Secret Recording Implicates Bank of England In Libor Rigging

Tyler Durden's picture

While it may seem like yesterday, it was nearly five years ago that the Libor scandal first broke, and with it brought scandalous suggestions that none other than the Bank of England was implicated.

As we first reported in July 2012, according to Barclays then CEO Bob Diamond, it was high level individuals at the BOE who may (or may not) have been aware that Libor had been "manipulated" and were (or were not) also active in the setting process:

  • BARCLAYS SAYS BANK OF ENGLAND CALLED ON OCT. 29, 2008 ON LIBOR
  • BARCLAYS SAYS DIAMOND MADE NOTE OF CALL; RECEIVED CALL FROM PAUL TUCKER
  • BARCLAYS SAYS TUCKER SAID `CERTAIN' BARCLAYS DIDN'T NEED ADVICE; SAID LIBOR DIDN'T ALWAYS NEED TO BE SO HIGH

And yet, concerned about how deep the rabbit hole would go if a central banker was implicated, Diamond tried to cover it up:

  • BARCLAYS SAYS DIAMOND DIDN'T BELIEVE HE HAD GOT INSTRUCTION

Even as:

  • BARCLAYS SAYS DEL MISSIER CONCLUDED INSTRUCTION HAD BEEN GIVEN; TOLD RATE SETTERS TO LOWER RATES

The note in question was represented below:

Needless to say, when it comes to the central bank nothing happened: a few BOE personnel were reassigned, some quietly lost their jobs, and nobody was prosecuted or charged. Certainly, nobody went to prison.

* * *

Fast forward nearly five years later, when the Libor scandal may have reemerged after a secret recording that implicates the Bank of England in Libor rigging has been uncovered by BBC Panorama.

According to the BBC, the 2008 recording adds to evidence the central bank repeatedly pressured commercial banks during the financial crisis to push their Libor rates down, just as suggested by Bob Diamond in 2012.

The recording calls into question evidence given in 2012 to the Treasury select committee by former Barclays boss Bob Diamond and Paul Tucker, the man who went on to become the deputy governor of the Bank of England. In the recording, a senior Barclays manager, Mark Dearlove, instructs Libor submitter Peter Johnson, to lower his Libor rates.

Dearlove tells him: "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." To which 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.

Mr Johnson says: "So I'll push them below a realistic level of where I think I can get money?"

 

His boss Mr Dearlove replies: "The fact of the matter is we've got the Bank of England, all sorts of people involved in the whole thing... I am as reluctant as you are... these guys have just turned around and said just do it."

The phone call between Mr Dearlove and Mr Johnson took place on 29 October 2008 the BBC notes, the same day that Tucker, who was at that time an executive director of the Bank of England, phoned Barclays boss Diamond. Barclays' Libor rate was discussed.

Diamond and Tucker were called to give evidence before the Treasury select committee in 2012. Both said that they had only recently become aware of lowballing, despite Diamond's abovementioned tacit admission, which he then tried to cover up.

In its report, Panorama says it played the October 2008 recording to Chris Philp MP, who sits on the Treasury committee.

He told the programme: "It sounds to me like those people giving evidence, particularly Bob Diamond and Paul Tucker were misleading parliament, that is a contempt of parliament, it's a very serious matter and I think we need to urgently summon those individuals back before parliament to explain why it is they appear to have misled MPs. It's extremely serious."

Responding to the recording, Diamond told the BBC: "I never misled parliament and… I stand by everything I have said previously." Tucker did not respond to our questions. Peter Johnson, the Barclays Libor submitter, was jailed last summer after pleading guilty to accepting trader requests to manipulate Libor.

Two traders who made requests for Mr Johnson to move Libor up or down, Jay Merchant and Alex Pabon, were found guilty last June of conspiracy to defraud along with another submitter, Jonathan Mathew.

However, the jury could not reach a verdict on two other traders then on trial, Ryan Reich and Stelios Contogoulas. The Serious Fraud Office requested a retrial which concluded last week. Both Mr Reich and Mr Contogoulas were unanimously acquitted. Panorama also played Contogoulas the October 2008 recording. He said he believed that if it had been played during the criminal trials it might have affected the outcomes.

He said: "That's the thing, you know in these trials that we went through they separated everything, separated trading requests and lowballing. So anything that has to do with this they don't go in. So you're asking me do I think that if all this was in would it make a difference? Probably, is the answer."

* * *

Another notable "criminal" to emerge from the Libor scandal was Tom Hayes, the UBS and Citi-based Libor manipulating protagonist of the recent book "The Spider Network", and who was arguably at the center of the prosection's LIbor case. He has repeatedly claimed that the real culprits are not those - like him - who executed the Libor rigging, but the ones at the very top who have the instructions to do so.

Like, as the case may be, the Bank of England.

Yet while some junior people went to prison, nobody in the corner office, and certainly nobody at the BOE has faced any criminal consequences from their actions.

The BBC adds that the Serious Fraud Office, which brought the Barclays prosecutions told Panorama that evidence of lowballing, was provided to the recording. They also say they are still investigating lowballing and that they follow the evidence "as high as it goes and aim to charge the most senior people wherever there is a realistic prospect of conviction".

The Bank of England said: "Libor and other global benchmarks were not regulated in the UK or elsewhere during the period in question.... Nonetheless, the Bank of England has been assisting the SFO's criminal investigations into Libor manipulation by employees at commercial banks and brokers by providing, on a voluntary basis, documents and records requested by the SFO."

Ironically, it is precisely that it was unregulated that may have given the Bank of England the green light to assume it can manipulate it with impunity.

It remains to be seen if, nearly a decade after the Libor manipulation took place, any central banker will go to prison over it.

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Looney's picture

 

So, lemme get it straight…

China IS a currency manipulator, but the BOE, the ECB, and the Fed ain’t?

Looney

NotApplicable's picture

Paul Tucker best watch out for nail-guns!

J S Bach's picture

Meh.   Also heard on the recording was, "Whatcha gonna do about it, Goyim?"

SoilMyselfRotten's picture

This is BS, i know it's only a few rogue traders as the CB's would never steer us wrong!

Delving Eye's picture

LIBOR is still being rigged -- way too high.

yogibear's picture

Out-right stealing has been reavealed and still now outrage by the populous.

fx's picture

they did it for all of us! to save the planet. heroes!

Fvck 'em all!

sgt_doom's picture

I believe that's because it went from the Rothschild Bank LIBOR to ICE (InterContinental Exchange) LIBOR --- ICE being owned by Goldman Sachs, Morgan Stanley, BP, Totalfina and Deutsch Bank --- need I say more?

Sometime, try checking out the ownership of the NY Stock Exchange, and the interlinking between ICE, its owners, the NYSE, etc. and basically they all own one another, so it is really just one owner!

GRDguy's picture

Just snakes shedding skins for a new generation.

Pinto Currency's picture

Gees I misread one of the committees as 'Stealing Committee' vs 'Sealing Committee'.

GunnerySgtHartman's picture

Is there really any difference??????

Ghordius's picture

I'll give it to you straight: "Currency Manipulator" is a label. under trademark. of the US Secretary of the Treasury

yes, it's the same official that was laughed off by Chinese students when uttering words like "We believe in a Strong Dollar Policy"

Consuelo's picture

 

 

Yes.

 

Because - well, Freedom & Democracy...

sgt_doom's picture

This is what I got also (possibly inferred, it's been awhile since I read it) from Open Secret: The Global Banking Conspiracy That Swindled Investors Out of Billions by Erin Arvedlund, an investigative journalist with the Philly Inquirer.

 

Great book, should be read by one and all, and it is important to understand that those cities and counties (King County, WA where Gates and Bezos dwell, and those places in North and South Carolina, etc.) which did those interest rate swaps deals and gotten taken to the cleaners, those LIBOR rates manipulation figured in mightily!

(In her book there's a great line from Prof. Greenberger (formerly with Brooksley Born when they were at the CFTC) who explains that the credit default swaps were responsible for the global economic meltdown (and those crooks behind them)!

Richard Chesler's picture

We deeply regret getting caught. - BOE

SoDamnMad's picture

We are going to trade off any fines from the US with suppressing all information about MI5 bugging Trump.

Hey, throw in suppressing information about supplying Sarin to the anti-Assad rebels and you got a deal.

nachochan's picture

So they have this recording for 9 years and all of sudden it shows up when article 50 gets submitted to the EU.  

NotApplicable's picture

<= This is my shocked face.

Ghordius's picture

yes. because for all purposes, it's the "Get Out Of Jail" card, aka "no ECJ jurisdiction anymore"

as a reminder, the first barely serious enquiry in the "Libor scandal" was some 5-6 years ago

Ghordius's picture

there she blows!

and another little piece of rigging comes out. and... another British argument about the post-Brexit EU deal is wrecked

funny, eh? so many... decades of Continental conspiracy theories on London's bank complex becoming... scandalous facts

"The Bank of England said: "Libor and other global benchmarks were not regulated in the UK or elsewhere during the period in question.... "

ZH: "Ironically, it is precisely that it was unregulated that may have given the Bank of England the green light to assume it can manipulate it with impunity. " zing!

next: the Great Repeal Act, which involves all regulations "previously known as EU" becoming British Law. I really look forward to find out which ones are those that molested the Brits most, and have to go asap. (most probably everything that has to do with the environment and with labour protection, wanna bet on it?)

smacker's picture

Don't choke on your schadenfreude Ghordius. We know how much you hate the United Kingdom.

The most dishonest, corrupt and undemocratic organisation in the Western world today: the European Union.

Ghordius's picture

yes, I hate the United Kingdom's... nest of vipers that you British Cousins have allowed to build up

but go on, believe whatever you want to believe. your Brexiters have so incredibly many lies that are still to be digested... when reality surfaces

btw, is now PM May going to take you out of the ECHR or not? you know, the representative... from Maidenhead? the Tory leader that brought the party through a general election? the one that did not want to involve both Commons and... Lords?

yeah, sure

smacker's picture

Trust me, I have no time for May. She has screwed up so many things, first as Home Secretary and now as PM. She is not really a true conservative as I understand that label to mean. Snoopers Charter II is her baby and is a disgrace to civilised privacy.

That said, even the worst dorks do something good once in their lives and her claim to fame will be steering Britain out of the EU. I passionately believe that Britain can make it as an independent nation trading around the world. The "New Global Britain" as she calls it. This is what angers me with her repetitive anti-Putin comments ,,, doesn't she realise that Russia is a potential huge market place for British trade??

Your comment about the ECHR concerns me. That organisation was at the top of my list of concerns about Brexiting because I simply do not trust British politicians to look after our rights. Snoopers Charter II is one example.

skbull44's picture

Rigged? Nah, this time is different because it's all fundamentals now...

smacker's picture

FWIW I have always believed that the UK BoE was directly involved in Libor rigging,,,that's why the expected replacement for Mervyn King (his No.2) was bypassed and Carney parachuted in by Osborne.

What we don't know is on who's orders was the BoE acting in this rigging. There's only one person it can be: Gordoom Brown.

Ghordius's picture

that's only half of the story, smacker

the other half is that the Bank of England... is under direct political control. of the Cabinet, of course

and this is the very first reason why all this did not surface that fast: it does not matter which PM, which Chancellor... they are all involved, from the Brown Cabinet onwards

smacker's picture

"the other half is that the Bank of England... is under direct political control. of the Cabinet, of course"

Correct. If you'd known me longer, you will also know that I'm on record saying that when Gordoom Brown officially made the BoE "independent" of government, it was a pile of pants intended only to calm The City when the socialist Lab.gov came into orifice c1997 and to deceive people into believing that this time Labour really was different and would practice sound money.

As we later learned, Labour wasn't different ,,, Brown went on a borrowing and spending spree and pressured the BoE to keep base rates way down to allow the huge bubbles to emerge. The rest is history.

When the crash happened, I'm also on record saying this time it is different: "it will take a generation for this finc mess to unwind".

I may have been over-optimistic(!)

GRDguy's picture

I'll never forget Brown's Bottom.

https://en.wikipedia.org/wiki/Sale_of_UK_gold_reserves,_1999%E2%80%932002

And he still runs loose.  Must have very powerful friends.

smacker's picture

Brown's Bottom was a disaster of his ,,, cost the UK taxpayers billions.

Brown was obsessed by his belief in the "endogenous growth theory".

bjax's picture

And then ... absoultey nothing happens!! It's business as usual for the banker scum.

Pumpkin's picture

Uh, Hello!.....Fiat money banks were created to rig, it's what they do.

HANGEMHIGHER's picture

Anybody know a bank or banker that's not dodgy? If you do, I think you might be mistaken.

Solio's picture

It's all made up shit to keep the flow of funds going to benefit a few, not YOU!

FlipSide's picture

Another private bank masquerading as a government one

Solio's picture

Fine: pay some million$$$ and some official miscreant certifies that you can just keep doing what your doing.

GRDguy's picture

When THE Church ran everything, it was called "absolution." 

It made sure the poor stayed poor, while the church and the sociopaths got rich.

Somehow, not much has changed.

tlnzz's picture

"What difference does it make?" No one is ever punished for fraud no matter how big it is. They just keep on stealing honest peoples money.

Atomizer's picture

That day will never leave me. Flying to our Marco Island house. Question: Were is Jon Corzine?

The Libor scam really got under my skin. I was so pissed. BTW, aware. 

Jon Corzine Gets $5 Million Fine and Lifetime Ban for Tanking MF Global | | Observer

Herodotus's picture

He needs to be put through a chipper.

Grandad Grumps's picture

The more relevant question is: what do the central banks NOT rig?

Apeon's picture

Time to turn the Regulation and Control of POlicy over the Iceland.

Joebloinvestor's picture

The UK, ground zero for banking malfeasance and non prosecution or discovery by the "in the back pocket" regulators.

No wonder the UK gave up on manufacturing anything except financial crimes.

Olympus Mons is not a Volcano's picture

More Attempts to Lower the Pound

GRDguy's picture

Barclays, in one form or another, has been around since 1690.

They've seen a thing or two, so they know a thing or two.

That's why they hide behind a BlackRock these days.

gregga777's picture

There is no Rule of Law in the West.  Governments are nothing more than protection rackets for organized crime mobs in banking and CON Street.  It is a travesty that sheep on juries continue sending their countrymen to prison for supposed crimes that the Intellectual Yet Idiot classes ruling morons all violate with complete impunity.  It is time for American juries to practice Jury Nullification and refuse to send any more of their countrymen to prison to serve a rotten and corrupt system.

sinbad2's picture

Capitalism is the legitimate racket of the ruling class.(Al Capone)

Umh's picture

If it needs a fix it will be rigged.