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”
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