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.

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Is the Great Fire of London a blueprint for how governments deal with disasters?

Visible leadership, an established authority, and a common external enemy: an enduring defence mechanism 350 years on.

In 1968, the science journal The Lancet ran a report into human behaviour. When populations are confronted with disaster, it recommended, effective “communications, coordination, and control, and the establishment of a recognised authority” are of utmost importance (advice that should have been heeded immediately after the Brexit result in June this year).

The 350th anniversary of the Great Fire of London this week seems is a good time to think about how we deal with disasters: over 13,000 homes were destroyed, 87 churches ruined and thousands of Londoners displaced.

For me, one of the most striking parts of the story of the Great Fire is not the fire itself nor the dramatic rebuilding programme that followed, but the state of flux in between.

When the fire broke out, England was at war with both the Dutch Republic and France. As soon as news reached France, the Venetian ambassador Alvise Sagredo, declared that the fire would be “worse than the plague and any other disaster, capable of making [the English] change their government and their principles”.

In England, even the London Gazette warned that England’s foes would try “to persuade the world abroad of great parties and disaffection at home against his majesties government”. Faced with unparalleled destruction and unprecedented disarray, how did the king, his advisers and civic authorities regain control of London?

With the Guildhall severely damaged and the Royal Exchange destroyed, the first step was to find a new base for civic and mercantile power. On 6 September, Charles II instructed the Lord Mayor and the city aldermen to resume governance of the city. Gresham College and buildings around Bishopsgate were taken over and efforts were immediately taken to re-establish trade. Vendors were granted permission to set up sheds in temporary markets at Bishopsgate Street, Tower Hill, Smithfield and Leadenhall Street.

“Honest and able persons” were selected to monitor the ruined city to ensure fire did not break out afresh, appeals were made across the country for charitable donations and neighbouring counties were called upon to provide sustenance. From the navy stores, ship’s biscuit was offered to the needy and canvas was provided so that the tens of thousands of homeless people stranded in the fields surrounding London could fashion tents.

The measures were not perfect. Visiting Moorfields, the diarist John Evelyn described, “the poor inhabitants . . . some under tents, some under miserable huts and hovels, many without a rag”.

Those stranded found food to be in short supply and many succumbed to the illnesses bred by a reduced condition in life, including aged playwright James Shirley, who died in October 1666.

But it wasn’t long before people started to disperse – either leaving London altogether, finding accommodation elsewhere, or returning to the locations of their former homes and shops to erect makeshift shacks above the ruins.

In the background, the trial and execution of French watchmaker Robert Hubert, who falsely claimed to have started the fire, provided a focus for any anger and rage.

With communication ruptured following the destruction of the London Gazette printing house and the General Letter Office, rumours of plots, arson and invasions had spread almost as quickly as the fire itself. Indeed, terrible violence had broken out during the fire, with mobs targeting any “strangers” or foreign-born Londoners. One French servant, for example, reported how gangs of “English women did knock down strangers for not speaking good English. Some of them armed with spits, some with bread staffs, and the captain with a broad sword.”

When the London Gazette was released the week after the fire – after only skipping one edition of its biweekly run – it provided readers with a detailed description of the catastrophe, emphasising its accidental nature and promoting the role played by Charles II and his brother and heir, James, Duke of York, in preventing the fire spreading even further.

Against protocol, the newspaper also allowed important tradespeople to advertise their new offices: the goldsmith-bankers, for example, informed readers that they had found premises along Broad Street.

By mid-September, the etcher Wenceslaus Hollar had already begun his survey of the city and plans had been submitted to the king from John Evelyn and architects Christopher Wren and Robert Hooke, to name just a few, as to how to rebuild the capital.

Writing at the time, Sir Nathaniel Hobart, believed that the “rebuilding of the Citty will not be soe difficult as the satisfying all interests, there being many proprietors”. As such, one of the most important innovations following the disaster was the establishment of a judiciary, known as the Fire Court, to untangle the complex web of formal and informal agreements between tenants and landlords. From 1667 until 1672 the Fire Court settled hundreds and hundreds of cases.

There were certainly many bumps along the way – for a while, the City of London was plundered and inhabited by gangs. Plus, anger towards foreign-born Londoners continued; owing to his Dutch background, one Johan Vandermarsh had to fight tooth and nail to keep hold of his property on Lime Street, despite helping to save many of his neighbours’ homes.

All of this considered, there was nothing like the widespread disorder that Charles II had feared and his enemies expected. On the contrary, the visibility of the king and his brother and heir – and the convenient suspicion that the fire had been started by an external enemy – worked to bind the people to their king and settle unrest. Although hard to believe at the time, there was also the promise of “a more beautiful city”.

Rebecca Rideal is a historian, factual television producer and author of 1666: Plague, War and Hellfire.

She will be speaking at London’s Burning festival on Friday 2 September – a contemporary festival of art and ideas produced at Artichoke to commemorate the 350th anniversary of the Great Fire of London. Free to the public, it runs from 30 August-4 September.