Libor manipulation doesn't necessarily mean Libor lies

Reducing the rates at which you loan is the good sort of manipulation

Yesterday afternoon, Ric Holden (the Conservative Party's press officer) tweeted this quote, apparently from the 8 November 2008 edition of the Daily Express:

Chancellor Alistair Darling summoned bank chiefs to an emergency meeting yesterday before reading them the riot act. Just hours later the banking industry reacted by slashing the Libor - the rate at which banks lend to one another.

It certainly sounds like it plays into the narrative that Labour directly encouraged Barclays to lie about the rate at which it thought it could borrow. But there's an important distinction between the communication between Paul Tucker and Bob Diamond (or rather, Jerry del Missier's apparent misinterpretation of their communication) and the meeting of Darling and the bank chiefs, which is that the latter is plural.

Remember that Libor is the rate at which banks believe they can borrow large sums of money, unsecured, from other banks. There are two ways to artificially reduce that number. One is to encourage the banks to lie about the rate they think they could pay for borrowing; this is what del Missier believed Paul Tucker had done.

The other is to encourage the banks to lend to each other at lower rates. That's not manipulating Libor, although it is, of course, manipulating other aspects of the finance system. It's something you can only do if you have the ear of all the banks, though; if Barclays unilaterally decides to loan to other banks for less, all that happens is they lose money. But if all the banks do that, then interbank lending rates drop.

The Telegraph's Andrew Lilico points out today that that may even be what Paul Tucker was talking about in his "no particular reason why Barclays should be borrowing at such a high rate" comment:

Take this as an example. The Bank of England, if it found that one of the banks – let us call it B Bank – were finding it harder to borrow money than the rest, might have a chat with B Bank to see why. It might reassure senior officials in B Bank that it still regarded B Bank as sound. It might even tell those officials that it would have a chat with other banks to reassure them as well. It might also feel that other banks were sufficiently sound that it would be prepared to provide last resort lending to them. The upshot of B Bank being sound and other banks being able to obtain cash from the Bank of England if necessary might be that other banks should feel able to lend money to B Bank at interbank rates not wildly dissimilar to the rates those other banks lend to each other. A perfectly natural way to convey this, perfectly proper, intention by the central bank to reassure other banks about B Bank might be to say that the Bank of England saw no particular reason why B Bank should always be borrowing at the most expensive rate.

Of course, there is a lesser question here, which is whether we should be using Daily Express reports for any type of historical record. Here are the various dollar Libor rates (from overnight to 12 month) for the two months surrounding the reported meeting, with the black line marking when it apparently occurred (click, as ever, for big):

That doesn't seem like a suspicious drop. Or really a suspicious anything.

Alistair Darling: the Brows are Back, 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.

Getty Images.
Show Hide image

The government must demand that Iran release Nazanin Zaghari-Ratcliffe

Iran's imprisonment of my constituent breaches the Convention on the Rights of the Child.

I grew up with a very paranoid mother. She had tragically lost members of her family as a teenager and, as a result, she is extremely fearful when it came to her children. I used to laugh at her growing up – I indulged it but often scoffed at her constant need to hear from us.

A few days ago, I was in Parliament as normal. My husband, his parents and our baby daughter were all in Parliament. This rare occasion had come about due to my mother in law’s birthday – I thought it would be a treat for her to lunch in the Mother of Parliaments!

The division bells rang half way through our meal and I left them to vote, grabbing my phone of the table. “See you in ten minutes!” I told them. I didn’t see them for more than five hours.

The minute the doors bolted and the Deputy Speaker announced that we were indefinitely being kept safe in the chamber, all I could think about was my daughter. In my heart of hearts, I knew she was safe. She was surrounded by people who loved her and would protect her even more ferociously than I ever could.

But try explaining that to a paranoid mother. Those five hours felt like an eternity. In my head, I imagined she was crying for me and that I couldn’t be there for her while the building we were in was under attack. In reality, I later found out she had been happily singing Twinkle Twinkle little star and showing off her latest crawl.

That sense of helplessness and desperate impatience is hard to describe. I counted down the minutes until I could see her, as my imagination ran away with me. In those 5 hours, I started thinking more and more about my constituent Nazanin Zaghari-Ratcliffe.

Here I was, temporarily locked in the Parliamentary chamber, surrounded by friends and colleagues and door keepers who were doing all they could to keep me safe. I knew I was going to be let out eventually and that I would be reunited with my daughter and husband within hours.

Nazanin has been detained in the notorious Evin prison in Iran for nearly a year. She only gets an occasional supervised visit with her two-year-old daughter Gabriella. She’s missed Christmas with Gabriella, she missed Gabriella’s second birthday and no doubt she will be missing Mother’s Day with Gabriella.

But it’s not just the big occasions, it’s the everyday developments when Gabriella learns a new song, discovers a new story, makes a new friend. Those are the important milestones that my mother never missed with me and the ones I want to make sure I don’t miss with my daughter.

Unfortunately, Nazanin is just one of many examples to choose from. Globally there are more than half a million women in prison serving a sentence following conviction, or are awaiting trial. Many of these women are mothers who have been separated from their children for years.

In 2010, the United Nations General Assembly unanimously adopted the Bangkok Rules - the first international instrument to explicitly address the different needs that female prisoners have. It was also the first instrument to outline safeguards for the children of imprisoned mothers.

The Bangkok Rules apply to all women prisoners throughout all stages of the criminal justice system, including before sentencing and after release. However, Nazanin’s case has seen a wilful flouting of the rules at each and every stage.

Rule 23 states that ‘Disciplinary sanctions for women prisoners shall not include a prohibition of family contact, especially with children’. Tell that to her daughter, Gabriella, who has barely seen her mother for the best part of a year.

Rule 26 adds that women prisoners’ contact with their families shall be facilitated by all reasonable means, especially for those detained in prisons located far from their homes. Tell that to her husband, Richard, who in almost a year has only spoken to his wife via a few calls monitored by the Iranian Revolutionary Guard.

Iran has ratified the Convention on the Rights of the Child and supported the Bangkok Rules, yet it is breaching both with its treatment of Nazanin. It is therefore incumbent upon our government to take the formal step of calling for Nazanin's release - it is staggering they have not yet done so.

As I pass the window displays in shops for Mother’s Day, most of the cards have messages centred around ‘making your mother happy’. If there’s one mother I’d like to make happy this year, it’s Nazanin Zaghari-Ratcliffe.

Tulip Siddiq is Labour MP for Hampstead and Kilburn