Thursday of this week was probably the hottest day this year so far — getting up towards 85ºF in Horsham in the mid-afternoon. But it was a hot day in ways that had nothing to do with the weather. The Bankers are in trouble again. And leading the trouble is our old friend — "time to move on" — Bob Diamond at Barclays. Only about 2 weeks ago I had a moan about the ridiculous salary that Bob Diamond pays himself but now a new scandal emerges. It seems that traders in Barclays — as well as other banks — were systematically lying about the interest rates they were paying to borrow money in order to [1] manipulate the Libor rate and [2] make lots of money for themselves. Libor — the London Inter-Bank Offer Rate is a a lending rate that is published each day and it is an average figure that has been compiled from data fed to Thomson Reuters. The data from each bank should be the actual rate that they are having to pay to borrow money on that day. It is now clear that over several years before the great crash — and after — Barclays traders manipulated the rate by lying — either to put more money in their own pockets or to hide money problems in the bank. These operations in massaging the interest rate involved Barclays traders and their mates in other banks. This happened in the Barclays Capital wing of their operations and at the time the man in charge of that operation was Bob Diamond — now CEO. The bank has been fined £291,000,000 by the regulatory authorities in the USA and in the UK. Not a huge sum for a bank the size of Barclays and the money will come from the pockets of their customers. Mr Diamond said that these lapses were down to the actions of one or two traders who were no longer with the bank. "I am sorry," he said, "that some people acted in a manner not consistent with our culture and values." I cannot agree. They acted completely in a manner consistent with their culture and values. Refusing to resign, Bob Diamond has said that he will give up one of his bonuses for this year. "What does this mean?" I hear your cry. I have no idea. It is something of a mystery trying to establish exactly how much Mr Diamond is paid and how it is calculated. Does his fore-going of the bonus mean that he will collect it later when things have quietened down a bit? Will he have to try to get by on only £10 million or so? After all his 2011 package amounted to nearly £21 million.
Barclays have now been fined and censured several times; they have directors under investigation for fraud in Italy; they pay their senior officers — including various investment bankers/traders ludicrous sums of money; they avoid tax; their shareholders get screwed over and over again while the bankers take away their pay in wheel-barrows. Yesterday, Barclays shares dropped by 16% — ie from next to nothing to a whole lot less.
This massaging of the Libor rate does involve other banks and more sludge will come to the surface in coming months. This scandal damages the reputation of the City of London and action needs to be taken to prosecute — if possible — making it absolutely clear that these actions will not be tolerated. It is even suggested that it is still going on! Banks have to be regulated. They cannot be allowed to carry on operating like vast casinos using our money to place bets to make buckets of money for themselves or, if it all goes belly up, we the tax-payers will bail them out.
Irrespective of whatever else floats to the surface, Bob Diamond cannot be allowed to carry on as though nothing has happened. What has been happening at Barclays is that all the wrong-doing, greed, incompetence and gambling that took place in the period before the Crash is now being exposed. Shareholders and the public in general are demanding action. Everybody is struggling to sort out the mess. The government, commerce, industry, everyone needs more cash to try to balance the books, yet the only group not have to shoulder any of the burden has been the bankers; one of the groups most responsible. Still, they carry on telling us about their expertise, their importance to the economy and why they should be paid such huge sums. Yet, every day we see only just how inadequate and incompetent they really are. The very people at the centre of the financial mess carry on regardless.
What next?
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