This morning we had the surprising, but not unwarranted, resignation of Bob Diamond from the British bank, Barclays, followed shortly thereafter by the resignation of his #2, following on from yesterday's resignation of the Barclays' Chairman of the Board.
Big Deal? Actually - YES!!!!
This all has to do with the LIBOR scandal that has been brewing for years but has recently come to the fore with the recent massive settlement with Barclays. Barclay's admitted trying to manipulate the LIBOR rate (basically the most important short term rate in the world) over a multi-year period.
So far Barclays has been the biggest name in the news and I guess because Barclay's is a British bank and because in LIBOR the L stands for London, the scandal has been getting little press in the US, though tons of press in the UK. But this is about to get much bigger ... Here's why!
1. Barclays is the first to settle because it was "cooperating" with the investigation. So think about it. Barclays got a huge fine for cooperating. So what is to come? From what is being whispered just about all the banks were involved to some degree or another (otherwise the rigging would not have worked). That basically means the other banks - and yes that means the likes of JPM and Bof A - are likely to get hit with even bigger fines. And now that the Barclay's top brass has resigned it has set an interesting precedent. (If the guys that cooperated with investigators resigned, shouldn't the banks that did not also have their top brass resign?)
2. It looks like Diamond has himself to blame for his resignation as it seems to have been his recent attitude that caused the hammer to come down. (And Bob Diamond Resigns 'Under Pressure')
What I hear is that Mr. Bob Diamond's arrogant defiance so outraged Whitehall that the word went down to the Bank of England to show him the door, immediately as an example, in the Old Lady's role of making and breaking the major players in the City.
Mr. Diamond would have been lauded in the States, and offered a settlement and a wristslap, soft pillows and sweet praises by fawning lawmakers and the captive corporate media.
He will still have to appear before the government for questioning on Wednesday. That might be worth watching.
Someone should have cautioned him that the Jamie Dimon model of deriding the regulators and attempting to intimidate the government does not work as well in the UK.
The Tories may not be any more interested in serving the interests of their people, but they do have some measure of pride in their office and self-respect, of decorum, in comparison to Wall Street's bawds in the Congressional corporate campaign contributions bordello.
But again this does set a precedent for the next banks to be fined.
3. Interestingly ZeroHedge (This Makes No Sense: LIBOR By Bank) was asking questions about BofA and JPM and LIBOR 3 years ago. They noted at the time that BofA and JPM were submitting lower rates than banks that were backstopped by their governments, which really makes no sense. How can a nominally independent bank have lower funding costs than a backstopped bank, given that the independent bank has more risk? So ... were JPM and BofA also rigging their LIBOR submissions? Ya think?
So to wrap up .... maybe courtesy of the Brits we may finally see some consequences for the heads of the major banks for their misbehavior, as the general public there seems to have woken up. Wouldn't that be an awesome development for a change?
He was a poster boy for corporate arrogance, telling Parliament last year that the time for bankers to apologize had passed.
Now Bob Diamond is just the latest victim of growing public anger at a British establishment they regard as greedy and ethically challenged. Bankers, politicians and journalists have all felt the full force of the growing disdain at a time of economic troubles.
The hard-driving CEO of Barclays bank resigned Tuesday, buckling under massive media pressure and a few none-too-subtle hints from top politicians that his days at the top should be numbered.