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By Martin Kelly

Rigging interest rates and miss-selling financial products that led to hikes in mortgages, increased loan repayments and businesses closing down - the banking crisis is back with a vengeance.

Last week no-one had heard of LIBOR, now everyone knows about the City of London based interest rate that banks use in order to set the rate at which they lend to one another.

Barclays Chairman Marcus Agius, who has resigned today just days before appearing in front of a select committee of MPs, is the first Corporate victim of the scandal, and as with every scandal there’s bound to be political fall-out.

‘What goes around comes around’ the old saying goes, and make no mistake this is a scandal that is very firmly laid at the feet of Gordon Brown and Alistair Darling.  The men who apparently saved the banks in 2008.

Now we know that from 2005 through to 2008 and possibly even into 2009, UK banks were conspiring to rig the LIBOR interest rate.  ‘Greed is good’ said Gordon Gekko in the iconic movie Wall Street and, if emails promising bottles of Bollinger for favours are to be believed, greed was indeed good for some.

However, missing from the scandal thus far is the role, or lack thereof, played by the UK Labour Government at the time.  Gordon Brown was both Chancellor and Prime Minister at different periods when the scandal was taking place.  When Brown eventually became PM his replacement was Alistair Darling.

Both men were central to the catastrophe that was the UK banking system from 2008 onwards – first Northern Rock, then Bradford and Bingley, RBS and HBOS all suffered as the casino bankers lost their, or rather our, shirt.

Brown de-regulated to such a degree that banks operated in a kind of financial anarchy that saw once proud institutions brought to their knees.  Initially all looked well as Brown lauded the casino capitalists, describing them as his “inspiration”.

In 2006 Brown attended a dinner and gave a speech in which he publicly praised them. “I congratulate you” said Brown “on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London.”

This glorious success, Brown added, was achieved through “a deep and abiding belief in open markets”.

Brown had good reason to laud the bankers.  The financial success story was underpinning UK public spending.  Not only did public sector employment increase by 750,000 between 1999 and 2008, but from 2000 or so onwards, financial services’ share of UK GDP increased dramatically.

However, by 2007 it was starting to unravel.  Northern Rock was the first to succumb and UK taxpayers’ cash saved the north of England institution.  When Barclays and RBS both vied for ABN-AMRO and the scourge of toxic debts was about to be unleashed, it was the beginning of the end.

It all began of course when Gordon Brown removed regulation of banking from the Bank of England and handed it to the FSA, an organisation he himself helped create.  Light touch legislation was what Brown desired and no touch regulation was what resulted.

As far as LIBOR was concerned what legislation there was didn’t even cover this key banking interest rate.  Regulation of LIBOR was left to the British Bankers’ Association and there was no fear of conviction for those who transgressed the gentleman’s agreements that passed for rules.

If one had to design a system ripe for corruption and certain to lead to catastrophe then this was it – Global Gordon had created a monster.

We are now faced with what is possibly the biggest scandal in banking history and the revelations now coming out suggests that collateral damage may be considerable.

There are now claims by Barclay’s managers that they were acting under instruction from the Bank of England when seeking to suppress LIBOR in 2008.  A phone call from BoE deputy Paul Tucker to Bob Diamond is said to have led to manager’s believing they had BoE approval.

This was at the height of the banking crisis and Diamond, at the time, headed the department responsible for the rigging scandal – Barclays Capital.

At around this time interests rates had began to spike as banks became reluctant to lend to one another.  However, they very quickly began to drop, something that caused suspicion amongst many analysts and was echoed by the Wall Street Journal (WSJ).

The WSJ also reported as early as March 2011 that investigations were already underway in the USA over suspicions that the LIBOR rate had been illegally manipulated at this time.

The City watchdog, the Financial Services Authority (FSA), alluded to the Tucker/Diamond phone call in its recent judgment against Barclays, but it concluded that Mr Tucker had issued no instruction that Barclays should lie about its borrowing costs.

However others have speculated that the Labour government under Gordon Brown may have applied pressure in order to persuade UK banks to lower the LIBOR and thus stave off a surge in interests rates, which could have triggered a recession.

Adding to the ‘smoking gun’, French Establishment paper Le Figaro claimed on 25th March 2011 that “the [UK] authorities suspect that key traders [at Barclays Capital] used Treasury information via the main branch dealing with the UK Treasury”.

If true, who would have had access to Treasury knowledge and how would it have been passed to traders at Barclays Capital and with whose approval?

Whatever the truth, in 2008 Barclays’ managers sought to manipulate rates in order to bring down LIBOR – and by all accounts they succeeded.

Not long afterwards Brown and Darling handed the UK banking industry one trillion pounds obtained by putting the UK into hock - a no strings attached deal that left many open mouthed and the consequences of which are being felt now with banks refusing to lend to businesses.

Whether Labour Ministers applied pressure to lower interest rates or whether they were unaware it was happening, one thing is certain.  The environment that allowed morally repugnant practices to become institutionally accepted was created by first Gordon Brown then Alistair Darling.

When, in 2010 during the general election campaign, Brown was asked by Channel 4's John Snow to condemn Diamond who had been described as the "unacceptable face of banking" after receiving a reported £63 million bonus, he refused saying:

“When you look at banking revenues, capital has got to be increased there’s no certainty on that.”

“…They [banks] have been undercapitalised, and they have to be re-capitalised”

Yesterday the SNP, keen no doubt to make political capital out of the situation, published a list of ten questions they suggest might clarify Labour’s role in this latest banking mess.

The sad thing is that, despite Labour’s very clear culpability in this whole sorry episode, there are few – if any – Scottish journalists who will pursue Gordon Brown and Alistair Darling.

Here are the SNP's ten questions:

  • 1. During the former Chancellor's discussions with various banks including Barclays and RBS, did the subject of funding rates for RBS arise and did Mr Darling receive a briefing on this subject from officials?
  • 2. Did the former Prime Minister or Chancellor ask whether there was oversight of the arrangements around LIBOR given the increasing relevance of liquidity and the obvious self-interest of banks during the financial crisis?
  • 3. When was the former Chancellor first informed of the LIBOR fixing allegations and by whom? What was his immediate response?
  • 4. Do the former Prime Minister, Chancellor and UK Economic Secretary consider the fixing of LIBOR to have potentially impacted the ability of UK banks to remain solvent during the financial crisis? If so, was this a consideration in their silence on the matter?
  • 5. Did they receive official advice on the relevance of transparency around such a serious investigation in the context of wider allegations of malpractice and mismanagement in UK banking?
  • 6. Why did the former Chancellor not make a statement to Parliament on these serious allegations as soon as they became known or at least at some point during his tenure in office?
  • 7. Does the former Chancellor believe it would have been appropriate in the context of substantial malpractice in the banking sector to at least make Parliament aware of the LIBOR fixing investigation?
  • 8. Do the former Prime Minister, Chancellor and Economic Secretary believe it was appropriate for such an important financial rate to be set by the banks without proper supervision particularly in the context of a banking crisis?
  • 9. The Economic Secretary is responsible within HMT for banking, finance and financial regulation. Did the former Economic Secretary attend any discussions or briefings with regulators, officials or banking representatives which covered the subject of LIBOR?
  • 10. Will Ed Miliband compel the former Labour ministers to give come clean on what they knew and when?

Comments  

 
# From The Suburbs 2012-07-02 06:43
Not within the mainstream supine Scottish media corps. Imagine the pouring of outrage in the press if Alex Salmond had been in charge of the UK finances at the time.
 
 
# Ready to Start 2012-07-02 07:16
Brown and Darling have no credibility left yet media still portray them as some economic experts who saved the world and on independence.

AS reported in Private Eye, Gordon Brown earned £125,000 fee for speaking to Russian bankers and the annual £550,000 costs of the personal Office of Gordon and Sarah Brown to cover "salaries, accommodation costs and staff expenses" from speaking engagements is a good top up to his House of Commons salary which is earned for not turning up very often.

And any credibility Alastair Darling has left was further tarnished last month when the Governor of the Bank of England, Sir Mervyn King criticised the lack of action, despite warnings from the Bank of England in the early days of the banking crisis after the collapse of Northern Rock, by the then Chancellor of Exchequer which could have cost up to one million people their jobs in the UK as the bailing out of the banks came far too late to prevent the financial crisis from spilling over into the world economy.
 
 
# gus1940 2012-07-02 08:44
It is reported elsewhere this morning that the accountants who ran the scheme in which Jimmy Carr participated are based in guess where - Kirkcaldy - handily close to somebody else who seems to be generating substantial amounts of cash little of which somehow is treated as personal income.
 
 
# UpSpake 2012-07-02 07:36
It's fact that neither Brown nor Darling had any financial training at any time in their respective 'careers'. They, therefore as in-experienced, largely incompetent individuals were only as good as their advice from 'officials' none of them either who had ever lived in the real world.
So here we have a group of politicians elevated way beyond their capabilities being advised by civil servants who had never faught for survival in the outside world of business.
Recipe for disaster. Oh sorry, it did happen, didn't it ?. Well, who is really to blame, the system or its spokespersons ?.
 
 
# Leswil 2012-07-02 07:40
Certainly, in any other world but Westminster world, Brown and Darling would be forced to face "the full extent" of the law.
However, Westminster world has many cloaks to cover wrong doing. They are experts at looking after their own. There will be little justice for the wrong doers and even less for those who made these frauds possible by insuring little or no, regulation of standards.
So do not hold your breath for any resemblance of justice. There will be bluster, there will be accusations, there will be faux anger.
However, at the end of the day Westminster world is working feverishly to spin it all away as a small incident with a few bad traders. It is seriously not that, it is a major fraud that effected many people's lives.
Just remember friends that Westminster Justice is like no other, so do not expect any serious charges to other than the minor actors in this, it will as usual be the soldiers who will be made accountable. Not the generals of deceit.
 
 
# Macart 2012-07-02 07:52
Jinkies

I am chortling like a buffoon right now. If you didn't laugh, you'd weep. These are indeed the same people who are lecturing the SNP on future economic strategy in an independent Scotland and current strategy in our devolved Scotland.

Corrupt, inept, un disciplined, morally bereft and greedy. You could go on but they'll do for starters, the Mods may be on their second cup by now. :)

Put it this way - Our government of the day and their banking and financial services friends either knew exactly what was going on, supported it and indeed favoured this course - in which case they are particularly inept gangsters who chose to risk the welfare of the UK public for the the world's biggest get rich quick scheme.

or

They had little or no control or knowledge of the catastrophe occurring in their midst in which case they were merely inept and completely unsuited for the posts in their charge.

In either case what they have done in the intervening years is cover up, obfuscate and prevaricate in the vain hope that maybe it would all somehow get better or that people having their lives financially trashed would forgive and forget.

What goes round..................

P.S. Love the questions at the end, nice touch.

P.P.S Have you ever noticed that once they have been exposed (after perhaps maybe several years of getting away with it), not only do they get the buy out handshake but are said to be stepping down or offering resignation as a point of principle or honour.

If they had any (add word) principles or (add another several words) honour, they would not have played fast and loose with public purse or private savings in the first place (add lots of words).
 
 
# GrassyKnollington 2012-07-02 08:30
I assume the sudden distracting appearance of the " Cameron to offer referendum on Europe story" was more evidence of Labour and the Tories being "Better Together".

I expect he was hoping to divert attention from this story as both parties are like ferrets in a sack with the bankers.

Last weeks joke that following the banking disaster, Iceland put it's politicians in jail and Scotland put hers in charge of the No campaign is wearing thin this morning.
 
 
# Indy_Scot 2012-07-02 08:38
I am looking forward to BBC Scotland’s and Brian Taylor’s impartial analysis of Darling and Browns role in this whole sordid affair.
 
 
# GrassyKnollington 2012-07-02 09:26
not forgetting Johann "I'm here all week" Lamont's perspective as a mother.
 
 
# Leswil 2012-07-02 11:40
Indy,I can't see that anytime soon.
 
 
# Training Day 2012-07-02 10:07
O/T.. Pacific Quay calling.. Pacific Quay calling..

Did anyone else hear the zany twosome of Cockers and Crichters this morning on GMS? The wacky duo - while assuring us that the important business of having a referendum on Europe might, kinda like, maybe happen.. or not - found time to agree that Alex Salmond doesn't actually want a referendum on Scottish independence.

Now, why couldn't the poor man's Statler and Waldorf have imparted this news to Alistair Darling's London backers of the No campaign, and saved all that money spent on cheese fondue at Napier University last Monday? Must do better, Cockers and Crichters!
 
 
# GrassyKnollington 2012-07-02 10:24
I didn't hear it but they sound like a fantastic double act.

Not only are they fighting the nationalists of their imagination, they're fighting the nationalists of their imagination from 1971....

Torcuil and Alan as cosy together as Magrit Curran and Annabel Goldie or Johann and Ruthie.

They have to keep in of course as Labour's No campaign bus is running on Tory petrol.

In fact there's a potential newsnet sticker. Might even print it off myself.
 
 
# Mad Jock McMad 2012-07-02 11:11
I hope the committee also call back the BBC's Robert Peston to once again ask him about the sources who fed him information to block the BoS buy out proposal in late 2008 and the run on HBOS in the week running up to the 2008 collapse.

My guess? The source will be the same Treasury Minister acting under the 'authority' of Brown and Darling that gave Diamond the 'OK'. The most likely suspect? Ed Balls (Gordon's gopher and hatchet man) and not anyone at the B of E.

This would explain, in part, why Balls was touting himself for Darling's job, at the time, as a reward for being his master's voice. While no Darling apologist I suggest Darling refused to budge because there was worse afoot in the minds of Brown, Balls and their pals in the 'City' on this issue and further manipulation of the financial markets planned to save Gordon's political legacy.

Cameron and Osbourne are up to their necks in this cack as well because they continued to turn a blind eye to what used to be called 'chinese practices' in pre PC days in the financial sector.

A final thought. This must have at least three out of four legs as the 'crash' and its imapacts mostly hit the City of London market where LIBOR was being manipulated as is suggested by Professor Hughes-Hallet's calculation that an Independent Scotland's exposure would have been in the region of £3 billion at most against the current UK 'City' liability.
 
 
# Rafiki 2012-07-02 13:46
When someone sent me a copy of Gordon Brown's Mansion House speech, I thought it was a spoof!

But even an aged cynic such as myself did not expect the moral and/or legal turpitude now being revealed.

Labour, Tory and the Banks are all in it together - better for whom?
 
 
# Fourfolksache 2012-07-02 14:48
We just have to hope that the Tories, in the hope that they can divert attention from their own complicity, will reveal information on Darling that will scupper him and the No campaign's credibility!
 
 
# roboftheburnawn 2012-07-02 15:11
WHITEWASH ALERT, WHITEWASH ALERT-

Watching " house of commons live "
 
 
# steveb 2012-07-02 15:54
Yep, I said yesterday that this is too big. So an attempted whitewash is to be expected.
But it is too big to go away as well.
Heres a thought, when the expenses scandal broke we instantly became one of the worlds hot spots for swine flu, newspapers full of it, government announcements and leaks, not enough vaccine for everyone, and panic all around. The expenses scandal got buried and tidied away.
Recently, just after the Tories were caught soliciting funds from business leaders we were all quickly led to focus on an imaginary, probable, forthcoming petrol shortage, which never happened. The messy story was buried and tidied away.
So, what is going to happen if the papers dont let this go. Has to be something big!
 
 
# From The Suburbs 2012-07-02 16:05
Slightly Off topic. My attention has been drawn to an interesting article on Icelandic Banks in Sunday Times Business Section.

Three major banks collapsed within a week of each other. Iceland's stock market lost three-quarters of its value.
Alongside assistance from the country's Nordic neighbours and Poland, the International Monetary Fund (IMF) lent $2.1 billion to stabilise the banks and the currency.

But its economy grew more than 4% between October last year and March this year. Unemployment is at 5.6%.. less than the UK rate. The deficit peaked at about £1.2 billion. It's now a sixth of that.
The IMF loans are being repaid early. The British and Dutch governments, which reimbursed Icesave depositors in full, are being repaid in full out of the estate of its wound-up parent Landsbanki, as are British councils that invested.
It's a common mistake to say that Iceland defaulted on its debts. It didn't. Unlike Ireland, it allowed its banks to renege on their promises so it could protect the sovereign debt.
Foreign banks are getting back only a small proportion of what they lent to Icelandic institutions. Most Icelanders are adamant that the blame for mistakes made by bankers should not be placed at their door
 
 
# Robabody 2012-07-02 16:57
Should we expect extradition requests from the US anytime soon for Darling and Brown? Although fidling the interest rates to your own / company benefit does not appear to be illegal here (how come?), what about the US?

I was just reflecting on the couple selling chemicals legally here and now awaiting extradition to the US.

I wonder how quickly Westmonster would move to nulify the treaty if Brown and Darling were asked to come forward for trial in the US?

Cynical, me? Depressed more like. What an absolute shower.
 
 
# alisdair 2012-07-02 17:38
R, as usual neither Brown or Darling will be extradited to the US. The fact that they were incompetant players in the system of economics that the US, at the point of the bayonet, imposes on any coutry they decide to rape means they are safe. Bliare as a 'middle east peace envoy' anyone?
 
 
# daveniz 2012-07-02 19:07
after reading all that goes on within London and its banking and political systems it has made me realise London is the new Babylon and will fall under its own corruption and greed and Scottish independance will accelerate the process! just another reason to vote yes!
 
 
# Mac 2012-07-02 19:37
The WSJ have stated that they highlighted the problems with LIBOR in 2008 with the BBA by directly contacting Angela Knight. WSJ also claim that the FSA and the BoE also knew about these problems in 2008. Finally it is becoming apparent that Barclays were acting on information obtained from the Treasury. So it seems every man and his dog in the City knew about LIBOR being fixed, so the Labour government must have known as well.
 
 
# Dundonian West 2012-07-03 10:53
"The sad thing is that, despite Labour’s very clear culpability in this whole sorry episode, there are few – if any – Scottish journalists who will pursue Gordon Brown and Alistair Darling."

The people in Scotland won't hold it's breath for that.
The journalists up here are part of the NO campaign problem----can't(don't have the intellectual resources and/or ability),or too afraid to break ranks and put their jobs at risk.

Just do as we're told----and don't push the blinkin obvious too far---go through the motions of journalism---and no further.

Can't blame them when it's puttin food on the table.
Just glad I'm not training to be a journalist in Scotland.
 
 
# Outoftown2012 2012-07-04 02:52
Oh Darling, what another fine mess you have got yourself into.
The people of Scotland will now definately believe everything you say.......not.

Better Together, with whom?
 
 
# rhymer 2012-07-05 15:43
If this brings A. Darling down who is left to lead
the "OH NO" campaign ? Apart from Charles Kennedy
there is nobody of sufficient gravitas left to lead them.
(and Charles seems to have gone AWOL)

Maybe Mr. Darling's banker friends can pass the hat around
and get enought money to hire Tony Blair for the occasion.
 
 
# Leswil 2012-07-06 11:20
Here is something very interesting on the american Gata website which explains the seemingly unexplicable - how and why Gordon Brown sold 400 tons of UK gold ( inc about 9% of our gold! )
This is crazy stuff, the article is an amazing insight into the levels of deceit that Gordon Brown got into.He took big market risks with what he was up to,he seriously made the wrong call.
Read it here and pass the link around,
www.gata.org/node/11541
 
 
# rhymer 2012-07-08 08:54
Brown and Darling were obviously involved and I'm sure there was quite a lot of Balls there too. All three of them were in charge when this went down so. . . did they know and just went along with the "books being fiddled" or were they totally oblivious to what was happening in their departments ?
 

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