8 ms·

Libor: Bank of England implicated in secret recording

235 points by iamben 10y ago

Lazare 10y ago
It's not really news; it's always been clear that: 1. The Bank of England knew about the Libor rigging as it happened 2. And was, at a minimum, very happy with the results (given that it reduced the risk of bank runs imperiling the entire system) 3. And that nobody involved really thought this was a serious issue, much less a crime. Putting the above together, it would be surprising if there wasn't some pressure from the Bank of England to push Libor down; why wouldn't they be doing that? In the circumstances, it would have practically been remiss of them to do otherwise. Of course, it looks absolutely horrific now that we've decided that manipulating Libor is a serious issue that people should go to prison for!
- Lazare 10y ago
  As an update, keep in mind that Barclay's was being pretty open about it. They were talking about it to the NY Fed, US Fed, ECB, World Bank, etc. http://dealbreaker.com/2012/07/same-old-boring-story/ http://dealbreaker.com/2012/07/same-old-boring-story/ Like, literally, a Barclay's guy is on record telling a regulator that they were lying about Libor because telling the truth hurt their share price, so they stopped! And then everyone laughed, and that was the end of it, because it was just Libor, and it's not like there was an assumption that it was somehow accurate or objective. Times change.
  - branchless 10y ago
    Times change! Same Barclays that bailed itself out by lending to Qatar so they could buy back Barclays shares, which UK regulators signed off so one UK bank could appear solvent. Sant, who signed it off, got a job at Barclays shortly after. Who are you? Why pages of jocular "boys will be boys" on UK fraud?
  - raesene6 10y ago
    You don't think that people on the other ends of trades that depended on Barclay's Libor rate were depending on it being objective or accurate? So those people on the other end of the trades, literally were aware that Barclays were ripping them off by manipulating the rate and were fine with that?? If so, where can I find these traders who like losing money, so I can make some trades with them.
    - Lazare 10y ago
      > You don't think that people on the other ends of trades that depended on Barclay's Libor rate were depending on it being objective or accurate? I certainly hope that people were not depending on Libor being an objective metric, because that would imply they hadn't the foggiest clue what Libor is or how it's calculated. (Also, "Barclays was ripping them off" implies Barclay's was on the other end of the trade, but that's not typically what happened. A more representative example might be "hedge fund buys a bunch of mortgage backed securities pegged to Libor + some number; Barclay's lies to try and avoid going under and pushes the Libor rate down a fraction of a hair, meaning a few million homeowners pay slightly less interest than they "should", and the hedge fund makes slightly less money that it "should". Which is, sure, horrible, and people have paid large fines and gone to jail for it. But it's hard to get too outraged over it; compare it to, eg, the banks who knowingly resold bad mortgages.)
      - raesene6 10y ago
        well the lawsuits that Barclays and others are facing seem to indicate there was rather more harm than that. One example, from https://en.wikipedia.org/wiki/Libor_scandal https://en.wikipedia.org/wiki/Libor_scandal "Early estimates are that the rate manipulation scandal cost US states, counties, and local governments at least $6 billion in fraudulent interest payments, above $4 billion that state and local governments have already had to spend to unwind their positions exposed to rate manipulation."
- blowski 10y ago
  If it was a good idea for everyone, why not do it explicitly and transparently? Allowing (or even encouraging) a small group of people to secretly make a lot of money doesn't seem like a fair way to run the economy.
  - cm2187 10y ago
    I don't believe the idea was to make money at that time. It was to avoid a run on the banks and a repeat of 1929. I am not convinced the economy would have been better off. In those days you had pretty much one major bank failing every week.
    - blowski 10y ago
      So why not make the change explicitly? I'm not against a change in the rate of LIBOR, nor am I against people making profits, as long as it's done fairly.
      - cm2187 10y ago
        Again, not profits, collapse of the financial system. The problem was: how do you combat fear? The LIBOR submissions were pretty transparent and investors were using it as a way to guess which banks would be the next to fail. I guess the BoE either thought they needed a short term solution / didn't have the time or appetite to change the way LIBOR was submitted. Or they thought that if they were hidding individual bank submissions (which they ultimately did), it would only aggravate fear.
        branchless 10y ago
        No this is warped. They put profits before stability, then needed low rates forever, then had to lie again.
      - al452 10y ago
        The LIBOR rates were constructed by the BBA phoning around the banks, and reporting an average of the numbers they came up with. How would the BoE "explicitly" change that? By telling the BBA to lie? I don't imagine you'd find that "fair".
- paganel 10y ago
  > 3. And that nobody involved really thought this was a serious issue, much less a crime. TFA: "Mr Johnson objects, saying that this would mean breaking the rules for setting Libor, which required him to put in rates based only on the cost of borrowing cash. " so it seems like the people involved were well aware of what they were doing. Also, it's been news to me that the Bank of England was actively pushing for the LIBOR rates to go down, and was not merely "happy" with them going down, and I've pretty much followed this scandal since it first came out.
  - milesskorpen 10y ago
    Breaking rules != serious issues People speed all the time, no one thinks twice about it. They know they're speeding, they know they're breaking the rules, but the culture they're in doesn't care. I don't know enough about LIBOR rates in banking culture, but it seems possible this is a similar situation.
    - jacquesm 10y ago
      > Breaking rules != serious issues In a nutshell, this is why we're seeing all these financial scandals and stockmarket melt-downs every so many years. Because the perception has become that if you break the rules it is not a serious issue, no matter what level of society you are operating at. If you start equating speeding with breaking banking rules something is fundamentally wrong (not that speeding is ok, but the impact of say going 10 km over the limit versus wrecking the economy seems to be of a qualitatively different level).
      - milesskorpen 10y ago
        Not all rules & rule violations are created equal — embezzling money is different than deleting an innocuous email. Also, 'rules' don't mean 'legal requirement' necessarily.
        mannykannot 10y ago
        Deleting an innocuous email became a rule violation because of all the times a substantive email was deleted under the cover of allegedly being innocuous.
- arca_vorago 10y ago
  "The Bank of England knew about the Libor rigging as it happened" Isn't the implication that BoE actually encouraged it in the first place, as opposed to just simply having knowledge of? The distinction is important.
  - branchless 10y ago
    Yes, because the UK was about to collapse due to rampant fraud, which the boe also allowed.
- futun 10y ago
  > "3. And that nobody involved really thought this was a serious issue, much less a crime." I'm not sure where that point came from. It's not only a crime, it's an extremely serious crime. What on Earth are you talking about? LIBOR is a derivative of daily rate data which is shared between banks. It is not rigged centrally. You can't tell investors that the rate is based on a daily measurement of interbank risk, and then just go ahead and base that rate on something entirely different when it suits you. That's called fraud.
  - jonwachob91 10y ago
    > I'm not sure where that point came from. It's not only a crime, it's an extremely serious crime. What on Earth are you talking about? The OP never said it wasn't illegal, just that no one thought it was a serious crime. Kind of like how sodomy is illegal for DoD personnel under UCMJ law, no one gives a damn and no one enforces it. > You can't tell investors that the rate is based on a daily measurement of interbank risk, and then just go ahead and base that rate on something entirely different when it suits you. But it's not based on interbank risk, it's based on how much you THINK you can get an interbank loan for. How much you THINK the risk is worth. They base the Libor rate off a lot of thoughts and few facts. The fact that they base it entirely off of thoughts and few facts gives these bank personnel a lot of incentive to lowball, giving whatever number is necessary to get the lowest loan possible and profit the most. Libor rigging will continue at all levels until they change HOW they get to the Libor rate.
  - Lazare 10y ago
    > It's not only a crime, it's an extremely serious crime. What on Earth are you talking about? Today it is. Back then it wasn't. (Or rather, it wasn't seen as such.) It was, by definition, a number that people made up based on their gut feeling (NOT hard data), and there was no regulation or precedent for what sort of number you could make up. Notice that in the linked article, the Bank of England carefully doesn't deny putting pressure on banks to keep Libor low, and just says that: "" Or see the article I linked elsewhere in the thread about Barclay's who was perfectly open with analysts and regulators that they were lying about Libor to improve their share price: http://dealbreaker.com/2012/07/same-old-boring-story/ http://dealbreaker.com/2012/07/same-old-boring-story/ Yes, we see it as a serious crime now, but it's pretty clear that circa 2007-2008, that was not a common view. > LIBOR is a derivative of daily rate data which is shared between banks [...] You can't tell investors that the rate is based on a daily measurement of interbank risk It's neither of those things, and I certainly hope investors weren't being told that, because that would be a lie. It's literally the result of asking some banks, "hey, if you went and borrowed some money...how much do you reckon you'd get charged?". And it turns out that's horribly subjective, not very useful, and prone to manipulation!
- Allower 10y ago
  1. Are you a troll? 2. Maybe you are just an idiot. 3. You are probably a stupid troll
sid-kap 10y ago
Is the US the only state whose federal bank (the Fed) controls the inter-bank lending rate (called the federal funds rate in the US)? What are the pros and cons of the Bank of England not setting Libor in the same way?
- arkis22 10y ago
  I could be wrong. But I think that the two rates serve slightly different purposes. The federal funds rate is an overnight rate for one. And I'm sure that American banks sometimes use libor for setting rates on securities. I would be surprised if the Euro didn't have something that was closer to the federal funds rate than libor.
  - gergoerdi 10y ago
    I guess that would be the Eonia: "Eonia reference rates are calculated by the European Central Bank, based on all overnight interbank assets" https://en.wikipedia.org/wiki/Eonia https://en.wikipedia.org/wiki/Eonia
    - cm2187 10y ago
      EUR: EONIA GBP: SONIA
  - paganel 10y ago
    > I would be surprised if the Euro didn't have something that was closer to the federal funds rate than libor. I used to work for a small, independent East-European mortgage-broker back when the financial crisis started and pretty much all the banks active on my country's market were using LIBOR as a reference rate when issuing mortgages, this is actually the first time when I hear about EONIA. I remember my boss telling me at some point to write a script that would parse the daily LIBOR rates from the Internet, and me being very surprised that one of few places from where I could get those values reliably was a crappy geocities-like page hidden inside a major bank's website.
- kevindkeogh 10y ago
fanzhang 10y ago
There is no recording of any BoE official asking Libor to be changed, which I had partially expected. Instead, a Barclay employee is on record saying: "The bottom line is you're going to absolutely hate this... but we've had some very serious pressure from the UK government and the Bank of England about pushing our Libors lower." This is the equivalent of hearsay evidence, and how Dearlove brought up the BoE only illustratively further distances the BoE. Also, the manager just says they had pressure for lower BoE rates -- but charitably read, the BoE may have meant through actually lending at lower rates and trusting your fellow banks. After all ensuring trust in the banking system is a core BoE function. Your parents might pressure you to get better grades, but often they don't intend cheating. Now does is this evidence that the UK government wanted Libor rates lower -- sure. Does it increase the chances the BoE encouraged the manipulation -- probably. But is it a smoking gun where the BoE explicitly instructs manipulation? Far from.
- raesene6 10y ago
  Well they'd have to be pretty stupid to put it in writing, given that it was against the rules. It seems to me a shame that people lower down the chain, who didn't stand to personally profit from the manipulation are going to be the only ones to take the fall for this. The suggestion that the rate fixer acted independently to manipulate the rates, even though he will have known that he risked prosecution as a result, just isn't credible to me. It's obvious that general banks + BoE colluded to fix a rate that was meant to be based on the realities of lending, and that they did so either to make more money (in the case of the general banks) or to instill confidence in the banking system (in the case of BoE). Whilst there may not be enough evidence to prosecute, it seems wishful thinking to say that the BoE didn't know that people might take their wishes and translate them into effectively illegal actions. The point of Libor was that it was meant to be a reflection of bank's actual rates, so any pressure for lower rates inevitably is pressure to cook the books, and the BoE staff involved will have known that.
  - K9-Mumbai 10y ago
    "It seems to me a shame that people lower down the chain, who didn't stand to personally profit from the manipulation are going to be the only ones to take the fall for this." The point is now that its clear that the people who have been arrested are not to blame - what happens next? They rot in jail while years pass while the country and the SFO and the courts debate on who was really to blame!?
tici_88 10y ago
Back in my Econ classes we were taught that Libor was this atomic-clock-like gauge that objectively and impartially measures interest rates with absolute precision. Turns out that isn't exactly the case. We know that some commercial banks that participated in rigging it - the article mentions about employees of Barclays who and got caught, convicted and jailed for rigging Libor. But if the Bank of England has exerted pressure one way or another on Libor the claim that it is a a 'precise' interest rate gauge determined by the 'free market' are starting to look increasingly more questionable.
- scatters 10y ago
  Yes, and in high school chemistry you were taught that electrons go round the atomic nucleus in orbitals. The real scandal here is the poor state of undergraduate education in economics.
  - thaumasiotes 10y ago
    In high school chemistry I was taught that electrons existed as a fuzzy smear near the nucleus and were particularly likely to be found within various oddly-shaped orbitals. Motion of the electron was not discussed nor implied. That may not be a perfect model, but it's a pretty far cry from "electrons go round the nucleus". My bog-standard high school chemistry textbook showed pictures of s and p orbitals and they are clearly three-dimensional. I think you'd have to go a pretty long way back to find a high school chemistry textbook saying that electrons follow a path.
    - jacquesm 10y ago
      Not all teachers are equal. There are plenty of places where the current state of chemistry education is still teaching kids the electrons go around the nuclei in perfect little circular orbits and that electrons that are 'shared' do so by making figure 8's.
      - Symbiote 10y ago
        In England and Wales, the circular orbits simplification is used at GCSE [1] (age 15-16), but the orbitals/probability thing at A-level [2] (age 16-18). My teacher (the same for all four years) explained that the first model was an oversimplification, but I don't think it's inappropriate to use it. [1] http://www.bbc.co.uk/schools/gcsebitesize/science/add_ocr_pre_2011/periodic_table/atomicstructurerev1.shtml http://www.bbc.co.uk/schools/gcsebitesize/science/add_ocr_pr... [2] http://www.s-cool.co.uk/a-level/chemistry/atomic-structure/revise-it/the-structure-of-the-atom http://www.s-cool.co.uk/a-level/chemistry/atomic-structure/r...
bboreham 10y ago
This is, broadly speaking, the same story that came out in 2012: "Barclays Submitters believed mistakenly that they were operating under an instruction from the Bank of England (as conveyed by senior management) to reduce Barclays' LIBOR submissions" https://www.publications.parliament.uk/pa/cm201213/cmselect/cmtreasy/481/48106.htm https://www.publications.parliament.uk/pa/cm201213/cmselect/... Whether this belief was "mistaken" seems a matter of opinion, since no evidence has surfaced of what was actually said.
jgalt212 10y ago
There were those manipulating Libor to prevent bank runs (somewhat defensible) and those manipulating Libor for self gain (not defensible). Both manipulations went straight to the top and thus far, as expected, only mid-level operators have been held accountable.

235 points by iamben 10y ago

It's not really news; it's always been clear that: 1. The Bank of England knew about the Libor rigging as it happened 2. And was, at a minimum, very happy with the results (given that it reduced the risk of bank runs imperiling the entire system) 3. And that nobody involved really thought this was a serious issue, much less a crime. Putting the above together, it would be surprising if there wasn't some pressure from the Bank of England to push Libor down; why wouldn't they be doing that? In the circumstances, it would have practically been remiss of them to do otherwise. Of course, it looks absolutely horrific now that we've decided that manipulating Libor is a serious issue that people should go to prison for!

Lazare 10y ago
As an update, keep in mind that Barclay's was being pretty open about it. They were talking about it to the NY Fed, US Fed, ECB, World Bank, etc. http://dealbreaker.com/2012/07/same-old-boring-story/ http://dealbreaker.com/2012/07/same-old-boring-story/ Like, literally, a Barclay's guy is on record telling a regulator that they were lying about Libor because telling the truth hurt their share price, so they stopped! And then everyone laughed, and that was the end of it, because it was just Libor, and it's not like there was an assumption that it was somehow accurate or objective. Times change.
- branchless 10y ago
  Times change! Same Barclays that bailed itself out by lending to Qatar so they could buy back Barclays shares, which UK regulators signed off so one UK bank could appear solvent. Sant, who signed it off, got a job at Barclays shortly after. Who are you? Why pages of jocular "boys will be boys" on UK fraud?
- raesene6 10y ago
  You don't think that people on the other ends of trades that depended on Barclay's Libor rate were depending on it being objective or accurate? So those people on the other end of the trades, literally were aware that Barclays were ripping them off by manipulating the rate and were fine with that?? If so, where can I find these traders who like losing money, so I can make some trades with them.
  - Lazare 10y ago
    > You don't think that people on the other ends of trades that depended on Barclay's Libor rate were depending on it being objective or accurate? I certainly hope that people were not depending on Libor being an objective metric, because that would imply they hadn't the foggiest clue what Libor is or how it's calculated. (Also, "Barclays was ripping them off" implies Barclay's was on the other end of the trade, but that's not typically what happened. A more representative example might be "hedge fund buys a bunch of mortgage backed securities pegged to Libor + some number; Barclay's lies to try and avoid going under and pushes the Libor rate down a fraction of a hair, meaning a few million homeowners pay slightly less interest than they "should", and the hedge fund makes slightly less money that it "should". Which is, sure, horrible, and people have paid large fines and gone to jail for it. But it's hard to get too outraged over it; compare it to, eg, the banks who knowingly resold bad mortgages.)
    - raesene6 10y ago
      well the lawsuits that Barclays and others are facing seem to indicate there was rather more harm than that. One example, from https://en.wikipedia.org/wiki/Libor_scandal https://en.wikipedia.org/wiki/Libor_scandal "Early estimates are that the rate manipulation scandal cost US states, counties, and local governments at least $6 billion in fraudulent interest payments, above $4 billion that state and local governments have already had to spend to unwind their positions exposed to rate manipulation."
blowski 10y ago
If it was a good idea for everyone, why not do it explicitly and transparently? Allowing (or even encouraging) a small group of people to secretly make a lot of money doesn't seem like a fair way to run the economy.
- cm2187 10y ago
  I don't believe the idea was to make money at that time. It was to avoid a run on the banks and a repeat of 1929. I am not convinced the economy would have been better off. In those days you had pretty much one major bank failing every week.
  - blowski 10y ago
    So why not make the change explicitly? I'm not against a change in the rate of LIBOR, nor am I against people making profits, as long as it's done fairly.
    - cm2187 10y ago
      Again, not profits, collapse of the financial system. The problem was: how do you combat fear? The LIBOR submissions were pretty transparent and investors were using it as a way to guess which banks would be the next to fail. I guess the BoE either thought they needed a short term solution / didn't have the time or appetite to change the way LIBOR was submitted. Or they thought that if they were hidding individual bank submissions (which they ultimately did), it would only aggravate fear.
      - branchless 10y ago
        No this is warped. They put profits before stability, then needed low rates forever, then had to lie again.
    - al452 10y ago
      The LIBOR rates were constructed by the BBA phoning around the banks, and reporting an average of the numbers they came up with. How would the BoE "explicitly" change that? By telling the BBA to lie? I don't imagine you'd find that "fair".
paganel 10y ago
> 3. And that nobody involved really thought this was a serious issue, much less a crime. TFA: "Mr Johnson objects, saying that this would mean breaking the rules for setting Libor, which required him to put in rates based only on the cost of borrowing cash. " so it seems like the people involved were well aware of what they were doing. Also, it's been news to me that the Bank of England was actively pushing for the LIBOR rates to go down, and was not merely "happy" with them going down, and I've pretty much followed this scandal since it first came out.
- milesskorpen 10y ago
  Breaking rules != serious issues People speed all the time, no one thinks twice about it. They know they're speeding, they know they're breaking the rules, but the culture they're in doesn't care. I don't know enough about LIBOR rates in banking culture, but it seems possible this is a similar situation.
  - jacquesm 10y ago
    > Breaking rules != serious issues In a nutshell, this is why we're seeing all these financial scandals and stockmarket melt-downs every so many years. Because the perception has become that if you break the rules it is not a serious issue, no matter what level of society you are operating at. If you start equating speeding with breaking banking rules something is fundamentally wrong (not that speeding is ok, but the impact of say going 10 km over the limit versus wrecking the economy seems to be of a qualitatively different level).
    - milesskorpen 10y ago
      Not all rules & rule violations are created equal — embezzling money is different than deleting an innocuous email. Also, 'rules' don't mean 'legal requirement' necessarily.
      - mannykannot 10y ago
        Deleting an innocuous email became a rule violation because of all the times a substantive email was deleted under the cover of allegedly being innocuous.
arca_vorago 10y ago
"The Bank of England knew about the Libor rigging as it happened" Isn't the implication that BoE actually encouraged it in the first place, as opposed to just simply having knowledge of? The distinction is important.
- branchless 10y ago
  Yes, because the UK was about to collapse due to rampant fraud, which the boe also allowed.
futun 10y ago
> "3. And that nobody involved really thought this was a serious issue, much less a crime." I'm not sure where that point came from. It's not only a crime, it's an extremely serious crime. What on Earth are you talking about? LIBOR is a derivative of daily rate data which is shared between banks. It is not rigged centrally. You can't tell investors that the rate is based on a daily measurement of interbank risk, and then just go ahead and base that rate on something entirely different when it suits you. That's called fraud.
- jonwachob91 10y ago
  > I'm not sure where that point came from. It's not only a crime, it's an extremely serious crime. What on Earth are you talking about? The OP never said it wasn't illegal, just that no one thought it was a serious crime. Kind of like how sodomy is illegal for DoD personnel under UCMJ law, no one gives a damn and no one enforces it. > You can't tell investors that the rate is based on a daily measurement of interbank risk, and then just go ahead and base that rate on something entirely different when it suits you. But it's not based on interbank risk, it's based on how much you THINK you can get an interbank loan for. How much you THINK the risk is worth. They base the Libor rate off a lot of thoughts and few facts. The fact that they base it entirely off of thoughts and few facts gives these bank personnel a lot of incentive to lowball, giving whatever number is necessary to get the lowest loan possible and profit the most. Libor rigging will continue at all levels until they change HOW they get to the Libor rate.
- Lazare 10y ago
  > It's not only a crime, it's an extremely serious crime. What on Earth are you talking about? Today it is. Back then it wasn't. (Or rather, it wasn't seen as such.) It was, by definition, a number that people made up based on their gut feeling (NOT hard data), and there was no regulation or precedent for what sort of number you could make up. Notice that in the linked article, the Bank of England carefully doesn't deny putting pressure on banks to keep Libor low, and just says that: "" Or see the article I linked elsewhere in the thread about Barclay's who was perfectly open with analysts and regulators that they were lying about Libor to improve their share price: http://dealbreaker.com/2012/07/same-old-boring-story/ http://dealbreaker.com/2012/07/same-old-boring-story/ Yes, we see it as a serious crime now, but it's pretty clear that circa 2007-2008, that was not a common view. > LIBOR is a derivative of daily rate data which is shared between banks [...] You can't tell investors that the rate is based on a daily measurement of interbank risk It's neither of those things, and I certainly hope investors weren't being told that, because that would be a lie. It's literally the result of asking some banks, "hey, if you went and borrowed some money...how much do you reckon you'd get charged?". And it turns out that's horribly subjective, not very useful, and prone to manipulation!
Allower 10y ago
1. Are you a troll? 2. Maybe you are just an idiot. 3. You are probably a stupid troll

sid-kap 10y ago

Is the US the only state whose federal bank (the Fed) controls the inter-bank lending rate (called the federal funds rate in the US)? What are the pros and cons of the Bank of England not setting Libor in the same way?

arkis22 10y ago
I could be wrong. But I think that the two rates serve slightly different purposes. The federal funds rate is an overnight rate for one. And I'm sure that American banks sometimes use libor for setting rates on securities. I would be surprised if the Euro didn't have something that was closer to the federal funds rate than libor.
- gergoerdi 10y ago
  I guess that would be the Eonia: "Eonia reference rates are calculated by the European Central Bank, based on all overnight interbank assets" https://en.wikipedia.org/wiki/Eonia https://en.wikipedia.org/wiki/Eonia
  - cm2187 10y ago
    EUR: EONIA GBP: SONIA
- paganel 10y ago
  > I would be surprised if the Euro didn't have something that was closer to the federal funds rate than libor. I used to work for a small, independent East-European mortgage-broker back when the financial crisis started and pretty much all the banks active on my country's market were using LIBOR as a reference rate when issuing mortgages, this is actually the first time when I hear about EONIA. I remember my boss telling me at some point to write a script that would parse the daily LIBOR rates from the Internet, and me being very surprised that one of few places from where I could get those values reliably was a crappy geocities-like page hidden inside a major bank's website.
kevindkeogh 10y ago

fanzhang 10y ago

There is no recording of any BoE official asking Libor to be changed, which I had partially expected. Instead, a Barclay employee is on record saying: "The bottom line is you're going to absolutely hate this... but we've had some very serious pressure from the UK government and the Bank of England about pushing our Libors lower." This is the equivalent of hearsay evidence, and how Dearlove brought up the BoE only illustratively further distances the BoE. Also, the manager just says they had pressure for lower BoE rates -- but charitably read, the BoE may have meant through actually lending at lower rates and trusting your fellow banks. After all ensuring trust in the banking system is a core BoE function. Your parents might pressure you to get better grades, but often they don't intend cheating. Now does is this evidence that the UK government wanted Libor rates lower -- sure. Does it increase the chances the BoE encouraged the manipulation -- probably. But is it a smoking gun where the BoE explicitly instructs manipulation? Far from.

raesene6 10y ago
Well they'd have to be pretty stupid to put it in writing, given that it was against the rules. It seems to me a shame that people lower down the chain, who didn't stand to personally profit from the manipulation are going to be the only ones to take the fall for this. The suggestion that the rate fixer acted independently to manipulate the rates, even though he will have known that he risked prosecution as a result, just isn't credible to me. It's obvious that general banks + BoE colluded to fix a rate that was meant to be based on the realities of lending, and that they did so either to make more money (in the case of the general banks) or to instill confidence in the banking system (in the case of BoE). Whilst there may not be enough evidence to prosecute, it seems wishful thinking to say that the BoE didn't know that people might take their wishes and translate them into effectively illegal actions. The point of Libor was that it was meant to be a reflection of bank's actual rates, so any pressure for lower rates inevitably is pressure to cook the books, and the BoE staff involved will have known that.
- K9-Mumbai 10y ago
  "It seems to me a shame that people lower down the chain, who didn't stand to personally profit from the manipulation are going to be the only ones to take the fall for this." The point is now that its clear that the people who have been arrested are not to blame - what happens next? They rot in jail while years pass while the country and the SFO and the courts debate on who was really to blame!?

tici_88 10y ago

Back in my Econ classes we were taught that Libor was this atomic-clock-like gauge that objectively and impartially measures interest rates with absolute precision. Turns out that isn't exactly the case. We know that some commercial banks that participated in rigging it - the article mentions about employees of Barclays who and got caught, convicted and jailed for rigging Libor. But if the Bank of England has exerted pressure one way or another on Libor the claim that it is a a 'precise' interest rate gauge determined by the 'free market' are starting to look increasingly more questionable.

scatters 10y ago
Yes, and in high school chemistry you were taught that electrons go round the atomic nucleus in orbitals. The real scandal here is the poor state of undergraduate education in economics.
- thaumasiotes 10y ago
  In high school chemistry I was taught that electrons existed as a fuzzy smear near the nucleus and were particularly likely to be found within various oddly-shaped orbitals. Motion of the electron was not discussed nor implied. That may not be a perfect model, but it's a pretty far cry from "electrons go round the nucleus". My bog-standard high school chemistry textbook showed pictures of s and p orbitals and they are clearly three-dimensional. I think you'd have to go a pretty long way back to find a high school chemistry textbook saying that electrons follow a path.
  - jacquesm 10y ago
    Not all teachers are equal. There are plenty of places where the current state of chemistry education is still teaching kids the electrons go around the nuclei in perfect little circular orbits and that electrons that are 'shared' do so by making figure 8's.
    - Symbiote 10y ago
      In England and Wales, the circular orbits simplification is used at GCSE [1] (age 15-16), but the orbitals/probability thing at A-level [2] (age 16-18). My teacher (the same for all four years) explained that the first model was an oversimplification, but I don't think it's inappropriate to use it. [1] http://www.bbc.co.uk/schools/gcsebitesize/science/add_ocr_pre_2011/periodic_table/atomicstructurerev1.shtml http://www.bbc.co.uk/schools/gcsebitesize/science/add_ocr_pr... [2] http://www.s-cool.co.uk/a-level/chemistry/atomic-structure/revise-it/the-structure-of-the-atom http://www.s-cool.co.uk/a-level/chemistry/atomic-structure/r...

bboreham 10y ago

This is, broadly speaking, the same story that came out in 2012: "Barclays Submitters believed mistakenly that they were operating under an instruction from the Bank of England (as conveyed by senior management) to reduce Barclays' LIBOR submissions" https://www.publications.parliament.uk/pa/cm201213/cmselect/cmtreasy/481/48106.htm https://www.publications.parliament.uk/pa/cm201213/cmselect/... Whether this belief was "mistaken" seems a matter of opinion, since no evidence has surfaced of what was actually said.

jgalt212 10y ago

There were those manipulating Libor to prevent bank runs (somewhat defensible) and those manipulating Libor for self gain (not defensible). Both manipulations went straight to the top and thus far, as expected, only mid-level operators have been held accountable.