Citywire for Financial Professionals
Stay connected:

View the article online at http://citywire.co.uk/money/article/a602173

Four! Questions Bob 'Boycott' Diamond didn't answer

The Treasury Select Committee (TSC) did a surprisingly patchy job bowling questions at former Barclays boss Bob Diamond.

 
Four! Questions Bob 'Boycott' Diamond didn't answer

The Treasury Select Committee (TSC) did a surprisingly patchy job interrogating Bob Diamond.

The former chief executive of Barclays calmly batted away most questions on Wednesday, prompting John Thurso MP (pictured) to compare him to Geoff Boycott, the famously tough-to-beat test cricketer. ‘You’ve been at the crease for two-and-a-half hours and we’re not much further forward,’ joked the Lib Dem representative for Caithness, Sutherland and Easter Ross.

It was frustrating to watch. Perhaps committee chairman Andrew Tyrie and his colleagues are playing a long game, hoping to prise more information from future guests. These should include Bank of England deputy Paul Tucker, who has actually asked to be invited to speak to the TSC, so keen is he to set the record straight over a crucial phone call he had with Diamond at the height of the financial crisis in 2008. The events and actions around this key conversation cropped up repeatedly.

Here then are the questions MPs let slip away without getting a proper answer.

What kind of a firm was Bob Diamond running?

Several MPs expressed amazement at Diamond’s assertion that he didn’t hear about Barclays ‘low-balling’, or submitting deliberately low rates of interest, to the Libor panel until this month, shortly before UK and US regulators published their report after a three-year inquiry and imposed £290 million of fines on the British bank.

For an explanation what Libor is and how it is calculated please read this guide.

The ability for banks to under report their true borrowing costs to the Libor panel – and thus escape scrutiny of any financial stress they were experiencing – was raised by Diamond in his conversation with Tucker on 29 October, 2008.

Tucker had called Diamond to tell him that senior Whitehall officials were concerned at the high rates of interest that Barclays was putting into the Libor setting process. Diamond complained that Barclays was attracting attention simply because it was being honest about the rate at which it was borrowing from other banks, while many banks were not.

At the time Diamond was trying to complete a £6.7 billion fund raising from Middle East investors and was desperate that officials didn’t get the wrong idea and demand to nationalise the bank, like had just happened to RBS.

Unusually, Diamond took notes of the conversation and sent them to John Varley, then Barclays chief executive. His note is important because it indicates that Tucker, while expressing disapproval of the practice, hinted that Barclays might do the same.

Following the phone call Diamond spoke to the bank’s chief operating officer Jerry del Missier (pictured) who apparently misunderstood what his boss was telling him as an instruction from the Bank of England to submit lower rates to the Libor panel. He went on to tell the people responsible for submitting rates to Libor to do this.

Sign in / register to view full article on one page

26 comments so far. Why not have your say?

Martin Drew

Jul 05, 2012 at 08:47

It was good TV, not sure much else. It also exposed how little some MPs know about how multinational companies work - or indeed any company works. One MP was such an embarrassment his party should suggest they apply for the Steward and Bailiff of the Manor of Northstead (not sure which party they belonged to), then they could have a by-election and get someone a bit more intelligent. Diamond is a shrewd operator, I am sure he will be back in the US in a top job very soon.

report this

Rob Walker

Jul 05, 2012 at 08:48

Why are there no actions already in progress to address the LIBOR loophole? Does the government / FSA have to wait for a verdict before pushing legislation through?

An analogy would be patients using a faulty machine in a hospital. Would we wait for an engineer's report before stopping people being treated on it?

Look at the various actions already taken some time ago by banks (not just Barclays by any means) to sack traders and initiate their own investigations with the full knowledge of the authorities. And only now politicians are arguing over the type of inquision to be set up that the would then pre-empt any legislative action. The world will definitely be in a different place by the time this finishes. Pathetic!

report this

Jonathan

Jul 05, 2012 at 09:31

I've yet so see an article explaining who would have lost/made money and how they would have from the LIBOR rate statements Barclay's made. An article on this would be really interesting.

report this

joe stalin

Jul 05, 2012 at 09:34

Good TV perhaps but two and half hours too long a bit like the BBC's Thames jubilee pageant. It again iluustrated what buffons we have running our country. Most were completely out of their depth and only realy indulging in grand standing. They have no idea of what went on in 2007/2008 who was responsible and what lesson might have been learned. Sure Whitehall and the Labour Govt leant on Barclays and sure the BOE knew this. Traders are always looking at ways to screw the system they did then and are doing it now ,every day.Look at the way markets are manipulated every morning and every evening at our close for example. Add HFT, dark pools insider trading, money laundering ,naked short selling the list goes on and on. Think it is just the banks? How much has Glaxo just been fined for fraud? This will go little further and should be dealt with by the banks themselves lest it opens up a very nasty can of worms for the Opposition, the BOE and the FSA. A waste of time and money to pursue it further.

report this

joe stalin

Jul 05, 2012 at 10:09

Most people on tracker mortgages made out like bandits as did anyone paying interest on loans at LIBOR plus. Naturally not mentioned in yesterdays comedy club procedings.

report this

John B - (Not the sloop)

Jul 05, 2012 at 10:26

As usual Joe, a perfect summation of what went on yesterday, and is currently occurring not just in the city but globally in financial markets.

I must agree with St Vince though in his reference to "Spivs" but I am not sure what he would call the other group of know nothings in parliament,

Isn't it rich, the incessant whinging and finger pointing from many of the MPs whose own grasp on integrity was non existent, and their manipulative deceit self evident.

Gripping TV? I think not, Bob stitched them up big time, and Martin you are right, the golden handshake is waiting for Bob across the pond as we speak.

report this

dd

Jul 05, 2012 at 10:45

Jonathan, Re:

"I've yet so see an article explaining who would have lost/made money and how they would have from the LIBOR rate statements Barclay's made. An article on this would be really interesting"

Sorry I can't provide an article but, if LIBOR was reported lower than it actually was, then:

Would the Borrowers not benefit from that? Loans are priced at LIBOR + margin. Margin stays the same. Lower LIBOR means less to pay.

Barclays would have benefited by appearing to be stronger than it was and therefore able to pacify investors and avert panic as with other banks which had to be part nationalised. Would borrowers and depositors not benefit from that?

Not that I am recommending any sort of manipulation, of course!

What have I missed out? Who loses? Barclays on the cost of loans but not on the financial strength?

report this

MoneyObserver

Jul 05, 2012 at 10:57

Through the lack of skill of the MPs on the committee, and their unwillingness to get together beforehand and agree and frame a consistent line of questioning, nothing was achieved.

The problems are

(a) each MP wants to shine personally - none ever do due to 'talent deficiency'.

(b) the different questions had different objectives, none very productive e.g. one MP wanted Diamond to agree that banking wrongdoers should go to jail- what a waste of valuable questioning time.

All too easy for Diamond - these MPs are clearly 3rd raters pitching against formidable opponents - but then thats why their MPs in the first place and not holding down successful careers in commerce and industry.

And of course they'll be lobbying for salary rises all too soon.

report this

dd

Jul 05, 2012 at 11:04

Manipulation of interest rates reminded me of something else.

It struck me that the manipulation of annuity rates by QE seems to have done people in my situation far greater harm than the misreporting of LIBOR. The price of index-linked gilts which I will have to buy in the form of an annuity has risen so high that any prospect of a decent retirement is out of the window.

But that doesn't count and I shouldn't compare the two because it is a decision (part of an economic strategy) rather than a lie?

Not that I am recommending any sort of misreporting or manipulation, of course! (as above).

report this

tony williams

Jul 05, 2012 at 11:14

mps embarassing lot over a smart american bob diamond

report this

White Stick follower

Jul 05, 2012 at 11:22

Generally Gov't Dept's don't want to hear about problems,nor do senior staff want to alert ministers, for fear that ministers will shoot the messenger. The FSA is and always was a waste of space, only ever taking action after the event and more often than not after members of the public had lost personal fortunes. The 'Regulated', when exposed largely ,merely went away and restructured,renamed and then got back to their favourite pastime of 'ripping off ' the public. The BoE would have been constantly focussed on maintaining confidence, so again, bad news is unpopular.

As for the so-called grilling of Diamond, what a damp squib that was. Given that there are so many solicitors and barristers sitting as MP's one might have expected a Select Committee comprising those capable of cross- examination. Bob Diamond, who despite his gross earnings, seemed redolent of Basil in Faulty Towers- " I am from Barcelona, I know nothing". His professed endless love of Barclays might have some connection with the colossal amounts that Barclays paid, or gave, him. Did he earn or justify it as he sat in his palatial accommodation? If his constant response that he did not know is any measure then the answer must be 'No'. As usual when the top dogs are caught with their trousers down he blamed lesser lights, those 'reprehensible' traders who have now been disciplined.

There is only one place for this appalling affair to be publicly explored and that is in a Criminal Court, in front of a Jury. Its no good looking at FSA for action as it has wailed that it does not have the powers, so call in the City of London Force, which has demonstrated that it can deal with these matters. However, after much 'huffing & puffing' in all probability this affair will be allowed to quietly die a death, and then the 'City Chaps' can get back to the real business of making money- at any cost, and unseated MP's can join the Boards as non Exec Directors.

report this

Jonathan

Jul 05, 2012 at 11:47

dd, This might be of interest to you:

http://blogs.telegraph.co.uk/finance/jeremywarner/100018290/the-emails-that-reveal-how-king-and-osborne-fixed-the-gilts-market/

It's a joke but probably more like the truth than the BS the BOE announce.

report this

RL

Jul 05, 2012 at 12:48

Did anyone notice, at the very beginning, Bob Diamond thanked the Select Committee for coming! Slip of the tongue, but it set the tone!!!

report this

dd

Jul 05, 2012 at 13:37

Thanks Jonathan, that's funny and sad at the same time - and just now, between our posts, Citiwire announces another dose of QE.

Anon 1 commenting on that article says that stock markets and therefore pension pots would be lower without the QE. OK, that is easy to understand but it still seems to me that for certain groups only it is a lose/lose situation.

report this

Jonathan

Jul 05, 2012 at 14:14

dd, Stock markets go up and the value of the pound deflates.

Q. If share prices rise and the pounds deflates, am I better or worse off?

A. It depends on how much markets go up and by how much the pound deflates. But if you have savings you will be able to afford less with them.

report this

Philmo

Jul 05, 2012 at 15:46

The TSC was pathetic and made full clear why such examinations need members of the judiciary/experienced counsel who would have worked Diamond into a corner and made him squirm till a full confession was delivered!

As it was he just played with them, just as if it were business as normal.

report this

snoekie

Jul 05, 2012 at 17:12

For those advocating strong inquisitorial skills, be advised that the approach would have taken far longer than was available for the time before the TSC.

It takes time to set up the person being questioned, and plenty paperwork needed as well and then the 'mark' (person being questioned) is then nailed, time and again when he says (infamous reply of the guilty) 'I have no recollection', 'I don't know' (when clearly something that should have been within his remit) 'I was not aware'. and so on and so forth when clearly told and did nothing about making further enquiries.

A thought, how about a hybrid of a judicial enquiry and a select committee enquiry with members listening to a forensic dissection of wintnesses and adding in their own bits. Their are some skills in the house, but the the real 'artists' make their living teasing out the facts and are not easily diverted as members would be and chasing after res herrings.

report this

thinkfirst

Jul 05, 2012 at 18:33

Some simple thoughts:

a. 0.01% of Barclays traders guilty of an ineffective scam

b. more than 10% of MPs were found lacking with the ethics of their expense claims ... is the enquiry the wrong way round?

c. because Barclays was typically an outlier, any manipulation efforts would not have impacted LIBOR anyway

d. select ctte interview of Diamond proved the case that the ctte can't be trusted to scrutinise a village fair

e. having watched some Levison footage I have grave doubts about the quality of a judge-led enquiry

f. perhaps we should consider spending £100m by hiring a couple of top legal teams?

g. we mutter about the quality of the MPs ... what about the quality of press and so-called expert commentary

report this

White Stick follower

Jul 05, 2012 at 18:33

In summary, Diamond ducked & dived, and like most senior managers disclaimed knowledge and responsibility. The facing of the TSC held no terrors for Diamond, because, as he probably already knew they are inexperienced, lack knowledge and are generally inept. Further each 'inquisitor' has only a limited time ration, so unlike in Court none of them could drive on & on in an attempt to wear the witness down. There were a couple of enthusiastic amateurs, but in the relaxed atmosphere of this session evading difficult issues was no challenge for Diamond.

Similarly a Leveson type enquiry will not do any better, where the soft approach and gentlemanly ambience also prevails.

report this

MoneyObserver

Jul 05, 2012 at 21:58

As regards the TSC they are obviously not professonal inquisitors (even though some profess to be), but some of them are not even skilled amateurs - they simply played into Diamonds hands.

I think only John Mann showed the necessary 'attitude' ,but by the time he was called the battle was already lost.

He should have been called at the beginning of the session.

report this

Inge Jones

Jul 07, 2012 at 08:53

I think it's unfair to say the committee did not put him through a thorough questioning. I watched it, and there were some questions they asked over and over, and became quite firm and almost aggressive when he refused to give a clear answer. It was quite obvious that he was not totally cooperative, and short of allowing torture techniques into the room, what more could they do? At the end of the day, it all looked sufficiently suspicious that the Serious Fraud dept. decided they would become involved after all.

report this

MoneyObserver

Jul 07, 2012 at 09:42

The inability of the MPs to get any where with an evasive witness highlights the need for a full judicial process with a judge in charge.

report this

John B

Jul 07, 2012 at 10:06

Just shows that Ed Milliband was right to call for a full Public Inquiry

report this

Graham Barlow

Jul 07, 2012 at 11:32

This is yet another CEO up before the Parliamentary Finance ||Committee. They got nothing out of the Lloyds Board who took over the Bankcrupt HBOS in a matter of days without due diligence, and with Brown;s connivance. Now even Diamond is not prepared to let on exactly what happened. I suspect the reality is appalling that at the time the Politicians were capable of anything to get the Country through the crisis, honest or not, unclean and not pure. The B of E were not responsible at the time for Bank supervision , this was the totally discredited FSA ,Browns modern creation fit for the 21st century.The mere boys they are putting up from the Treasury who were making statements and comments on LIBOR is so crass that it again smacks of skulduggery ,like the crass takeover of HBOS. No one would believe what has gone on as the unvarnished truth , it beggars belief. If it is true then we need to sack all those in Parliament responsible forthwith, and get a non politicised central Bank as soon as possible as the existing one does nothing but print money.. It is so demeaning for the City to have to put up with this Political interference and in the end the finacial service industry will go the same way of all the other British Industries which have suffered Government meddling and interference. It will wither on the vine and go out of Britain.

report this

Christopher

Jul 07, 2012 at 13:35

What I don't understand is why bank CEO's are voluntarily giving up their bonuses. When Ulsterbank closes its books for possibly several weeks because of a software SNAFU, or Barclays acts like a Sicilian S&L, why do the board and chairman even allow them a bonus? Why isn't it just annulled by the employing bank? Is it assumed that a CEO who totally fouls up, because of some wrong choice of staff and management, or some corrupting philosophy or some other event which massively destroys either the bank's reputation or the financial affairs of its customers, is still somehow performing above the average standard posited by his enormous salary?

report this

MoneyObserver

Jul 07, 2012 at 21:45

Your quite right Christopher - it shouldn't be up to the CEO to "give up their bonus".

The way it seems at present is that a level of calamitous and dismal performance from the organisation does not exist, that a bank board would consider justified not paying their CEO a bonus.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire guide to investment trusts

In association with Aberdeen Asset Management

Henderson Global Investors: 2014 looks set to be another strong year for UK commercial property


Andrew Friend, acting co-manager*, and Marcus Langlands Pearse, co-manager of the Henderson UK Property Unit Trust (HUKPUT), provide an overview of the key risks and opportunities for the UK commercial property market.

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Sorry, this link is not
quite ready yet