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Lengthy as it is the article fails to mention how the Libor fraud actually worked and that it had two very distinct motivations. Understating the interest a ba

Lengthy as it is the article fails to mention how the Libor fraud actually worked and that it had two very distinct motivations. Understating the interest a bank had to pay during a short dramatic period in 2008 when there could have been disastrous bank runs was the less problematic part of it. In my opinion, breaking the letter of the law to avoid a run on a healthy bank is the right decision. But that's not all there was. The article fails to mention the second part, which was traders trying to make a profit by colluding with those at the same bank who were in charge of setting (or rather influencing) the Libor rate. The bankers knew that they would be forgiven for the first part, and that's why they tried to use it as an excuse for the second part. That's also where Bob Diamond's claim about the BoE comes from.

osrec 8y ago
Quite right. I was at the bank at the time, and couldn't quite believe what my colleagues had done. It was most disappointing and inexcusable. These guys should certainly be punished even more heavily, but in reality, the antiquated system that defines LIBOR must also change as it is wide open to manipulation.
cm2187 8y ago
I am not sure I follow your reasoning. The second part (collusion between swap traders and libor submitters) occured in the years preceding the financial crisis, 2005-2007, while the first part (the lowballing at the height of the financial crisis) happened in 2007-2008. So no there is no way they did the collusion thinking it would be forgiven because of the lowballing.
- fauigerzigerk 8y ago
  I didn't mean to imply that at all. What I meant is that when the whole thing blew up in 2012, they clearly thought they could use the crisis and the understandable attempts by themselves and the BoE to avoid a bank run to deflect all criticism of their Libor rigging more generally. That's what I think the purpose of Bob Diamond's accusations against the BoE was. An attempt to confuse the two issues. The Guardian article doesn't make the distinction clear at all.
  - cm2187 8y ago
    Hum. I am pretty sure the investigation started with the lowballing (as many investors were complaining about it) and that in the process of that investigation they uncovered the swap desk collusion (which had an impact in fractions of basis point and which wasn't really on anyone's radar). So I'd argue the contrary. Barclays had rather a good hand on the lowballing, having reported the issue to every regulator, and in the end by lowballing themselves in a way that wouldn't affect the resulting index (by remaining one of the top contributions that get excluded by the Libor calculations). The swap trading collusion is what made their position morally indefensible when the BoE joined the two in a single report.
    - fauigerzigerk 8y ago
      I don't understand how this is the contrary of what I'm saying. I agree that they had a pretty good hand on the lowballing issue. That's what I said all along. Everybody understands why they did that, and most would believe that it was at least tolerated by the BoE. So they tried to keep the focus on that issue and use it to sweep the rather more shady collusion business under the rug, at least as far as the wider public and perhaps parliament is concerned. All I'm trying to do here is to make it clear that there are two entirely seperate issues with wholly different motives.
- chii 8y ago
  if they knew a crisis is coming, and they can see a way to profit off it, then that is what is going to happen.

osrec 8y ago

Quite right. I was at the bank at the time, and couldn't quite believe what my colleagues had done. It was most disappointing and inexcusable. These guys should certainly be punished even more heavily, but in reality, the antiquated system that defines LIBOR must also change as it is wide open to manipulation.

cm2187 8y ago

I am not sure I follow your reasoning. The second part (collusion between swap traders and libor submitters) occured in the years preceding the financial crisis, 2005-2007, while the first part (the lowballing at the height of the financial crisis) happened in 2007-2008. So no there is no way they did the collusion thinking it would be forgiven because of the lowballing.

fauigerzigerk 8y ago
I didn't mean to imply that at all. What I meant is that when the whole thing blew up in 2012, they clearly thought they could use the crisis and the understandable attempts by themselves and the BoE to avoid a bank run to deflect all criticism of their Libor rigging more generally. That's what I think the purpose of Bob Diamond's accusations against the BoE was. An attempt to confuse the two issues. The Guardian article doesn't make the distinction clear at all.
- cm2187 8y ago
  Hum. I am pretty sure the investigation started with the lowballing (as many investors were complaining about it) and that in the process of that investigation they uncovered the swap desk collusion (which had an impact in fractions of basis point and which wasn't really on anyone's radar). So I'd argue the contrary. Barclays had rather a good hand on the lowballing, having reported the issue to every regulator, and in the end by lowballing themselves in a way that wouldn't affect the resulting index (by remaining one of the top contributions that get excluded by the Libor calculations). The swap trading collusion is what made their position morally indefensible when the BoE joined the two in a single report.
  - fauigerzigerk 8y ago
    I don't understand how this is the contrary of what I'm saying. I agree that they had a pretty good hand on the lowballing issue. That's what I said all along. Everybody understands why they did that, and most would believe that it was at least tolerated by the BoE. So they tried to keep the focus on that issue and use it to sweep the rather more shady collusion business under the rug, at least as far as the wider public and perhaps parliament is concerned. All I'm trying to do here is to make it clear that there are two entirely seperate issues with wholly different motives.
chii 8y ago
if they knew a crisis is coming, and they can see a way to profit off it, then that is what is going to happen.