Three weeks ago we mocked, rightfully so, the utter joke that is Liebor, which had been unchanged for just over 3 months. Nobody cared, certainly not the British Banker Association. This was not the first time: our first allegations of Liebor fraud and manipulation started over three years ago. There were others too. Nobody certainly cared back then. Now, in the aftermath of the Barclays lawsuit, and "those" e-mails, everyone suddenly cares. And a few days after the first public exposure of Lie-borgate, the first victim has been claimed: as numerous sources report, Barclays' Chairman Marcus Agius wil step down immediately. From the WSJ: "Political and investor pressure has mounted on the management of U.K.-based Barclays since the settlement was announced Wednesday. The announcement of Mr. Agius's departure could come as soon as Monday, said one of the people. Mr. Agius, 65 years old, a British-Maltese banker who formerly worked at Lazard Ltd., has led the bank since 2007, steering Barclays through the 2008 financial crisis and avoiding the direct state bailouts that were needed by many of its global peers." While the sacrifice of a scapegoat is expected, what we don't get is why the Chairman: after all by the time Agius became Chair of the British bank, the bulk of the Libor fixing alleged in the FSA lawsuit had already happened. And of course, with Bob Diamond having succeeded John Varley as CEO in 2010, one can easily claim that in this first (of many) confirmed Liebor transgression there really is nobody at fault who can be held accountable. Of course, Barclays is merely the first of many. We fully expect Lieborgate to spread not only to other British BBA member banks, but soon to jump across the Atlantic, where CEOs who have been with their banks for the duration of the entire Libor-fixing term will soon find themselves under the same microscope.
Over the weekend, the U.K. government ordered an independent review of how Libor is set that is expected to be completed by the end of the summer.
"It's very important [the review] takes all of the actions necessary, holding bankers accountable... making sure there's proper transparency, making sure the criminal law can go wherever it needs to uncover wrongdoing," Prime Minister David Cameron told BBC television Saturday.
Business Secretary Vince Cable said there should also be a criminal investigation into the Libor-fixing scandal.
"[The public] just can't understand why people are thrown into jail for petty theft and these guys just walk away having perpetrated what looks like conspiracy," Mr. Cable said told Sky television Sunday.
"I've been told the [Serious Fraud Office] is having a fresh look at the evidence," Mr. Cable said.
Bank of England Gov. Mervyn King on Friday called for the current system for calculating Libor to be scrapped. Libor rates are calculated for different currencies each day under the auspices of the British Bankers' Association using quotes submitted by banks on a panel, based on the banks' estimated borrowing costs.
The biggest irony in all of this what nobody talks about: namely that Liebor has been completely irrelevant since 2009, when virtually all unsecured liquidity funding would come from central banks. In a world where Interbank lending has long been dead, Libor is merely the latest anachronism of free capital markets now that everything has been replaced by central planning.
Finally, if Barclays stock can tumble 20% in 3 days for the simple crime of interest rate rigging, we can only thank our lucky stars that the Federal Reserve has still not succumbed to the temptation to IPO itself.