<h1>Barclays scandal: How big will this get?</h1> <span class="cnnDateStamp">July 3, 2012: 11:37 AM ET</span>
<p><em>By Larry Doyle, contributor</em></p>
<p><em></em>The earthquake that rocked Wall Street and the global
financial markets in 2008 continues to reverberate today. Just ask Bob
Diamond, CEO of Barclays (<a href="http://money.cnn.com/quote/quote.html?symb=BCS">BCS</a>)... or I should say, the <em>former</em> CEO of Barclays.</p>
<p>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.</p>
<p>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 <em>Bloomberg</em> acknowledge what many have known for far too long, <a href="http://www.bloomberg.com/news/2012-07-02/barclays-case-shows-something-s-rotten-in-banking-culture.html" target="_blank">There's Something Rotten in Banking</a>:</p>
<blockquote><p>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.</p>
<p>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.</p></blockquote>
<p><em>Bloomberg</em> hits Wall Street and The City hard. Deservedly so. The call for jail time echoes my sentiments <a href="http://www.senseoncents.com/2012/07/barclays-libor-scandal-prison-will-remedy/" target="_blank">expressed yesterday</a>.</p>
<blockquote><p>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.</p></blockquote>
<p>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.</p>
<p><strong>MORE: <a href="http://management.fortune.cnn.com/2012/07/03/the-barclays-school-of-crisis-management/?iid=SF_F_River">The Barclays school of crisis management</a></strong></p>
<p>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.</p>
<p>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," <em>Bloomberg</em> reveals,</p>
<blockquote><p>Here's an <a title="Open Web Site" href="http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfbarclaysorder062712.pdf" rel="external">e-mail</a> 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."</p>
<p>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."</p>
<p>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."</p></blockquote>
<p>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 <em>WSJ</em> reported <a href="http://online.wsj.com/article/SB10001424052702304708604577503041110363000.html?mod=WSJ_hp_LEFTWhatsNewsCollection" target="_blank">Banks Seek Dismissal of Libor Suit</a>. Not so fast, gentlemen. Let's see the e-mail exchanges first.</p>
<p>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?</p>
<p><em>Larry is a Wall Street veteran, having worked at such banks as First Boston, Bear Stearns and Union Bank. <em>He blogs at <a href="http://www.senseoncents.com/" rel="external nofollow" target="new">www.senseoncents.com</a></em></em></p>
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