Tag Archives: Barclays


Translated from the French by Tim Gupwell.

The first hypothesis which comes to mind with regard to the American Justice Department’s decision on Friday not to prosecute the bank Goldman Sachs for its alleged role in the Subprime crisis, is of course of corruption at the very heart of the Department. The facts are well-established and eminently reprehensible: exploiting the trust of their best clients to sell them junk products; organizing bets and participating actively in these bets on complex securities which had been manipulated to ensure they were of the worst possible quality.

Which begs the next question: “is it possible that it actually had nothing to do with corruption?” And the answer to this is in fact “yes”. Other explanations are possible and even the totally disgusted Senator Carl Levin himself, who headed the American Senate’s enquiry committee, conceded this since he said that the Justice Department’s decision “shows  either weak laws or weak enforcement”.

Evoking “weak enforcement” is tantamount to maintaining that the Department of Justice is complicit. So is this an accusation of corruption on the part of Levin? Not necessarily. It could simply be the result of Goldman Sachs having far more clout than the Justice Department. In the past, I have detailed a number of incidents proving that the balance of power between transnational firms (and sometimes even national ones) and States, is loaded firmly in favour of the former in the vast majority of cases.

Talking of ‘weak laws’, is the equivalent of saying, using the terms I employed previously that “exploiting the trust of their best clients to sell them junk products; organizing bets and participating actively in these bets on complex securities which had been manipulated to ensure they were of the worst possible quality”, does not come under the remit of American law. What can be more worrying than that? Let’s look at that in more detail.

First of all, “sales of junk financial products to the firm’s best clients”. Milton Friedman, Professor of Economics at Chicago University for nearly thirty years, winner of the Nobel Prize for economics in 1976, successfully spread the idea that a firm worked uniquely for its shareholders; not for its clients, nor for its employees. Friedman is considered the second most eminent economist of the 20th Century (after John Maynard Keynes); one of his books alone has sold a million copies. Judging from this perspective, the sale of junk products is justified if it increases profits.

Next, “making rigged bets on the collapse of a financial sector”. During his hearing before the American Senate Committee chaired by Carl Levin, in April 2010, Lloyd Blankfein, Chief Executive Officer of Goldman Sachs, maintained that the idea that financial bets are reprehensible did not make sense to him since a bet is a kind of “risk transfer”. In one of my previous articles dedicated to this hearing (in French) I thanked Senator McKaskill “for having reminded the boss of Goldman Sachs of the difference between an insurance policy and a bet. Blankfein had replied that for the market maker there was no difference, to which she replied that for the average American, that’s probably where the problem lies.” The error is of course a major one, as a bet creates out of nowhere a risk which had not previously existed. Nonetheless, I am sure that we would easily find half a dozen economists, holding some of the most prestigious economic chairs, to confirm without any hesitation Blankfein’s remarks that bets are just ‘risk transfers’ like any others.

But quite apart from the watering down of the laws under the influence of economists, there are other possible explanations for the Justice Department’s decision on Friday not to prosecute Goldman Sachs, and the principal one is that of the State: the operations of the firm Goldman Sachs may be so intertwined with the very functioning of the American state that any genuine challenge is impossible to envisage.

Over the years, I have reported here the theories of various traders, also bloggers or involved with the media in some way, who maintain that Goldman Sachs is the right arm of American State manipulation aiming to create a “bullish sentiment” on the stock markets, or, in other words, the tool of the ‘Plunge Protection Team’, according to the nickname of the ‘Working Group on Financial Markets’, set up by the Secretary of the Treasury, the President of the Fed, the President of the Securities and Exchange Commission (the regulator of the stock market) and the President of the Commodity Futures Trading Commission (regulator of the futures and options market). There is no actual proof of these allegations; curious souls can however regularly consult the site Nanex, a firm which collects information on financial transactions.

Does this amount to saying that there is only one choice: that either the American Justice Department has been in one way or another corrupt in this affair (for financial reasons or for state ones); or that the financial sector as a whole is untouchable? No, because as the recent interventions from the American regulatory authorities against the British banks Barclays and Standard Chartered prove, there are indeed some financial establishments in the firing line and in serious trouble. The British will no doubt feel slightly bitter that these kinds of double-standards exist, and there is no doubt that the next compromising revelations will come from that direction in the form of reprisals. Unless of course, as the independent trader Alessio Rastani maintains, Goldman Sachs really does rule the world, in which case nothing will happen. This is moreover not the kind of hypothesis that can be easily dismissed.


Translated from the French by Tim Gupwell

Up to now in the LIBOR affair, the witness statements before the parliamentary select committee have essentially seen everyone lying to protect their own interests. The inevitable result is a sort of cacophony, compounded by strategy changes half-way through, which was particularly the case for Bob Diamond, former Chief Executive of Barclays, who one day sought to bring down with him Paul Tucker, Vice-Governor of the Bank of England, only to attempt the following day to absolve him of any responsibility, with the catastrophic result you can easily imagine.

As for the officials, regulators and managers of the Bank of England, the performance was not much more convincing: “saving one’s ass” as one says in Shakespeare’s language, saving one’s skin (“sauver sa peau”), as one says more politely in Molière’s language.

Jerry Del Missier, Chief Operating Officer, N° 3 at Barclays until only a few days ago, chose a completely different strategy: honesty. It is difficult to say whether it was 100% sincere, but whatever it was, it was close to 90%, and probably more than that. And this strategy is, of course, far more effective due to the not entirely surprising reason that while there may be a thousand different ways of lying, there is only one way of telling the truth – which prevents one from getting too muddled up.

Obviously, the collateral damage is tremendous since in his candour, del Missier dragged absolutely everybody into it – not just the liars of recent days but also some new protagonists whose names he freely quoted, despite them having not been mentioned up to now

When he was asked, ‘if as you maintain, the orders coming from on high were encouraging you to manipulate the rates downwards, were there no alarm bells ringing at the thought that it was illegal?’, he responded ingratiatingly, ‘well…no, because effectively it was the only reasonable thing to do to save the system”.

Why have the others not adopted this approach, and consequently sacrificed tens of millions of Pounds Sterling in salaries and bonuses? Because the Golden Calf once said to the crowds kneeling before it, “Finance regulates itself, and the promised earthly paradise will only come to pass when there are no regulators or governments!”; and these tens of lost millions represent little if they are the price to pay for ensuring that their children and their childrens’ children can continue repeating the words of the Golden Calf for centuries to come.

Jerry del Missier, former C.O.O. of Barclays

Mervyn King, Governor of the Bank of England, Paul Tucker, Vice-Governor of the Bank of England, Adair Turner, President of the Financial Services Authority, the British regulatory authority.


Translated from the French by Tim Gupwell

Over recent years you may have seen me carrying out extremely complex complications such as this: “it needed four years – between 1929 and 1933 – before any genuine measures were taken at the time of the Great Depression!” And it was this kind of calculation which led to my disenchanted musings– since nothing was being done – when I wondered on the 28th June whether I should put an end to the blog.

And then, and in fact it was on this very same day, the second episode of the LIBOR affair broke, an affair which has since grown to such an extent that it is difficult to say where it will end, the only sure thing being that Barclays, which is only one of the 16 banks involved and certainly one of the least guilty parties, finds itself in the firing line today, and that up to now we have only had caught a glimpse of the highly probable involvement of the regulators and governing class in the affair.

The first episode, namely the events themselves, took place in 2008; the second, which is the realization, is taking place now, in other words four years later. Exactly the time needed, as I mentioned, during the Great Depression.

What can explain this sort of delayed reaction? Doubtless the time needed for an administrative enquiry to pronounce justice, but there is something else. And this other thing is the object of my article in Le Monde-Économie which will appear shortly: it is a climate operating like a reverberation chamber, ensuring that what had been merely an anomaly in 2008 (see my article in French un taux LIBOR à 3 mois trop bas de 17 points de base*) becomes in the eyes of public opinion in 2012, a scandal.

How is such a climate created? By the coming together of a number of different developments – for which four years would be required before a critical mass was finally attained – constituted (more precisely) in this particular case, in Great Britain, by the Rupert  Murdoch affair, which revealed an incestuous collusion between business leaders and governments, scorning all principles, and revealing (to reemploy the terms used in my forthcoming article) “an arrogant managing class, which does not trouble itself with rules, and organizes its affairs as it sees fit, whilst maintaining a bare minimum of appearances.”

This is how – in the case of one particular country – a climate is created which means that after four years, what had initially appeared to be a fairly banal collection of simple facts saw itself transformed into an absolute disgrace.

* The 3 month LIBOR rate 17 basis points too low


Translated from the French by Tim Gupwell

Paul Tucker, Deputy Governor of the Bank of England, made a statement this afternoon before a British Treasury Select Committee. The reason for his presence today was that on the 4th July, before this same committee, Bob Diamond (who was the Chief Executive of Barclays until a few days ago) had hinted that he had been under pressure from Tucker for the bank he managed to submit lower figures for its inter-bank borrowings than the figures it was actually submitting. The figures in question were used at the time by the British Bankers’ Association to calculate the interest rates known as LIBOR (London interbank offered rate): the interbank rates (in dollars) prevailing in London. During the course of a conversation between Tucker and Diamond, the first is claimed to have said to the other that “you wouldn’t suggest anybody doing anything wrong” if Barclays submitted lower figures than it had been doing. Tucker is said to have declared that he was being leaned on himself in this respect by senior members of the Government.

If Bob Diamond’s interpretation of his conversations with Tucker was correct, then a key figure at the head of the Bank of England was inciting one of the Executive Managers of the second biggest commercial bank in the country to manipulate the LIBOR, a rate which constitutes a reference point for the entire international financial system.

My feeling having watched this hearing from start to finish is that Tucker, once widely touted as a replacement for Mervyn King at the head of the Bank of England, has blown his chances. Mind you, I am still the same person who was convinced that Jérôme Kerviel’s trial (the first episode at least, not the recent appeal) would definitely not lead to a conviction!

Tucker’s explanation of the events was that there has been a misunderstanding about the meaning of the conversations he had had with Diamond. At that time Barclays had refused government aid, in the form of a massive capital injection, as it feared that accepting these sums would almost inevitably have lead to its nationalization. Barclays is said to have got round this a little later thanks to a capital investment from the sovereign funds of Qatar. What Tucker was trying to do – according to him yesterday – was to inquire after the health of Barclays: did the rates submitted, which were higher than its peers, signify that the bank was in difficulty?

Paul Tucker is definitely not a great actor: he mechanically poured himself water and started to drink as soon as he was in any difficulty. At times, when posed a question by his interrogators, he appeared utterly panic-stricken, manifestly worried about where it might lead to. Nor was he very assured on the question of what brought him there: when the chairman of the committee highlighted the fact that the committee was called at his request he replied half-heartedly that “You’ve asked me to come voluntarily”, which led the chairman to declare ironically, “largely at your request”.

What conclusions can be drawn? In a formal sense, that today, in the West, we are still living in a democracy. During Goldmans Sach’s hearing in April 2010 (l’audition des dirigeants de Goldman Sachs, en avril 2010), I wrote here:

At this moment in time, I have been at this hearing for two hours. What amazes me is the robustness of this democratic regime, in spite of all the forces ranged against its correct functioning, in spite of the colossal sums which are paid out to lead it astray. It is virtually a miracle to me that people like Senator Carl Levin manage to conserve – despite the great money machine crushing all before it – the integrity that enables them to oppose this steam roller, as he is doing now before my very eyes.

I feel the same way this evening: we are still living in a democracy, at least in what concerns the quality of information I am able to access. To my great satisfaction, it is this information in fact which enables me to read with great clarity between the lines of what is said.

All that remains is for me to be able to explain with just as much satisfaction why all this remains without consequences, and why no decision is ever taken along the lines of my understanding of it.

In the case of Kerviel’s first trial, the verdict seemed to entirely ignore all that had been said during the hearings. Or rather, to ignore what I had been able to read between the lines of what had been said. And it is this which is without doubt the essential point: is the ruling class incapable of reading between the lines? Or does it know how to do it, but count on the fact that it will, more or less, be the only one capable of doing so and that everybody else – and in particular the average voter – will never be able to do so, and will therefore never ask for accounts to be rendered?


Translated from the French by Tim Gupwell

From the Financial Services Authority’s Final Notice of their decision, dated the 27th June, to impose an 85 million Pound fine on Barclays Bank (less a reduction of 30% for exemplary co-operation with the enquiry) due to their manipulation of the LIBOR interbank rates, two separate periods need to be distinguished. In the first period, which loosely spans the period from 2005 to 2007, rates were manipulated on trading floors by operators at a subordinate level; in the second period, which runs from 2007 to 2009 and which corresponds to the height of the crisis, rates were manipulated by these same subordinates following instructions from above.

Unambiguous figures are to be found in the conversations reported in the documents. During the first period, the rate manipulations were usually around about 1 basis point (a hundredth of 1%) and sometimes 1.5 basis points; in the second period, it was a matter of manipulations varying from 17 to 46 basis points. In other words, they were of a completely different order of magnitude.

When Bob Diamond, the former Chief Executive of Barclays, explained last Thursday to a British Parliamentary Select Committee that he had been “shocked” and “disgusted” by the behaviour of some of his employees, was he talking about the rank and file traders (the dozens of Kerviels that I discussed (in French) in my Friday video) during the period from 2005 – 2007, or about the Senior Bank Officers from the period 2007 to 2009? In my opinion, to ask the question is to know the answer.

That said, as I recalled in my accounts of the ‘LIBOR affair’, from the earliest in April 2008 (L’affaire du LIBOR) [in French], to the most recent (LIBOR: Delayed indignation), it can be said that on the one hand, minimizing the rates submitted by the 16 banks concerned for the calculation of the  LIBOR virtually amounted to a national duty in the climate of panic which had caught hold of the financial markets; and, on the other hand, according to what we already knew in 2008 and which was confirmed in the Final Notice, of all the London Banks it was in fact Barclays which was the most reluctant to falsify the figures. The following observation is representative of this point of view:

“….on 18 September 2008, a Submitter stated in a telephone conversation with Manager D that he would put in a one month US dollar LIBOR submission of 4.75 because that was where he had obtained money in the market…. The Submitter agreed to lower Barclays’ one month LIBOR submission to 4.50. The next highest submission was 50 basis points lower than Barclays’ submission on that day.” (p.30)

Let us be clear about this: 1) From 2005 – 2007, a “dozen Kerviels” working for Barclays regularly submitted, for the purpose of calculating the LIBOR ( at the same time as the 15 other banks), rates that had been manipulated upwards or downwards to the tune of 1 to 1.5 basis points. 2) From 2007 – 2009, in the case reported, a Senior Bank Officer instructed a subordinate to minimize the rate observed by 25 basis points. 3) On the same day, in another bank in the city of London (the one which manipulated the rates the least amount after Barclays), a senior Bank officer instructed a subordinate to submit in the bank’s name a rate which had been manipulated by at least 75 basis points – 25 [like Barclays] plus 50 [additional].

In conclusion, we can say that of the sixteen banks which submitted rates for the calculation of the LIBOR (18 nowadays), fifteen cheated even more than Barclays. This latter had a 85 million Pounds (107 million Euros) fine imposed upon it (before it was reduced), and has lost, since last week, Chief Executive Bob Diamond, Chairman Marcus Agius, and Chief Operating officer Jerry del Missier – who were all firmly shown the door by the FSA, the Bank of England and the Chancellor of the Exchequer. This latter, George Osborne, declared that the facts revealed were “symptomatic of a financial system that elevated greed above all other concerns and brought our economy to its knees” and added that “fraud is a crime in ordinary business; why shouldn’t it be so in banking?”

We can only approve of the British Chancellor’s remarks. But what do the mangers of the other 15 banks who were responsible for submitting rates for LIBOR think of all this? In any case I would rather be in my shoes than theirs.



Translated from the French by Tim Gupwell

The paradox of the 2008 ‘LIBOR scandal’ – in addition to its familiar ring in 2012 – is that, as I alluded to at the time and as I recalled a few days ago, the fraud was well-intentioned for once: the ‘philia’ of Aristotle, the good will exercised by everyone so that a common activity can be pursued – in this case the very existence of the financial system.

Yesterday’s ‘surprise’ was that Paul Tucker, Vice-Governor of the Bank of England, was said to have advised Bob Diamond, who resigned yesterday from Barclays, to tone it down when the bank transmitted the amount of the rates that its peers were charging it over various terms.

In a memorandum addressed by Diamond on the 29th October 2008 to John Varley, Chief Executive of Barclays at the time, he explained that Tucker had called him the day before to ask him why the bank often gave higher rates than the other banks whose opinions contributed to determining the LIBOR rate. Tucker explained that his call was motivated by the fact that he was receiving numerous phone calls from members of the Government. Mr. Tucker reiterated that the calls he was receiving from the government were “senior”, according to Diamond, and that while he was certain that we did not need advice it did not always need to be the case that the rates appeared as high as we have recently”.

On Friday I explained in The Manipulation of the LIBOR why it was in the interest of banks like Barclays, in the interest of the Bank of England, in the interest of senior Government figures, in the interest of Great Britain and in the interest of financial markets as a whole, to fiddle the rates since at that time everyone in some form or another would have been heading to their downfall if they had behaved nay differently.

It is a particularity of the time required for criminal prosecution (the fine of 359 million Euros imposed on Barclays on the 27th June) and for popular indignation to be ignited, that the scandal – despite being known about in April 2008 (see my French article L’affaire du LIBOR) – only created a real buzz in the media four years later; sweeping before it (some might say “finally”), those in charge of commercial banks, central banks, and senior politicians, all of them sharing an uncustomary “surge of philia”, for which, irony of ironies, they were roundly punished.


Translated from the French by Tim Gupwell

I watched the hearing of Bob Diamond live, who had resigned the day before from his post as Chief Executive of the British bank Barclays.

Diamond was extremely polite but his tactics in response to the questions posed him were very skilful: the more brutally a British parliamentarian interrogated him, the more he highlighted in his answer the complicity that had previously bound them together, frequently resorting to the use of his interrogators’ first names in the answers he gave (playing on the fact that they would  be forced to pass this familiarity off as being some sort of ‘Americanism’, forgivable in the name of good international relations), or saying for example, “John, that’s a subject which, as you know, we have already discussed in the past, you and me, on many occasions…”, etc.

Obviously Diamond’s intention is to save his reputation and his past bonuses (for which he maintains that it is Barclays which is responsible rather than him). But for you and me, who don’t know him or the others personally, the impression given out was that all these respectable people, the  accusers just as much as the accused, are in reality best of friends and are essentially indulging in a spot of theatre for PR reasons; a staged hostility, a pure façade of antagonism.