There is a putrescence coming from the banks of what Londoners term ‘The City’, an intense odour of disgust suggesting old tricks from the seasoned and the crooked. The resignation this week of Barclay’s CEO Bob Diamond should not have been the bombshell it became but even after years of banking mismanagement, the public has yet to be desensitised to the antics of the bankster.
The former Barclays chief executive, who quit on Tuesday under pressure from the Bank of England and the financial regulator, more or less conceded that Libor, or the London Interbank Offered Rate, had been manipulated by the bank with frequency. Such behaviour has earned Barclays fines from regulators on both sides of the Atlantic in the vicinity of $441 million. Rigging the rate, it seems, was a banking motto.
A spate of resignations have ensued – chairman Marcus Agius, formerly of Lazard, went on Monday, Diamond on Tuesday kept company with chief operating officer Jerry del Missier. For his part, Diamond unconvincingly claimed before the Treasury Select Committee that he had no knowledge of the interest rate fiddling in October 2008.
The ponds of this banking foray were muddied further when it came to light that the artificially lower rates of lending to other banks had been pointed out in advice that came from the Bank of England’s Paul Tucker, who had, it seems, spoken to Diamond in October 2008. Tucker, the Bank’s deputy governor general, explained that ‘senior figures within Whitehall’ felt that Barclay’s Libor rate was simply too high.
The wise crew of Barclays have sought to deflect their actions upon the Bank of England on the one hand, and the desperation born from an economic crisis that ensued in the collapse of Lehman Brothers. Eschewing a government administered bailout package and effective nationalisation, Barclays decided to flirt and ultimately seduce their Qatari and Abu Dhabi investors in gaining their signatures. In Diamond’s words, ‘This was a very, very pressured situation. This was probably the most momentous week in the history of Barclays and the history of financial markets.’
The differences between the Barclays of 320 years ago and the modern beleaguered version could not be greater. It is a story of the banking sector writ large – traditional banking marginalised in favour of speculative-styled investment banking. In 2008, it became a trans-Atlantic investing giant by snapping up the assets of a bankrupt Lehman Brothers (Reuters, Jul 6). The bank had moved inexorably, and aggressively, into the world of debt markets.
There is no beginning to the manner of what The City will do to preserve its fetid image. Tony Blair’s former advisor Tim Allan has been brought in to soften the lamentable image – and massage the bruised egos of bank managers. Allan, it is worth noting, works for a public relations company that has, on its payroll, such delectable creatures as President Nursultan Nazarbayev of Kazakhstan and Stella Artois. If there is an image to be cleansed for popular consumption you can count on Portland Communication to appear with an oversized brush and a good deal of foundation.
The banksters themselves are disgusted by the political reaction shown towards their proclivities. For them it’s the pot calling the kettle blacker than black. ‘In recent years’, complains Investec’s Ian Gordon, ‘0.5 percent of MPs in the UK have been imprisoned for theft. Many more escaped sanction by agreeing to repay expenses claimed in error, while perjury, perverting the course of justice and spying for the Czech Republic have also proved popular pastimes amongst their predecessors’ (The Independent, Jul 6). Being a bankster, in short, is an onerous burden to bear.
The question is, what will the good British do about it? At the instrumental level, separation of the investment functions and traditional ‘domestic’ functions is being called for. The political will for an independent, judge-led public inquiry, as demanded by Labour, is not there.
Prime Minister David Cameron has opted for a joint committee of MPs and peers to investigate the rate fixing scandal, arguing that it would be speedier than Labour’s more ‘forensic’ option and enable a banking reform Bill to be put together for next year. Little, it seems, will be done. The public, however, are simply readying themselves for another revelation.
Binoy Kampmark was a Commonwealth Scholar at Selwyn College, Cambridge. He lectures at RMIT University, Melbourne. Email: firstname.lastname@example.org