Libor rate fixing leaves PM in a fix

‘A Molotov Cocktail Party’ of conflicted interests

As David Cameron might say, let’s be clear about this: Tory Party supporting inter-dealer brokers like Tullet Prebon and ICAP provide liquidity and anonymity to buyers and sellers. These clients are frequently banks of one form or another. Michael Fallon insists that Tullet’s “helped to nail the banks” – but given the confidentiality of the firm’s role and the BBA CEO on board as a Senion Non-Exec, this is quickly revealed to be nonsense: for them to have done this would’ve required both a betrayal of client trust, and massive business losses.

In fact, even the suspicion that they might have turned Queen’s Evidence with the FSA has helped lead to a fall-off in business at both ICAP and Tullet’s. At the latter, ‘Banks that use the services of brokers like Tullett’s are scared so they’re doing less business’ wrote The Times last September; and they weren’t wrong. Tullet Prebon income dropped 3% in both November and December of last year, and the firm’s year was flat at £910m of income. In January of this year, Tullet’s cut 80 jobs, and then a further 80 in March.

In short, the continuing mistrust, suspicions and controversy surrounding the Libor rate are ruining Tullet’s business. The firm therefore has an enormous conflict of interest via Michael Fallon’s membership of the Treasury Select Committee – and a life-or-death desire to see the scandal go away.

Taken together and with new information added by The Slog’s research, the Libor Party is revealed as being a seamless relationship between the Conservatives and the Libor broking sector – or as one senior investment bank staffer put it yesterday afternoon, “The Libor Party is amusing as a monniker at one level, but the inbred nature of it means it is really a highly inflammable Molotov Cocktail Party about the blow up in the Tory Party’s face”.

Read on now and see why this source’s view is easily vindicated.

Key players in the Libor Party:

Angela Knight, Michael Fallon, Terry Smith, Michael Spencer.

What they all have in common:

They all support or work for the Conservative Party

They’ve all been involved in the Libor sector for years

They all have obvious conflicts of interest

The five organisations involved in this cosy crony-club are the British Bankers’ Association (BBA), ICAP, Tullet Prebon, The Treasury Select Committee (TSC), and the Conservative Party.

Michael Fallon is Deputy Chairman of the Tory Party, a senior member of the TSC, and a senior Board member at Tullet Prebon – a company described to me last night by a City insider as “dominating the Libor sector”. At least three of the major institutions reporting on Libor rates are known to be Tullet clients. Fallon may thus have been questioning one of his clients when he interrogated Bob Diamond of Barclays last Wednesday.

Angela Knight was until recently the CEO of the BBA, an organisation on behalf of which she gave misleading Libor evidence on at least one occasion. She is a non-Exec director of Tullet Prebon, and she used to be a Conservative MP.

Michael Spencer  is the founder and CEO of ICAP, the largest Libor-sector money brokerage in Europe, he used to be the Tory Party’s Treasurer, and he (and his company) last year donated £1.3m to the Conservative Party. In 2010, Spencer was censured by the City for selling £45m of ICAP shares three weeks before issuing a profit warning.

Terry Smith is the CEO of Tullet Prebon. Derek Tullett, founder of inter-dealer broker Tullett Prebon, was listed as ‘a major contributor’ to Tory Party election funding during 2010. On his Board he has collected both Fallon and Knight, and although Fallon says Tullet’s “helped to nail the banks” that must in turn have put Angela Knight into an awkward position, she being the UK’s greatest defender of both the Banks and Libor. Smith spent the first five years of his life working on the investment side at Barclays, and is an Associate at the Chartered Institute of Bankers.

Is Britain still a country where the chosen few look after each other and ignore the law? If the conflicts outlined above do not lead to a judicial enquiry at least, then the answer must be a resounding “Yes”.

Related: Why the role of The Enquiry in contemporary Britain has been perverted