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.

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No, David Cameron’s speech was not “left wing”

Come on, guys.

There is a strange journalistic phenomenon that occurs when a party leader makes a speech. It is a blend of groupthink, relief, utter certainty, and online backslapping. It happened particularly quickly after David Cameron’s speech to Tory party conference today. A few pundits decided that – because he mentioned, like, diversity and social mobility – this was a centre-left speech. A leftwing speech, even. Or at least a clear grab for the liberal centre ground. And so that’s what everyone now believes. The analysis is decided. The commentary is written. Thank God for that.

Really? It’s quite easy, even as one of those nasty, wicked Tories, to mention that you actually don’t much like racism, and point out that you’d quite like poor children to get jobs, without moving onto Labour's "territory". Which normal person is in favour of discriminating against someone on the basis of race, or blocking opportunity on the basis of class? Of course he’s against that. He’s a politician operating in a liberal democracy. And this isn’t Ukip conference.

Looking at the whole package, it was actually quite a rightwing speech. It was a paean to defence – championing drones, protecting Britain from the evils of the world, and getting all excited about “launching the biggest aircraft carriers in our history”.

It was a festival of flagwaving guff about the British “character”, a celebration of shoehorning our history chronologically onto the curriculum, looking towards a “Greater Britain”, asking for more “national pride”. There was even a Bake Off pun.

He also deployed the illiberal device of inculcating a divide-and-rule fear of the “shadow of extremism – hanging over every single one of us”, informing us that children in UK madrassas are having their “heads filled with poison and their hearts filled with hate”, and saying Britain shouldn’t be “overwhelmed” with refugees, before quickly changing the subject to ousting Assad. How unashamedly centrist, of you, Mr Prime Minister.

Benefit cuts and a reduction of tax credits will mean the Prime Minister’s enthusiasm for “equality of opportunity, as opposed to equality of outcome” will be just that – with the outcome pretty bleak for those who end up losing any opportunity that comes with state support. And his excitement about diversity in his cabinet rings a little hollow the day following a tubthumping anti-immigration speech from his Home Secretary.

If this year's Tory conference wins the party votes, it’ll be because of its conservative commitment – not lefty love bombing.

Anoosh Chakelian is deputy web editor at the New Statesman.