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[Art Deco]

Barclays scandal: How big will this get? July 3, 2012: 11:37 AM ET

*By Larry Doyle, contributor*

**The earthquake that rocked Wall Street and the global financial markets
in 2008 continues to reverberate today. Just ask Bob Diamond, CEO of
Barclays (BCS <http://money.cnn.com/quote/quote.html?symb=BCS>)... or I
should say, the *former* CEO of Barclays.

Diamond, the once high-flying American banker, was dethroned overnight as
the chief executive of the UK-based bank as public pressure and outrage
grows over the Libor price-fixing scandal. Do not think for a second that
the CEOs of other large global banks are not sufficiently concerned of
their own standing this morning. As well they should be.

I have written at length of the destruction of public trust due to the
incestuous nature of the relationship between financial titans, their
political partners, and compliant financial self-regulators. Major
financial media have shied away from fully addressing this reality. In what
I would define as a tipping point, I am surprised yet heartened to to read *
Bloomberg* acknowledge what many have known for far too long, There's
Something Rotten in
Banking<http://www.bloomberg.com/news/2012-07-02/barclays-case-shows-something-s-rotten-in-banking-culture.html>
:

We don't countenance bank bashing. Nor have we ever called on regulators to
bust up big banks. But it's difficult to defend an industry that defrauds
the market with fake interest rate figures, thereby stealing from other
banks and customers.

Sadly, the Libor case reveals something rotten in today's banking culture.
We hope the investigations expose the bad actors, lead to jail terms for
those who knowingly manipulated the market, and force out the senior
managers and board directors who participated in, or overlooked, such
conduct.

*Bloomberg* hits Wall Street and The City hard. Deservedly so. The call for
jail time echoes my sentiments expressed
yesterday<http://www.senseoncents.com/2012/07/barclays-libor-scandal-prison-will-remedy/>
.

Why so exercised? In the Barclays settlement documents, regulators released
smoking-gun e-mails that reveal the extent of the dirty dealing between
bank traders (looking to protect profits and bonuses) and senior officials
in bank treasury units (hoping to convince markets that their banks weren't
in financial difficulty). The two aren't supposed to collude, but it's
obvious that the Chinese walls between them come with ladders.

As this story continues to unfold and the public outrage mounts, I would
bet executives at the banks in the crosshairs of this scandal might have
already called senior officials within the Federal Reserve and U.S.
Treasury looking for cover. Public outrage and accompanying demands for
total transparency here in the States are required to expose the truth of
this entire scandal.

*MORE: The Barclays school of crisis
management<http://management.fortune.cnn.com/2012/07/03/the-barclays-school-of-crisis-management/?iid=SF_F_River>
*

Barclays was certainly not an island in the tsunami that overwhelmed all
banks and the global economy in 2008. How many other institutions are
currently sweating profusely wondering what may be revealed in a review of
internal communications? Despite what banking executives might say, the
e-mail expose emanating from Barclays is explosive and  indicative of
culture not only at that organization but the industry as a whole.

Who knows what the future might hold for the individuals who wrote the
following. Will they be indicted for market manipulation? They should
certainly be indicted for stupidity. Under the heading of "you cannot make
this stuff up," *Bloomberg* reveals,

Here's an e-mail<http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfbarclaysorder062712.pdf>
about
the three- month rate from a senior Barclays trader in New York to the
London banker who submitted the rates: "Hi Guys, We got a big position in
3m libor for the next 3 days. Can we please keep the lib or fixing at 5.39
for the next few days. It would really help. We do not want it to fix any
higher than that. Tks a lot."

Bankers submitting rates responded to such requests as if they were
routine: "For you, anything," and "done … for you big boy," according to
the e-mails. Not that the efforts went unappreciated: "Dude. I owe you big
time!" one trader wrote to a Libor submitter. "Come over one day after work
and I'm opening a bottle of Bollinger."

Barclays traders also coordinated with counterparts from other banks. In an
instant message, one Barclays trader wrote to a trader at another bank: "If
you know how to keep a secret I'll bring you in on it, we're going to push
the cash downwards. … I know my treasury's firepower … please keep it to
yourself otherwise it won't work."

If the best defense is a good offense, other banks likely to be dragged
into this scandal are already hard at work. How so? Late yesterday
afternoon, the *WSJ* reported Banks Seek Dismissal of Libor
Suit<http://online.wsj.com/article/SB10001424052702304708604577503041110363000.html?mod=WSJ_hp_LEFTWhatsNewsCollection>.
Not so fast, gentlemen. Let's see the e-mail exchanges first.

I have long maintained, that the banking industry shouldn't be trusted to
regulate itself. Will this scandal bring about the necessary change on that
front?

*Larry is a Wall Street veteran, having worked at such banks as First
Boston, Bear Stearns and Union Bank. He blogs at www.senseoncents.com*


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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