Barclays' Bob Diamond: "Incredible or incompetent"
Bob Diamond, on July 4, 2012. / Mark St George/Rex Features via AP Images
(MoneyWatch) That was the verdict of Conservative Member of Parliament Andrea Leadsom after a three hour session in which former Barclays CEO Bob Diamond was grilled by members of Parliament about what he did, and did not, know about the manipulation of inter-bank lending rates.
Much of the testimony did not add up. In 2008, Diamond had discussed with a deputy director of the Bank of England the fact that Barclays was paying more to borrow money than other British banks which were in the process of being bailed out or nationalized. This suggested Barclays was the more vulnerable bank whereas in fact it was within days of closing private funding. If Diamond was so interested in whether other banks were manipulating their interest rates - why did he apparently not investigate what was going on in his own? Diamond claims that he had no idea what his own bank was doing in this regard until just a few days ago. That, according to Leadsom, is the incredible part.
Diamond repeatedly blamed market manipulation on 14 traders who reportedly shouted proposed interest rates across office desks and reported their rigging of the market in emails. It had happened on his watch but wasn't his fault. "I don't feel personally culpable for those actions," he said, but he felt accountable. How, members of parliament wanted to know, could it be that Diamond knew nothing of this? Why had no one told him? Wasn't he responsible for the culture of his institution? Diamond's repeated insistence that he simply didn't know is the incompetent part.
Chair Andrew Tyrie concluded: "I think, cumulatively, the whole package looks somewhat implausible." Talking to British business leaders afterwards, the overall verdict I heard was that Diamond had not emerged well. He had neither taken responsibility nor explained what had happened. Instead he had danced around questions, stonewalled, delayed, prevaricated and distracted attention. Many felt he was preserving and protecting the friends he'd need for a future career. After half an hour, members of the press were seen to leave the hearing, bored and disappointed by both sides' failure to engage. Members of parliament were disorganized in their approach and lacked sufficient expertise to be forensic in their exploration of what had gone on; that Diamond insisted on addressing them by their first names rankled with many - including the MPs themselves. His tone conveyed an inappropriately clublike atmosphere of cosy informality, not an institutional inquisition by an elected government of a leading commercial organization. Diamond's one smirk during his appearance came when one MP told him he had given little away.
Next week, the investigation will continue as MPs question governors of the Bank of England. Over the next three month, details of the Royal Bank of Scotland's activity in the mortgage market are also expected to emerge. International banks - in the Far East and the U.S. - will also be drawn into the fray. There is much talk of cultural reform but no one can say what that would look like, how legislation might mandate it or what it would look like if complete. After the grand drama of massive fines and quick resignations, the drama sits becalmed, without enough detail or frankness on either side to keep it moving, awaiting the next storm.
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