out of thin air.

    Clever fellows if there ever were clever fellows.


  36. If this manipulation of LIBOR turns out to be illegal and people go to jail, perhaps Dave and Nick could answer these questions; is it a crime to not report a crime? and does the UK have enough jail space?


  37. This was always a bit that puzzled me too, Labour should be dead and buried by now for what they did.

    “Cameron at first saw this as the way to bury Brown and Labour forever, but the people in Threadneedle Street quickly disabused the Coalition of there being any wisdom in that approach”

    So I would guess the wisdom was this.

    If the major political parties are in cahoots it serves no purpose to destroy the other side. The argument being that if Labour were made unelectable for a couple of decades and the LibCon coalition were to then become despised who of the big three would form the next government?

    Then somebody has a problem.


  38. Here in the states, many of the older adjustable mortgages are indexed to the Libor. The good is that by suppressing it, you sort of have a back door bailout – countless homeowners (including moi) that may have otherwise gone under had their monthly payments drop severely in this manipulated blessing …..the bad news is that there is zero incentive or ability for underwater homeowners to refi away from a nice <2% loan rate that would require a substantial amount of cash out of pocket given that we're all so deep underwater. So at best we kick the cans with this deception, with hopes that they spread out along the road in front of us vs hitting all at once. Until this unwinds, expect the long winded "investigations" to continue – Perhaps climaxing in an executive pawn sacrifice or two when the at risk numbers look good again. So imho – I have no doubts about it being a coordinated effort. Still … Don't yell too loudly, if the ivestigation would be so kind as to continue past Dec, my home loan will drop to <1% for all of 2013 – thats almost banker status!


  39. Big can of worms
    I quit my job as a moneybroker in June 2000
    The depo traders were fixing the LIBOR rates to suit the positions of their Fra ( derivative ) traders even then !


  40. Its not a scam its fiction. The entire thing is fiction… They work for us the beneficiaries and they (Govt) are the trustees. Everything else call it what you want however they are just corporations that you can created contracts with or not…


  41. Excellent article about the LIBOR scam and the recent “software” problems that prevented withdrawals from some U.K. banks. For a number of years now this commentator has been telling anyone who would listen that LIBOR was a scam and that the government of the U.K., the BoE and the BBA were active participants.



  42. @Mark. Exactly. “Whoever you vote for the government always gets in” (Viv Stanshall). With the two main parties running the show it’s in their interests to keep up the pretence that we live in a democracy. They are both as bad / incompetent / crooked a each other.


  43. Dan,
    no, this wasn’t a bailout of the borrowers, it was a bailout of the banks which would otherwise have been seen as insolvent (which of course they are).
    The borrowers won’t be given a second thought when the banks need the money back.


  44. I could understand that interbank lending rates were once determined by “gentlemen’s’ agreement” rather than by market forces, in order to maintain some stability.
    The problem is there aren’t any “gentlemen” any more. The people at the top of our banks, all of them, display breathtaking arrogance and contempt for their clients and even the government.
    Instead of acknowledging that they are stewards both of our money and of the great institutions they head up, they have this overbearing sense of entitlement .

    Diamond may be faced with the prospect of investigation and perhaps criminal proceedings – or the alternative of accepting a £20+ m golden goodbye. Doesn’t this so-called civilisation suck?


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  46. What on EARTH are you blethering about? The LIBOR did skyrocket after Lehman, demonstrating that extra risk was being priced and banks were more or less refusing to lend to each other. This persisted until for banks in this country until the BofE, prompted by the dramatic increase in LIBOR rates, realised it was obliged to act as “lender of last resort” and injected cash into the banking system, thus bringing LIBOR rates down. This process is well understood and the responsibility of the BofE in such cases is clear. There is no need for any kind of conspiracy or even government involvement. Much as I like to blame Gorgon Brown for everything that went wrong over the last 12 years or so, this particular issue does not have his fingerprints on it.


  47. JW,

    To the question, when did LIBOR manipulation start I opine much nearer it’s inception date of the mid 80’s.

    It appears that LIBOR setting is very much like the daily London gold fix that has resulted in the weird results for c.2000 to 2011 of buy in 2000 sell 2011 c+580%, buy at close of business London every day sell on opening next day during same period c+5800%, buy on opening London sell at close every day same period and you would have lost money.

    The gold fix appears with a fair amount of certainty to have artificially been depressed by the gold fixers.

    What it says to me that the M0U, City slickers and financial players do deserve E.Heath’s monicker of ‘The unacceptable face of capitalism’.

    Although they are not capitalists in my mind as they appear to need to play only in games that they can rig to their favour.


  48. What it proved at the time was that lending between banks was considered very risky, because various banks world-wide were clearly in trouble, including Northern Rock. LIBOR went very high early on in the crisis, in September 2007 at about the time Northern Rock went tits up.

    It went down again when central banks intervened across the globe, reducing the base rate and injecting cash into the banking system. Clearly this injection of cash made lending to banks significantly less risky so you would expect LIBOR to come down. There really isn’t anything remotely suspicious about it at all. LIBOR came down because more cash was injected into the system and more importantly it was clear that governments were going to stand behind the banks and prop them up, thus giving confidence back. There was no need to indulge in some sort of global conspiracy to get LIBOR down, because key national banks worldwide had taken the steps needed anyway. In fact the head of the Fed, Ben Bernanke, had been pointing out for years before the credit crunch that this was what he would do in the event of a credit crunch – this is how he earned the name “Helicopter Ben” way back in 2002 when he imagined the government doing “helicopter drops” of cash to counter deflationary forces.

    There is a good timeline for the credit crunch here:



  49. Careful about reading the biased views of another country.

    “The Federal
    Reserve definitely caused The Great Depression by contracting the amount of currency in
    circulation by one-third from 1929 to 1933”

    Actually it was the inevitable reaction to the crtedit BOOM that happened in the years immediately prior to the great depression. This caused house prices in places like Florida to rocket during the so-called “Roaring 20s”, and the stock market also went through the roof.

    After the Wall Street crash the currency in circulation actually collapsed as broad money collapsed due to wide ranging defaults on loans. This was what actually caused the Great Depression. Keynes realised that allowing broad money to collapse naturally as bad debts defaulted at a time of recession actually made matters significantly worse for everybody else, because those that had no debt were still dependent on the spending of those with debt. The banks didn’t CAUSE the Great Depression so much as stand back and let it happen. Some had made a lot of money during the boom years but many banks went to the wall during the crash. Allowing broad money to collapse meant that everyone was chasing after less and less cash, resulting in job losses and poverty on a wide scale even though the real economy was still capable of creating real wealth.

    Therefore, having learnt the lessons of the Great Depression, the BofE is injecting cash into the UK economy at around the rate at which it replaces written of debt. This process keeps inflation low (the real inflation was caused by the credit boom in the first place, which inflated house prices in the UK). Sadly the rest of Europe is heading for a second Great Depression because they are currently led by German “Austrian School” economics. The Austrian School has a lot to tell us about how to avoid a credit boom but little to tell us about how to survive a depression. Hence Germany under Merkel has engaged in Keynsian expansion after the 2001 dot.com bubble collapsed followed by Austrian School austerity since, which is the worst possible combination. This more or less guarantees the end of the EU, about which I am exceedingly happy.

    If you want to avoid a recession, avoid the credit boom that leads up to it. But that requires the people to get a grip of the situation and stop blaming the banks for doing what banks do naturally.


  50. All the filthy tricks the greedy have used for years and years are being laid bare on the media altar before us. But what will come of it in the end ? Not even a single resignation so far, let alone an arrest. Our ‘betters’ have failed us and got away with it scot free


  51. There are two: LIBOR and EURIBOR (this second one covers the EU).

    The LIBOR rates are determined in London but actually cover lending rates of banks world-wide.

    It is largely impossible for a single bank to influence the LIBOR on its own since a range of banks contribute and outliers are removed from the list.

    LIBOR is a benchmark, rather like the BofE base rate, and as such it influences lending rates but does not actually fix them (i.e. your mortgage provider may adjust its mortage rate depending on the BofE base rate, but actually the rate is dependent on the rates set by the competition).

    Manipulating the LIBOR down (as it seems Barclays was trying to do) will actually mean that banks will have to lend money out at a LOWER rate – so actually this is clearly good for consumers, but it would make the banks seem less risky as recipients of loans than they really were (or not, in fact, since the national banks of countries using LIBOR stood behind the banks anyway, so LIBOR probably was higher than it should reasonably have been during the credit crunch).

    In the end the rates actually charged for loans and interest paid on deposits have to exist in a competitive market, so LIBOR is not quite so important as some of the tales being told would suggest. It is really a starting point for the calculations, is fairly arbitrary in the way it is put together (it is based on a perception of the rate at which banks can lend to each other rather than traded bank lending rates), doesn’t indicate the risk of lending to a specific (possibly weak) bank, and might as well be plucked out of the air.


  52. Now you’re getting it. There is no democracy. The people running these parties all go to the same schools, talk the same language, hand out together in the same bars. They really don’t care if they are in power or not. It is like a school sports competition to them.

    Labour really should be finished as a political entity after what they have done. They are propped up by the Tories and the MSM who have it in their interests to let this whole tweedle-dum/tweedle-dee charade continue.

    Britain has been run by the same shower since Norman times, No matter what we do to kick the bastards out they keep finding a away to manipulate their way back to power. Most of the people pulling the string don’t even live in Britain.


  53. @Helen: I blame my old Latin master – and yes, I used the perfect participle, and not the singular imperative…


  54. @JS: If you want to avoid boom and bust, get rid of fiat and stick to commodity currency. We are surely right to blame banks when they behave dishonestly and as a cartel. Who are ‘the people’ and how are they supposed to ‘get a grip of the situation’ in the face of outright manipulation by pols and banks?


  55. Dear John,
    I enjoy your Blog and pearls from other Sloggers.

    I have tried to post at the Telegraph http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9363389/Letter-from-Barclays-chief-Bob-Diamond-to-Andrew-Tyrie.html#disqus_thread

    But have been flagged for moderation, not bad for my first attempt
    I only wanted to say:-

    This isn’t about a few nickel and dime insider trading deals
    This could bring down the banking system via Credit default swaps, in the derivatives market many fixed interest rate /swap rates are based on LIBOR.
    As the rates rise, many CDS would be triggered and the banks would have to pay out. The banks are skint, and don’t have the money
    Of course our banking geniuses will tell us the 700 trillion of CDS, all Nett out to ZERO…….That went well for AIG.


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  57. You are missing the real reason for holding down LIBOR.
    We are ta;king LIBOR not EURIBOR by the way.
    The $200 tn (then) of credit swaps tied to the LIBOR benchmark.
    That,s why it had to be held down.
    It is better to remain silent and let people think you’re an
    idiot,than to speak and remove all doubt.


  58. Pingback: Why the global political class lies in fear of the LIBOR scandal#

  59. Pingback: Führerurn in Berlin | A diary of deception and distortion

  60. Christ! Not this one again. The Lehman failure had nothing to do with London. Subprime was a US invention. There was no US subprime at Lehman London.


  61. Christ the ignorance here. CDS have no link to Libor. Every CDS credit event during the crisis has settled smoothly without incident, that includes Lehman and Greece.

    The attempts to manipulate Libor was zero sum. If I raise Libor then mortgage holders pay a higher rate and the banks get more. If I lower Libor then the mortgage holder pays less and the banks get less. So for most of the people here I would guess that pushing down Libor would be a good thing.

    Banks are on general RECEIVERS of libor since they want to the fixed rate paid on most of their assets to floating to match their floating liabilities. However they use interest rate swaps to do this. Their net position could be long or short libor. So some banks will want Libor to be higher, others lower. The whole point of the Libor calculation (pool of 16-20 banks, reject top and bottom 4 and average the rest) is intended to average out any manipulation. This has to be done because Libor is a subjective or soft measure of borrowing, i.e. someone MAKES IT UP.

    This whole “scandal” is really about nothing much.


  62. Sure Fred
    “Every CDS credit event during the crisis has settled smoothly without incident”

    Except just a little help from the tax payer, the magic money machine, and billions (or is it trillions) of secret loans from the Fed. That only came out after a Bloomberg’s FOI request.
    The derivative monster is already out of the cage and on the rampage, as rates rise he gets hungrier, and the only way to appease him is to shove lower interest rates down his throat…..and hope he doesn’t eat us.
    Are Interest Rate Derivatives a Ticking Time Bomb?
    “Derivatives are the world’s largest market, dwarfing the size of the bond market and world’s real economy.”
    But then they all net to zero…….Don’t they. Like I said, “it’s not the nickel & dime fiddles”


  63. The Austrian School has little to say about surviving the bust because they say there is NO CHANCE of avoiding the bust after a credit boom. You can only postpone it and then make it worse. The Austrian School’s remedy for a bust is to never get a credit boom.


  64. don’t worry folks, we’ve got big-cap cameron, little-boy clegg and loony-leftie militory to clear up the mess in the city…

    who you gonna call?


  65. scum dine with me (catering as ever provided courtesy of the better half of the sandwich, sexy sam's spam scam)

    i ain’t afraid of no banks


  66. jesus, what about this independent inquiry into jam-butties – when that gets rolling the ectoplasm’s really going to hit the fan. yikes.


  67. Pingback: Exclusive: Libor manipulation…. | A diary of deception and distortion

  68. Pingback: John Ward – Exclusive : Libor Manipulation … – 1 July 2012 | Lucas 2012 Infos

  69. Pingback: Libor manipulation [the Slog] « Mktgeist blog

  70. Pingback: LIBOR: BBC’s Peston confirms Slog central bank prediction | A diary of deception and distortion

  71. Pingback: John Ward – LIBOR – BBC’s Preston Confirms Slog Central Bank Prediction – Diamond’s Select Committee Testimony To Be Crucial – 2 July 2012 | Lucas 2012 Infos

  72. http://uti.is/2012/05/1584/. Read this. It is worth it.

    Look to Luxembourg for they are surely the ones giving the UK lessons in MANIPULATION of figures, false accounting and ignoring serious fraud accusations.
    Look at this blog which discusses the big frauds running from Luxembourg banks , subsidiaries of the Icelandic Banks protected by Lax Luxembourg Banking Laws.
    There is much that starts in this banker’s haven that needs serious investigation.
    London is not the only financial cess-Pitt in Europe!

    Luxembourg Landsbanki is threatening old aged pensioners that if they do not pay back in many cases, the manipulated figures and money which has disappeared from their personal accounts and drop all Criminal charges as well as sign a gagging clause against future legal complaint of the administration, they will have their homes seized because of this fraudulent bankrupt bank who sold the illegal schemes.
    Hundreds of old age pensioners are being blackmailed and living in terror of losing their only asset.
    Do not just look at London for manipulation of figures and fraud.
    Look at the heart of Europe, where we are not encouraged to look. Is it really London who gave the Libor fixing orders?
    Are we sure about that?


  73. Pingback: LIBOR: How both the BBA and the BIS publicly misled the World about the rate-fixing scam. | A diary of deception and distortion

  74. Pingback: John Ward – LIBOR : How Both The BBA And The BIS Publicly Misled The World About The Rate-Fixing Scam – 3 July 2012 | Lucas 2012 Infos

  75. Pingback: BARCLAYS & The BoE: Del Missier resigns as web of deceit unravels | A diary of deception and distortion

  76. Pingback: John Ward – Barclays & THe BoE : Del Missier Resigns As Web Of Deceit Unravels Lie Upon Lie, Until Nobody Knows The Truth – 3 July 2012 | Lucas 2012 Infos

  77. Pingback: DIAMOND TESTIMONY: Slog completely vindicated by TSC documents placed in evidence by Barclays | A diary of deception and distortion

  78. Pingback: John Ward – Diamond Testimony : Slog Completely Vindicated By TSC Documents Placed In Evidence By Barclays – 4 July 2012 | Lucas 2012 Infos

  79. Pingback: Bob Diamond, Libor & a Tale of Two Cities | Doomstead Diner

  80. Pingback: GEITHNER: Tucker knew about Libor scamming in 2008 | A diary of deception and distortion

  81. Pingback: John Ward – Geithner : Tucker Knew About Libor Scamming In 2008 – 13 july 2012 | Lucas 2012 Infos

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