In response to Secret Recording Implicates Bank of England in Libor Rigging I received an email from a UK reader working closely with a financial institution during the crisis.
During 2008 I worked closely with a financial institution that was working with departments of the then Prime Minister, Gordon Brown, and his trusted sidekick, Shriti Vadera (now Dame Vadera). In casual conversation, I learned from various managers who had been close to that advice, that these two senior figures in the UK government had been making direct calls to senior figures at UK banks ‘requesting’ that they keep LIBOR down.
In light of the latest news, I find it entirely credible that the government and the Bank of England conspired to demand that UK banks provide lower LIBOR quotes in the “cause of the greater good”.
“This puts the question of how the authorities viewed the supposedly illegal manipulation of LIBOR in a completely different light”
Best regards,
UK Reader
Question of Proof
Just because people are discussing things is not proof those things happened.
Here is a possible explanation: The BoE was likely very concerned over LIBOR, so a BoE official called Barclays. Rumors then hit the fan that the BoE told Barclays to rig LIBOR.
Let’s go over the recording once again, as presented by the BBC.
In the recording, a senior Barclays manager, Mark Dearlove, instructs Libor submitter Peter Johnson, to lower his Libor rates.
“The bottom line is you’re going to absolutely hate this… but we’ve had some very serious pressure from the UK government and the Bank of England about pushing our Libors lower.”
What we have is a clear case Mark Dearlove pressuring the trader to rig LIBOR. Dearlove could have made that up. Alternatively, Dearlove was stating the truth.
The recording is not proof of BOE involvement, but it is proof that a senior manager at Barclays pressured a trader using that message.
Thus either Dearlove, the BOE, or both are implicated in the scandal. Dearlove has a lot of explaining to do, but it will likely be swept under the rug.
Mike “Mish” Shedlock
There’s no scandal here except lying to the Parliamentary Select Committe. Interventionn to reduce overnight bank-bank stresses was absolutley necessary.
If various actions hadn’t been taken there would have been a scandal as to why no one did whatever was necessary.
This was the background – all hands to the pumps – “shut the f… up do as you’re told and get on with it.”
https://www.theguardian.com/politics/2010/feb/21/gordon-brown-saved-banks
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“There’s no scandal here[,] Interventionn to reduce overnight bank-bank stresses was absolutley necessary.” [sic]
aka “When it becomes serious, you have to lie,”
Is that you Jean-Claude?
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“If various actions hadn’t been taken there would have been a scandal as to why no one did whatever was necessary.”
Or, is it you Hank “tanks in the street” Paulson?
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I’m very pleased to know there was such rapid proactivity more interested in doing the right thing than doing thinngs right.
BoE understood the risks and did what was necessary.
My shock is that they had such presence of mind and took control.
Well done BoE.
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Yeah, dude! Whatever is good for a bunch of banksters and government hacks, must obviously be good! That’s what the Man on TV says, after all. And he says he is an Expert (wow!!) too…..
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Maybe, but what do you tell to that guy, who is sitting in jail for this? As I understood, this Johnson guy was made to be a scapegoat “for the right thing”.
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Well at the least, as UK does so UK has, meanwhile a broad sweep of banking in the common currency and its obfuscation , a topic which seems to have gone quiet recently :
https://hat4uk.wordpress.com/2017/04/07/getting-real-the-raging-fire-in-the-hold-of-ss-eutanic/
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Yeah, it’s always “for the greater good” and “the ends justify the means”.
A very convenient philosophy for these inbred criminals to have.
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Whether it is some hypothesis on inflation targeting, bank backscratching, privileged access to info, they all lead to the same kinds of hierarchy, some open for all to try to agree with or get in on, others part of scenery. All part of the power forge that banks and government share and profit from. I don’t think it can be supervised, only a change in the system itself would take away the opportunity, and I suppose that would mean allowing money to be its own master, not someone’s creation. The people who take the decisions, they might have sound reasoning, or they might be totally corrupt and misguided, but accountability has to exist as an integral part of the transaction process, it cannot be applied arbitrarily later.
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Barclays Libor rates were high compared to other banks though – so the explanation now sought from the Bank of England presumably will be to the effect that it quite properly wanted Barclays to move into line with everyone else (as it should have been had it been performing its Libor calculations on a like basis as was required). What was wrong with that?
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“likely”
?
hhmm,… is that on par with a developer meeting the local supervisor for lunch to “discuss” a much needed change (for developer’s benefit) to zoning … and excusing himself to the restroom … while leaving an envelope of cash on table … and “likely” disappearing before developer gets back?
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I would think banks would profit more with higher LIBOR rates, figuring they have out loan contracts priced at X% + LIBOR. So, the “crime” is profiting business customers at the expense of banks. No motivation for the bank to go in that direction unless directed by higher levels that could punish the bank for not going along with the scheme.
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In the USA, the Treasury department has TAC, the Treasury Advisory Committee, made up of “representatives” (aka head traders) of the government bond desks at the largest primary dealers.
They get together, eat a catered 5-star lunch (expensed to taxpayers), and the primary dealers “recommend” what bonds the Treasury should issue. The Treasury “recommends” what yields they would like to get (which always involves a “concession” to on-the-run yields).
Mom and pop don’t know in advance what maturities will be emphasized or what yield concessions will magically get applied before the auctions. It may sound like they are all colluding, but its done under the auspices of the Treasury and thus its perfectly legal.
The UK has a similar cozy arrangement between gilt market makers and the Exchequer. I don’t know why this Libor thing is news. It may not be ethical, but its legal because “the sheriff” (the host government) is in on the scam.
The reason bankers didn’t go to jail after 2008 is because they bankers made sure to keep the “commemorative photos” they took with government officials at each of the rigging meetings.
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The real reason USA bankers did not go to jail is that the government officials wanted to get in on the gravy train. Best way to do that is become one of them (bank) before exiting government to collect their rewards from the industry being aided. Of course, the politicians would lose the campaign loot if their contributors were put out of business or in jail. You scratch my back, I’ll scratch yours. Revolving doors, that sort of thing.
UK LIBOR is mostly likely a diversion, so gov can say it is punishing the bankers while letting the real banking crimes slip under the radar. Magic Tricks 101.
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Sometimes a finger needs to be applied to a sensitive area for the right reasons.
If Barclays were sitting high at the time it might just be the BoE wanted them off their perch and in the ring to offer liquidity rather than just a spectator?
If Barclays were high, why? Was it they were super risk averse at the time and that might have contributed to a seizing up of the market?
Not everything that was done was done for nefarious reasons.
“All hands to the pumps.”
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Problem is, preventing a massively distorting, and for most confiscatory, bubble from simply popping as quickly and thoroughly as possible, is in and of itself nefarious. So what you have, is nefarious means to achieve a nefarious end. There is simply nothing even conceivably good about it.
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It helped prevent an entire seizing up of the system. Mass business failure leading to mass unemployment. The Great Depression would have been nothing in comparison. Not just talking no credit but massive credit contraction in no time at all. Global trade off a cliff. No wages, no credit transfers, no payments.
Quite apocalyptic and hard to reverse once having taken hold.
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“.. hard to reverse once having taken hold.”
That’s what’s called a feature. Not a bug.
The “system” you speak of is no different than any other “system” existing solely for the purpose of robbing the vast majority, for the benefit of the few who are connected. If it was replaced wholesale by a nuclear crater; that would be, at worst, a lateral move. Any “seizing up” less disruptive than that, would be an undifferentiated good thing.
There is “waaaaay” too much credit in the system as it is. Contracting it back to where it was on the last date of even some pretense of sanity, sometime in 1971, is, again, an undifferentiated good.
“Business failures” due solely to credit contraction, is, in even the short medium term, complete nonevents. The factories are still there unchanged and undamaged. So is all raw materials. All infrastructure. And all workforce skills and knowledge that enabled the business to operate in the first place. None of it goes anywhere just because of “credit contraction” (which is where business failure due to being nuked is different…).
All that happens, is debt is erased, loosening the stranglehold banksters currently have on almost every productive venture. While making the businesses more competitive, as they are no longer saddled with the “duty” to keep paying usury to said banksters.
And in addition, ownership is transferred. From those who have profiteered on the back of the massive theft-by-debasement experiment being foisted on the West over the past 40 years. To…… initially pretty much random, since bringing credit and the dollar back to 1971 wrt gold, will bankrupt not just a few, but largely everyone.The Central Bank will, at the end of the credit unraveling, own it all, and have no option but to firesale it to a population consisting entirely of bankrupt guys.
Now, a random distribution of productive assets may not lead to their most efficient utilization. But, almost immediately, those who feel they can do the most with a given asset, will trade other assets in his random “allocation,” for more of the kind he has a competitive advantage operating. So, in quite a reasonable amount of time, you will inevitably end up with the assets ending up in the hands of those who can most efficiently utilize them.
As opposed to the situation today, which is the one your “system” tries so hard to maintain and even strengthen: Owned by those closest to the theft racket that is the Federal reserve. Such that even manufacturers are largely (and increasingly) owned and ran by half literate “fund managers”, “private equity” mediocrities and the like. All of whom know nothing and contribute even less. Yet insist on taking massive amounts of purchasing power out of “their” businesses. While wondering how come American business can no longer afford to compete while paying salaries it thrived with as late as in the 70s.
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Governments have huge power. However, even nuclear powers such as the UK don’t use their nukes to collect every tax.
My point is that when the sovereign says something such as “her Majesty’s services would be delighted if the LIBOR rates were lower” this is a direct order to fudge the rates down, and not complying with such an order would be unthinkable for any UK actor. When the governement asks something directly to you, the “or else” clause is implicit.
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