The mainstream press has been busy during the past 2 days working itself up into a frenzy of reporting, despite the fact that they are in effect reporting a 4 YEAR old story, something that I have touched on many, many times over the years that LIBOR rates are MANIPULATED by ALL parties concerned as a consequence of a series of credit crisis earth quakes that took place following the collapse of Northern Rock (a year before Lehman's), as fear driven Labour government politicians put pressure on a Panicking and Incompetent Bank of England to loosen the reins on the bankrupting, insolvent banks who took the increasingly nervous nods, winks and nudges as a licence to defraud counter parties to interest rate derivatives contracts (usually other banks). Now four years later the mainstream press is using a magnifying glass on just one aspect of market manipulation that took place during the financial crisis that ultimately will lead all the way to Alistair Darling's and Gordon Brown's Downing Street doors.
Today's mainstream press commentary is increasingly concentrating itself on statements that first started emerging in the mainstream press on late Sunday 1st July via Robert Preston of the BBC.
In making false submissions about their borrowing costs, managers at Barclays believed they were operating under an instruction from Paul Tucker, deputy governor of the Bank of England, I have learned.
This belief was fostered after a telephone conversation in the autumn of 2008 between Mr Tucker and Bob Diamond, who at the time ran Barclays' investment bank, Barclays Capital, and is today chief executive of Barclays.
In finding Barclays guilty of attempting to manipulate the important LIBOR borrowing rate, the benchmark rate for bank-to-bank lending, the Financial Services Authority (FSA) made an elliptical reference to this conversation.
The relevant passage from the FSA's judgement against Barclays talks of a "telephone conversation between a senior individual at Barclays and the Bank of England during which the external perceptions of Barclays' LIBOR submissions were discussed".
I have established that the conversation was between Mr Diamond and Mr Tucker, who is a leading candidate to succeed Sir Mervyn King as governor of the Bank of England.
However as I stated the day before in Saturday's article, LIBOR manipulation is NOT news to market participants, and instead amounts to pure smoke and mirrors to distract the public from those that gave tacit approval to manipulate LIBOR rates (30th June 2012 - Bank of England, FSA and Politicians Try to Insulate themselves from Bankster Fraud Fallout
The Bank of England, FSA and politicians of all parties have been busy all week putting up multiple screens of smoke and mirrors to try and separate themselves from their bankster brethren despite the facts of close relationships between all parties that amounts to negligence to regulate and hold bankster's to account where the fundamental fact remains that despite all of the continuing crimes amounting to an ongoing risk of actual bankruptcy of Britain i.e. continuing to inflict far more financial damage than the likes of Al-Qeeda could ever have hoped to have imagined to achieve, NO bankster criminal has gone to prison! The only consequence so far has been to lose a bonus for a year or two, let alone face the sack.
LIBOR Manipulation is NOT news as my article of 28th June illustrated that the mainstream press is only now coming to terms with the fact that the LIBOR rate is manipulated, something that most market participants have know for years and so will have the Bank of England and FSA, though they appear to be pretending otherwise, and something that I was aware of BEFORE Lehman's went bust in September 2008.
Neither do the Bank of England and the Treasury recognise that the official BBA LIBOR rate is broken , i.e. that the reported rate is not reflective of the true level of crisis as the reporting Banks are reluctant to announce the degree to which the banks are unable to function due to the continuing deleveraging of the huge $500 trillion derivatives market.
Without repeating what I have already written I refer to the following recent articles that preceded the mainstream press commentary of this week, that remains ahead of the curve on current reporting:
01 Jul 2012 - If Bank of England Approved LIBOR Rate Manipulation, Will Mervyn King Resign? - The real reason for the continuing manipulation of LIBOR was pressure from politicians to avert financial armageddon, probably as of early 2008, and that all roads ultimately lead to the head of the Bank of England, Mervyn King who will likely at some point play his own Ace Card in that he was acting under instructions from Alistair Darling and Gordon Brown even if they never realised the consequences of what they were requesting at the time during a period of extreme crisis.
30 Jun 2012 - Bank of England, FSA and Politicians Try to Insulate themselves from Bankster Fraud Fallout - FSA, Politicians and Bank of England were busy putting up smoke and mirrors screens to hide their own culpability in the manipulation of LIBOR. The truth is that politicians get the central bank to print money / debt so that they can buy votes with money they don't have. The central bank induces the banks with cheap money and capital requirements to fund the government deficit by buying government bonds.
28 Jun 2012 - Barclays LIBOR Market Manipulation Fraud To Boost Profits and Mask Insolvency, RBS, HSBC and Lloyds to Follow - That this is an 4 year old story that most market participants have been aware of the fact that the banks were manipulating LIBOR as a consequence of nods and winks from the Bank of England to do so.
Bob Diamond's Revenge
Barclays Ex-CEO Bob Diamond was liberated yesterday to reveal his version of the truth later today on the degree to which the Bank of England had alledgedly sanctioned manipulation of LIBOR rate submissions to the BBA following pressure from the previous Labour government. Though, I had previously thought (Sunday) that Bob Diamond would use his Get out of Jail Free Card to also keep his job, but the FSA and Bank of England Governor acted to push him to resign so as to reduce the intensity of press focus. He will present his evidence later today at the MP's Treasury Select Committee to include details of phone calls and emails allegedly emanating from right at the top of the Bank of England.
Barclays Email Full Text :
Emailed to John Varley on 30/10/2008. Copied to Jerry del Missier.
Date: 29th October 2008
Further to our last call, Mr Tucker reiterated that he had received calls from a number of senior figures within Whitehall to question why Barclays was always toward the top end of the Libor pricing. His response was "you have to pay what you have to pay". I asked if he could relay the reality, that not all banks were providing quotes at the levels that represented real transactions, his response "oh, that would be worse".
I explained again our market rate driven policy and that it had recently meant that we appeared in the top quartile and on occasion the top decile of the pricing. Equally I noted that we continued to see others in the market posting rates at levels that were not representative of where they would actually undertake business. This latter point has on occasion pushed us higher than would otherwise appear to be the case. In fact, we are not having to "pay up" for money at all.
Mr Tucker stated the levels of calls he was receiving from Whitehall were "senior" and that while he was certain we did not need advice, that it did not always need to be the case that we appeared as high as we have recently.
The email implies that ultimately all roads lead straight back to Gordon Brown's government as manipulating LIBOR was one of many calls to action pressures that they put on the Bank of England, to prevent financial armageddon, including and not limited to the Bank of England cutting interest rates and abandoning its Inflation target as they seized control of the levers of power due to FSA regulator and Bank of England incompetence during the preceding year of the credit crisis that started with Northern Rock going bust as I wrote 3 years ago:
The near collapse of the banking sector over the past 3 years illustrates the failure of the financial services authority to regulate. Yes the failure is over 3 years and not since the collapse of Northern Rock some 2 years ago, for the FSA first warned the British banks in 2006 following the peak in the US housing market to STRESS TEST their business models in the event of a 40% crash in house prices, coupled with mortgage defaults of 35% and to reign in excessive risky mortgage lending at too high salary multiples. However as we have seen, a decline in house prices of less than 15% by September 08 had brought virtually all of the British banks to the brink of bankruptcy only prevented by a tax payer bailout now totaling £1.5 trillion of liabilities to date which are expected to grow to £2 trillion !
Unfortunately the FSA talked the talk but DID NOTHING TO PREVENT OR REGULATE THE BANKS and therefore ensured the BOOM during the first 6 months of 2007 followed by the BUST that immediately wiped out Northern Rock in September 2007 and proceeded to wipe out bank after banks capital bases towards zero right upto September and October 08's Financial Armageddon panic that resulted in the across banking sector bailout and panic interest cuts by the Bank of England on the direct orders of the Prime Minster Gordon Brown, who announced the first 0.5% cut himself at Prime Ministers despatch box which sent the signal to the markets of exactly who now is in charge of setting UK interest rates, certainly not the Bank of England who's MPC had been sat twiddling their thumbs for the preceding 12 months of the crisis.
Readers should not forget that Barclays is only the first of many banks to be caught out in rate fixing, and probably the least culpable given the two facts that a. it was the first to settle and b. it was NOT nationalised, i.e. banks that actually did go bust such as HBOS and Lloyds will likely have attempted to manipulate rates to a greater extent. So by all means Barclays is just the beginning of the rate fixing story. Thus the Labour party should be afraid, very afraid, remember how the expenses scandal snowballed during the Summer of 2009, as this has the potential for something similar to occur where we move from bankster's being investigated for what they did and said to regulators and ultimately senior Labour politicians.
I will write later this week on the further implications for the Bank of England and its primary purpose which is to print and monetize UK Government debt as the UK continues to stealth default by means of high inflation. Ensure you are subscribed to my always free newsletter to get this analysis in your in box.
By Nadeem Walayat
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Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of three ebook's - The Inflation Mega-Trend; The Interest Rate Mega-Trend and The Stocks Stealth Bull Market Update 2011 that can be downloaded for Free.
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