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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Why isn't Labour putting forward Corbynite candidates?

Despite his successes as a candidate, the organisational victories have gone the way of Corbyn's opponents. 

The contest changes, but the result remains the same: Jeremy Corbyn’s preferred candidate defeated in a parliamentary selection. Afzhal Khan is Labour’s candidate in the Manchester Gorton by-election and the overwhelming favourite to be the seat’s next MP.

Although Khan, an MEP, was one of  the minority of Labour’s European MPs to dissent from a letter from the European parliamentary Labour party calling for Jeremy Corbyn to go in the summer of 2016, he backed Andy Burnham and Tom Watson in 2015, and it is widely believed, fairly or unfairly, that Khan had, as one local activist put it, “the brains to know which way the wind was blowing” rather than being a pukka Corbynite.

For the leader’s office, it was a double defeat;  their preferred candidate, Sam Wheeler, was kept off the longlist, when the party’s Corbynsceptics allied with the party’s BAME leadership to draw up an all ethnic minority shortlist, and Yasmine Dar, their back-up option, was narrowly defeated by Khan among members in Manchester Gorton.

But even when the leadership has got its preferred candidate to the contest, they have been defeated. That even happened in Copeland, where the shortlist was drawn up by Corbynites and designed to advantage Rachel Holliday, the leader’s office preferred candidate.

Why does the Labour left keep losing? Supporters combination of bad luck and bad decisions for the defeat.

In Oldham West, where Michael Meacher, a committed supporter of Jeremy Corbyn’s, was succeeded by Jim McMahon, who voted for Liz Kendall, McMahon was seen to be so far ahead that they had no credible chance of stopping him. Rosena Allin-Khan was a near-perfect candidate to hold the seat of Tooting: a doctor at the local hospital, the seat’s largest employer, with links to both the Polish and Pakistani communities that make up the seat’s biggest minority blocs.  Gillian Troughton, who won the Copeland selection, is a respected local councillor.

But the leadership has also made bad decisions, some claim.  The failure to get a candidate in Manchester Gorton was particularly egregious, as one trade unionist puts it: “We all knew that Gerald was not going to make it [until 2020], they had a local boy with good connections to the trade unions, that contest should have been theirs for the taking”. Instead, they lost control of the selection panel because Jeremy Corbyn missed an NEC meeting – the NEC is hung at present as the Corbynsceptics sacrificed their majority of one to retain the chair – and with it their best chance of taking the seat.

Others close to the leadership point out that for the first year of Corbyn’s leadership, the leader’s office was more preoccupied with the struggle for survival than it was with getting more of its people in. Decisions in by-elections were taken on the hop and often in a way that led to problems later down the line. It made sense to keep Mo Azam, from the party’s left, off the shortlist in Oldham West when Labour MPs were worried for their own seats and about the Ukip effect if Labour selected a minority candidate. But that enraged the party’s minority politicians and led directly to the all-ethnic-minority shortlist in Manchester Gorton.

They also point out that the party's councillor base, from where many candidates are drawn, is still largely Corbynsceptic, though they hope that this will change in the next round of local government selections. (Councillors must go through a reselection process at every election.)

But the biggest shift has very little to do with the Labour leadership. The big victories for the Labour left in internal battles under Ed Miliband were the result of Unite and the GMB working together. Now they are, for various reasons, at odds and the GMB has proven significantly better at working shortlists and campaigning for its members to become MPs.  That helps Corbynsceptics. “The reason why so many of the unions supported Jeremy the first time,” one senior Corbynite argues, “Is they wanted to move the Labour party a little bit to the left. They didn’t want a socialist transformation of the Labour party. And actually if you look at the people getting selected they are not Corbynites, but they are not Blairites either, and that’s what the unions wanted.”

Regardless of why, it means that, two years into Corbyn’s leadership, the Labour left finds itself smaller in parliament than it was at the beginning.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.