Heads Roll at Barclays After Lending Rate Scandal

Chairman Marcus Agius and Robert Diamond have resigned after the latest banking scandal.

LONDON—The chief executive of Barclays BARC.LN +2.67%PLC, Robert Diamond, resigned Tuesday amid intense political and investor pressure from the British bank's involvement in rigging an important interest-rate benchmark—and another senior executive appeared close to following him out the door...

...Pressure on Mr. Diamond increased after the bank agreed last week to pay $453 million to settle a U.K. and U.S. probe that showed traders had blatantly sought to manipulate the London interbank offered rate, or Libor, to disguise the high cost of the bank's own funding and to pad the profits of certain traders. A person close to Barclays management said Mr. Diamond made the decision to leave late Monday night, feeling "it was the right thing for the bank."

http://online.wsj.com/article/SB10001424052702304299704577503974000425002.html

And other banks may be involved:

http://money.cnn.com/2012/07/03/investing/barclays-libor/index.htm?iid=Lead

Phil Mickelson might need a new sponsor. Maybe take a page out of John Daly's book:

I'm going to go with "very likely." The NPR piece I heard talked about a whole bunch of other banks that are being investigated.

Nell Diamond jumps to her father's defense on the twitter:

A message posted on what appears to be the Twitter account of Miss Diamond, a graduate of Princeton University who now works for Deutsche Bank, read: "George Osborne and Ed Miliband you can go ahead and #hmd."
HMD is internet slang for 'hold my d---', an expression of disgruntlement used by American teenagers.

Minutes later the tweet was deleted. In its place a message appeared reading: "No one in the world I admire more than my dad. 16 yrs building Barclays. Shame to see the mistakes of few tarnish the hard work of so many."

http://www.telegraph.co.uk/finance/...Diamonds-daughter-attacks-George-Osborne.html

Plus a father with a male daughter who is older than him

This is a HUGE story over here and, as someone said, it's not just one bank. Not by a LONG shot. As I understand it there are about 16-17 banks under investigation.

Some of it goes back to the credit crunch and banks reporting their cost of borrowing from each other through the British Bankers Association to Reuters.

Of course, as these things often do, it's become highly charged politically...

http://www.independent.co.uk/news/u...-on-browns-watch-says-chancellor-7912764.html

George Osborne ratcheted up political tensions ahead of today's Commons showdown over the Barclays scandal as he accused members of the last Labour government of being "clearly involved" in rate fixing.

But Mark Steel's probably closer to my own feelings on the issue.

http://www.independent.co.uk/opinio...te-bankers-now-i-was-there-first-7906761.html

This is confusing. What do you say if you're a socialist once EVERYONE hates bankers?

...

One way to deal with this is to not call for an inquiry. Because it's not an inquiry we need, it's a trial. That's what happens after a normal bank robbery. You don't have an inquiry, in which a slow-talking judge takes two years to work out whether bank robberies could be carried out more efficiently, by asking questions like "Would you prefer it if I referred to you by your professional name of 'The Decapitator'? To commence, I refer you to a text sent on the ninth June concerning the arrival of some sawn-off shotguns. Could you enlighten us as to how one procures such weaponry?"

The next step is to demand a new law which bans anyone from complaining about bankers if they were part of a government that gave them all this power in the first place. Maybe these politicians will say "When we stripped away almost every check on bankers' behaviour, or celebrated that at last we were the party that promotes success and said it was wonderful to make yourself rich, and said anyone who suggested restricting the greed of bankers was an outdated idiotic dinosaur who would lose us elections, that certainly didn't mean we approved of bankers in any way."

The problem could be that not only are the bankers motivated by greed, but the banking system depends on greed. Or maybe this is wrong, and when bankers made their bank fifty million quid by interfering with interest rates, their chief executive said "What on earth are you doing? We're a bank, our job is to help the community. Now give it back, dress up as a mouse and entertain children at a care home or it's no bonus for you."

I have to say, to see the tories, who are funded by banks and the other financial institutions, saying that it's lack of effective regulation that's caused all this, when THEY were the ones that created it all with 'Big Bang' back in 1986, is a bit much to take.

http://en.wikipedia.org/wiki/Big_Bang_(financial_markets)



Bishopsgate in London's financial district... even the buildings are bent

They also spent most of the period of labour rule complaining that the regulations that WERE in place were too stringent.

Lively debate in the house yesterday about this...

At 2:30 - "for the first time will separate investment banking from retail banking." Sounds like Glass-Steagall which we had as a sound law for over 60 years until it was undone in the late 90s after much lobbying from the banksters.

A University of Chicago business professor would like to see Glass-Steagall implemented again and brings up a good point about the combined lobbying power of the institutions now:

Last but not least, Glass-Steagall helped restrain the political power of banks. Under the old regime, commercial banks, investment banks and insurance companies had different agendas, so their lobbying efforts tended to offset one another. But after the restrictions ended, the interests of all the major players were aligned. This gave the industry disproportionate power in shaping the political agenda. This excessive power has damaged not only the economy but the financial sector itself. One way to combat this excessive power, if only partially, is to bring Glass-Steagall back.

http://www.ft.com/intl/cms/s/0/cb3e52be-b08d-11e1-8b36-00144feabdc0.html#axzz1zfdasYoW

I think I'm right in saying it was the tories that allowed them to join together in the FIRST place as part of 'Big Bang' under Thatcher. As wikipedia mentions, it was because of the ever increasing joining together of the 'casino-banks' and retail banks in the states that led us to 'Big Bang' over here.

The only thing is that, if memory serves, GlassSteagel was already largely dead anyway when it was repealed under Clinton, by the various changes and amendments since the 1960's.

Edit:

Wikipedia seems to think so too...

http://en.wikipedia.org/wiki/Glass-Steagall_Act

The term Glass–Steagall Act, however, is most often used to refer to four provisions of the Banking Act of 1933 that limited commercial bank securities activities and affiliations between commercial banks and securities firms.[2] Starting in the early 1960s federal banking regulators interpreted these provisions to permit commercial banks and especially commercial bank affiliates to engage in an expanding list and volume of securities activities.[3] By the time the affiliation restrictions in the Glass–Steagall Act were repealed through the Gramm-Leach-Bliley Act in 1999 by President Bill Clinton, many commentators argued Glass-Steagall was already “dead.”[4] Most notably, Citibank’s 1998 affiliation with Salomon Smith Barney, one of the largest US securities firms, was permitted under the Federal Reserve Board’s then existing interpretation of the Glass-Steagall Act.[5] Clinton publicly declared, "The Glass-Steagall Act is no longer relevant."[6]

This has absolutely nothing to do with Glass-Steagall. Nothing at all. Glass-Steagall is a giant red herring.

We realize that. This latest LIBOR scandal falls more under "we have to watch these motherf'ers even while they're sleeping because they cannot be trusted." It would be nice if enforcement/massive fines/jail time was stepped up both here & in the UK.

And, just to be clear, Glass Steagall wouldn't have mattered, so why are we bringing it up again?

It was mentioned in the video and it also shows to the extent that banker lobbying had on getting a perfectly rational banking law overturned.

What does "perfectly rational" mean? Given that none of the problems we experienced in the past 5 years have anything to do with Glass-Steagall, how did this "perfectly rational" law matter? The intent behind Glass-Steagall (which I've written about repeatedly before but which you ignore because it doesn't fit your perceived set of facts) was to prevent banks from selling its customers crap securities. That hasn't been a problem since the crash of '29.

Like dumping underperforming proprietary funds on clients?

Facing a slump after the financial crisis, JPMorgan Chase turned to ordinary investors to make up for the lost profit.

But as the bank became one of the nation’s largest mutual fund managers, some current and former brokers say it emphasized its sales over clients’ needs.

These financial advisers say they were encouraged, at times, to favor JPMorgan’s own products even when competitors had better-performing or cheaper options. With one crucial offering, the bank exaggerated the returns of what it was selling in marketing materials, according to JPMorgan documents reviewed by The New York Times.

The benefit to JPMorgan is clear. The more money investors plow into the bank’s funds, the more fees it collects for managing them. The aggressive sales push has allowed JPMorgan to buck an industry trend. Amid the market volatility, ordinary investors are leaving stock funds in droves.

In contrast, JPMorgan is gathering assets in its stock funds at a rapid rate, despite having only a small group of top-performing mutual funds that are run by portfolio managers. Over the last three years, roughly 42 percent of its funds failed to beat the average performance of funds that make similar investments, according toMorningstar, a fund researcher.

“I was selling JPMorgan funds that often had weak performance records, and I was doing it for no other reason than to enrich the firm,” said Geoffrey Tomes, who left JPMorgan last year and is now an adviser at Urso Investment Management. “I couldn’t call myself objective.”

http://dealbook.nytimes.com/2012/07...-favored-selling-banks-own-funds-over-others/

Those aren't depositors.

No, they're soon-to-be former clients.

So do you believe the LIBOR issue is troubling or was this just business as usual? Who suffers if anyone?

Glass Steagall was about depositors. These are not depositors.

The reason why the Libor fiddling was occurring was because, a) On a most basic level, some of them are crooks and liars, and, b) Barclays and other banks were under pressure to lie about their requirements and how hard they were finding it to borrow. That pressure stemmed largely from the fact that the casino banks have joined with retail banks and thus have access to my, and everyone else's money. If not for that fact the political pressure wouldn't be as great. Of course, that's not the same thing as saying it wouldn't have been a huge problem in the same way Lehman's demise has been.

The latest over here is that 'Gorgeous George' Osborne is trying to pretend this only occurred during a time of pressure from the Labour government during the credit crunch... but there's a problem...

http://www.telegraph.co.uk/finance/.../Barclays-how-the-Libor-scandal-unfolded.html

June 2005

In the final years before the crash, markets are soaring and bankers are making huge bonuses. According to the Commodity Futures Trading Commission (CFTC), from “at least mid-2005” traders at Barclays start trying to rig the Libor market “routinely, and sometimes daily ... to benefit their derivatives trading positions”. They continue trying to manipulate Libor until the autumn of 2007. For the time being the activity goes undetected.

Regarding Glass-Steagel, wikipedia says...

http://en.wikipedia.org/wiki/Glass-Steagall_Act#Separation_of_commercial_and_investment_banking
Separation of commercial and investment banking

Over time the term Glass–Steagall Act came to be used most often to refer to four provisions of the 1933 Banking Act that separated commercial banking from investment banking.[

It's perfectly obvious that allowing casino and retail banks to join has made the dangers of the former relevant to the latter so, IMO, it's all part of the same problem. The thing to bear in mind is that this is one in a LONG line of banking scandals including PPI, (which is still continuing), and the damage done by the 2007-08 banking crisis.

What's also galling is that it seems nobody can be held to account for what most people think is criminal behaviour.... AGAIN!

That's like adding 3+3 and getting 27 because you like the number 27.

That's the magic of the free market and having an army of lobbyists doing your bidding and writing legislation behind the scenes. The SEC is like a toothless dog in this country because Wall St. and their lackeys in Washington want it that way. You'll notice that if President Obama even mildly criticizes the banksters for their criminal shenanigans, they get their Brooks Bros. underwear in a bunch and threaten to throw money Mitt Romney's way.