It's escalating. Following the resignation of Barclays' Chairman this morning, the government announced a twin probe into the Libor system and banking standards; and Bob Diamond (Barclays CEO) is threatening, according to the FT [8], to reveal potentially embarrassing details about Barclays' dealing with regulators if he comes under fire at a parliamentary hearing on Wednesday over Lie-borgate. Unlike his almost-namesake Jamie Dimon who suffered through the indignity of a congressional probing, Bob has gone all Mutually Assured Destruction with confrontational tactics that could further aggravate the fraught relations between the bank and the authorities. "If he is attacked, he will fight back" seems to be well understood and the key aspect - as we have pointed out - is that if this is pursued too vehemently then the whole house of cards could come down as [regulators and politicians] "likely knew perfectly well those rates were not the ones where banks were prepared to lend to each other". So much was made at the time of several of these short-term liquidity measures as indicative of 'no' stress to the ignorant investing public when credit market participants were well aware of the state of reality - perhaps it is worth a glance at the current levels of Lie-bor (especially relative to EUREPO and CDS curves) to get a sense of just what could happen if the truth was ever allowed out into the public eye. M.A.D. indeed.
[1]- Barclays [2]
- Bob Diamond [3]
- CDS [4]
- Jamie Dimon [5]
- LIBOR [6]
- Reality [7]
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