Barclays is being punished for being first, not worst

Barclays came clean while others are still hiding manipulation.

One thing that has come through in Barclays' counter-offensive over Libor-fixing is that it genuinely believes that what it was doing, if not actually ethical, was at least no worse than that which every other bank was doing.

In its submission to parliament, it writes of itself that:

The bank’s exceptional level of cooperation was expressly recorded by each of the Authorities, and was described by the DoJ as "extraordinary and extensive, in terms of the quality and types of information provided" and "the nature and value of Barclays cooperation has exceeded what other entities have provided in the course of this investigation." That cooperation has led to Barclays being the first to reach resolution of these issues. It ironic that there has been such an intense focus on Barclays alone, caused by our being first to settle in the midst of an industry-wide, global investigation.

Similarly, in Bob Diamond's record of his phone call with the Bank of England's Paul Tucker, we learn (as well as the fact that Diamond goes by RED, for Robert Edward Diamond, in internal memos) that Barclays genuninely believed the reality of Libor was that:

Not all banks were providing quotes at levels that represented real transactions.

This belief – that other banks have been manipulating Libor as well – is not some desperate attempt by Barclays to divert attention. We already know that RBS had to fire at least four, and possibly as many as ten, traders over Libor manipulation, and it seems likely that many other banks were doing the same thing. Indeed, if Barclays are to be believed, the only reason the call with Tucker happened at all was because they were manipulating Libor less than the other banks. This chart, via Reuter's Jamie McGreever, shows Barclay's spread over the Libor rate:

Notice the spike in Barclays' borrowing costs in September 2008, settling down almost entirely by December of that year. The Bank of England apparently thought that was because the market considered Barclays to be riskier than most banks; Barclays believed it to be because the other banks were lying more than it was. (The answer, of course, is likely somewhere in the middle.)

It may still be true that Barclays was qualitatively worse. There is no hint – yet – that the lies from RBS went any higher than trader level, whereas Barclays' Chief Operating Officer resigned yesterday as it became apparent that he may have directly ordered subordinates to under-report Libor rates, based on a mis-understanding of Tucker's phone call.

But it is undoubtedly the case that the reason Barclays is getting the most trouble – the reason why all subsequent investigation has focused on them, and they have had two waves of high-profile resignations – is because they were the first to be fingered. And they were only first because they held their hands up and admitted culpability. The authorities are, after all, still investigating other banks.

It may well turn out that what Barclays was doing was in no way unique. Now, if that results in the CEOs of all major banks being hounded out and potentially prosecuted for their actions in the run-up and immediate aftermath of the financial crisis, then it's been a long time coming. But it seems far more likely that what will happen is that by the third or fourth bank, the excuse that "everyone was doing it" will start to hold water. The failure will be seen as systematic, and worthy of investigation, but not of any extra punishment beyond the reforms which will be suggested then half-heartedly implemented on the industry. The chief executives who participated in cover-ups will get off.

What lesson does this teach banks and businesses in the future? Do not co-operate. Do not reveal anything to the authorities. If you hold your hands up and admit blame, you will be pilloried, but if you bury your wrongdoings until someone else is found out, you'll get away scott-free.

That doesn't seem to be the best idea.

Barclays bank, being punished worst for coming clean first. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: André Spicer
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“It’s scary to do it again”: the five-year-old fined £150 for running a lemonade stand

Enforcement officers penalised a child selling home-made lemonade in the street. Her father tells the full story. 

It was a lively Saturday afternoon in east London’s Mile End. Groups of people streamed through residential streets on their way to a music festival in the local park; booming bass could be heard from the surrounding houses.

One five-year-old girl who lived in the area had an idea. She had been to her school’s summer fête recently and looked longingly at the stalls. She loved the idea of setting up her own stall, and today was a good day for it.

“She eventually came round to the idea of selling lemonade,” her father André Spicer tells me. So he and his daughter went to their local shop to buy some lemons. They mixed a few jugs of lemonade, the girl made a fetching A4 sign with some lemons drawn on it – 50p for a small cup, £1 for a large – and they carried a table from home to the end of their road. 

“People suddenly started coming up and buying stuff, pretty quickly, and they were very happy,” Spicer recalls. “People looked overjoyed at this cute little girl on the side of the road – community feel and all that sort of stuff.”

But the heart-warming scene was soon interrupted. After about half an hour of what Spicer describes as “brisk” trade – his daughter’s recipe secret was some mint and a little bit of cucumber, for a “bit of a British touch” – four enforcement officers came striding up to the stand.

Three were in uniform, and one was in plain clothes. One uniformed officer turned the camera on his vest on, and began reciting a legal script at the weeping five-year-old.

“You’re trading without a licence, pursuant to x, y, z act and blah dah dah dah, really going through a script,” Spicer tells me, saying they showed no compassion for his daughter. “This is my job, I’m doing it and that’s it, basically.”

The girl burst into tears the moment they arrived.

“Officials have some degree of intimidation. I’m a grown adult, so I wasn’t super intimidated, but I was a bit shocked,” says Spicer. “But my daughter was intimidated. She started crying straight away.”

As they continued to recite their legalese, her father picked her up to try to comfort her – but that didn’t stop the officers giving her stall a £150 fine and handing them a penalty notice. “TRADING WITHOUT LICENCE,” it screamed.


Picture: André Spicer

“She was crying and repeating, ‘I’ve done a bad thing’,” says Spicer. “As we walked home, I had to try and convince her that it wasn’t her, it wasn’t her fault. It wasn’t her who had done something bad.”

She cried all the way home, and it wasn’t until she watched her favourite film, Brave, that she calmed down. It was then that Spicer suggested next time they would “do it all correctly”, get a permit, and set up another stand.

“No, I don’t want to, it’s a bit scary to do it again,” she replied. Her father hopes that “she’ll be able to get over it”, and that her enterprising spirit will return.

The Council has since apologised and cancelled the fine, and called on its officials to “show common sense and to use their powers sensibly”.

But Spicer felt “there’s a bigger principle here”, and wrote a piece for the Telegraph arguing that children in modern Britain are too restricted.

He would “absolutely” encourage his daughter to set up another stall, and “I’d encourage other people to go and do it as well. It’s a great way to spend a bit of time with the kids in the holidays, and they might learn something.”

A fitting reminder of the great life lesson: when life gives you a fixed penalty notice, make lemonade.

Anoosh Chakelian is senior writer at the New Statesman.