Nobody ever thought Barclays was the only bank fixing Libor

Those in charge always knew that other banks were involved. So why have they got away so far?

Over the weekend, it became clearer than ever that Barclays were not the only bank involved in Libor rate-fixing, a fact which will have ramifications for the future of Paul Tucker, the Bank of England official tied up in the scandal, but also raises further questions about the proporitionality of the response, both official and popular.

A bumper report from the Sunday Telegraph's Philip Aldrick details the smoking gun:

The 2011 report by the Financial Services Authority into the collapse of Royal Bank of Scotland in early October 2008, three weeks before Tucker’s call with Diamond, makes clear the lender had lost its access to the money markets, noting that the “liquidity run reached extreme proportions”.

"On 7 October, 2008, RBS’s wholesale counterparties, as well as, to a lesser extent, retail depositors, were simply not prepared to meet its funding needs and RBS was left reliant on ELA from the Bank of England," wrote the FSA.

The reference to ELA, or Emergency Liquidity Assistance, is important as Tucker, unlike the rest of the market at that stage, would have known that the Bank of England had begun providing secret loans, first to crisis-ridden HBOS and then to RBS, that totalled nearly £62bn.

Speaking to the Treasury Select Committee in November 2009, Tucker told the MPs that without the emergency loans it “would have been a lot worse than it would have been” otherwise. “This was a classic lender of last resort operation,” he said.

Records of historic Libor submissions available on Bloomberg show that despite HBOS and RBS being on emergency life support they were both submitting Libor figures that appeared to show they could borrow at cheaper rates in dollars and sterling than Barclays throughout the months leading up to the collapse of Lehman Brothers in September 2008, and in the period afterwards.

The normal way that Libor - and, indeed, lending in general - works is that the weaker a bank is, the more it has to pay to borrow. In the autumn of 2008, that all fell apart: banks which were too weak could offer high rates to borrow at, but those high rates were themselves taken as a sign that the banks were on the brink of collapse.

The result of this is that there was basically no level at which HBOS and RBS could borrow all the money they needed (the technical parlance is that there was no level which "cleared" the market). It would have been impossible for them to submit true estimates of how much they'd have to pay to borrow large sums, because they simply could not borrow that much. To be accurate, Libor would have had to hit infinity per cent.

The Bank of England, and Paul Tucker particularly, must have known this, because even after RBS and Lloyds Banking Group had taken secret funding from the Bank (£60bn of loans to make up for their inability to get money through conventional routes) they continued posting Libor rates lower than Barclays.

This isn't to say that the other banks are necessarily as guilty as Barclays. While we know it is unlikely to be the only bank posting artificially low rates to look safe during the crisis, there is no indication as yet that any other banks were partaking in the far more dubious manipulation, aimed at simple profits, that occurred in the run-up to 2008.

Still, there must be someone at Barclays kicking themselves over the fact that they co-operated with the authorities. The intention was clearly to gain some credit, and possibly lax treatment, for pleading guilty and co-operating from the start. Instead, the bank has become the scapegoat for the crimes of an industry. As Felix Salmon writes:

In any case, when the other shoe drops, the headlines are going to be smaller: this kind of activity is never as shocking the second time around. Look at what happened to Citigroup, which was actually more evil than Goldman when it put together the Class V Funding III CDO. (The profits from Goldman’s Abacus deal went mostly to John Paulson; the profits from the Citi deal went straight to Citi.) Citi settled the case for $285 million — less than Goldman paid — and suffered almost none of the PR backlash that was inflicted on Goldman.

Stephen Hester must be feeling pretty lucky right now. Who wants to bet his name will come up as much as Bob Diamond's?

Stephen Hester, chief executive of RBS, which has been accused of manipulating Libor. 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: Getty
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My son is shivering – precisely the response you want from a boy newly excited by drama

I can only assume theatre is in his blood, but not from my side of the family.

I went to the National Theatre last week to see, not a full production, but a reading of a play – Tarell Alvin McCraney’s Wig Out!, directed by, and starring, the writer himself. The pre-publicity described the play as a “big, bold and riotous look at gender, drag and fabulousness”, in which “the House of Light competes with the House of Diabolique for drag family supremacy at the Cinderella Ball”. It lived up to this thrilling billing, transcending the modest expectations of a “read-through” and bursting into vivid life on the stage. The audience, less subdued, less thoroughly straight and white than a standard West End theatre crowd, rose to the occasion, whooping their approval and leaping to their feet at the end in a genuinely rousing and moved ovation.

It was a great evening, and came hot on the heels of another success only two weeks ago, when Ben and I took our youngest to see Jez Butterworth’s The Ferryman. The boy is only 16, and freshly into drama, so it felt risky taking him to a new play. But we needn’t have worried. The piece is visceral and physical, set in County Armagh in 1981; against the backdrop of the hunger strikes, it tells a story of the long reach of the IRA, and even though the boy needs some of the history explaining to him, when I turn to him at the end of the final, shocking scene, he says: “I am actually shivering.” Which is presumably the precise response you would want to get out of a 16-year-old boy, poised on the brink of being excited about drama.

But theatre isn’t always exciting, is it? Let’s be honest. Ben and I have slunk out of too many intervals, bored witless by something flat and stagey, so I chalk these two latest experiences up as something of a triumph.

I didn’t even know the boy was so into theatre until I saw him on stage this year in a school production of Enron. He only had a small part, but still had to come to the very front of the stage, alone in a spotlight, and deliver a monologue in a Texan accent. And seeing him out of context like this, I nearly fell off my seat with the jolt of dislocation, almost not recognising him as my own son. Who knew he could do a Texan accent? (He’d practised for hours in the bathroom, he told me later.) And when did he get so tall? And so handsome? I see him every day and yet all I could think, seeing him up there on stage, was: “Who on earth IS this lanky six footer with the Hollywood smile, making eye contact and connecting with the audience in a way I never could in 20 years of gigs?”

I can only assume it is in his blood, and has come from Ben’s side of the family. Ben was studying drama at Hull when I met him; indeed the first time I saw him with his clothes off was on stage, in a production of The Winter’s Tale where the director, somewhat sadistically I thought, lined up a chorus of young men to be dancing satyrs, and made them strip down to nothing but giant codpieces. We’d only just started dating, so it was quite the introduction to my new boyfriend’s body.

Theatre was in his blood, too, inherited from his mother, and he was always confident on stage, enjoying the presence and feedback of an audience, which is why he still plays live and I don’t. His mother had been an actress, performing with John Gielgud and co at the Memorial Theatre Stratford-upon-Avon, until her career was cut short by having a child, and then triplets. At her funeral a couple of years ago we listened to a recording of her RADA audition from the 1940s, in which she performed one of Lady Macbeth’s speeches, her cut-glass English tones, declamatory and dramatic, in many ways every bit as fabulous and flamboyant as the drag queens in Wig Out!, whose theatricality she would have adored. She loved the stage, and she loved fame, and when it couldn’t be hers she revelled instead in mine and Ben’s, keeping every press cutting, wearing all the T-shirts, coming to every back-stage party. If it couldn’t be the spotlight, then the wings would do, darling.

Tracey Thorn is a musician and writer, best known as one half of Everything but the Girl. She writes the fortnightly “Off the Record” column for the New Statesman. Her latest book is Naked at the Albert Hall.

This article first appeared in the 20 July 2017 issue of the New Statesman, The new world disorder