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Anything for the Libor Boys

On a Tuesday evening last July, I was walking south across the Thames over the Millennium Bridge. The entrance to the Tate Modern was blocked off with police tape, and a blue tarp was spread across the ground. Under it was the corpse of someone who’d jumped from the members’ bar five floors up. A Tate membership costs £60 a year, and many members work within walking distance of the museum, just across the river in the City, the primary zone of banking here since the late sixteenth century.

A few days later, the London press reported that the body under the tarp belonged to Michael Foreman, forty-eight years old, married, a passionate trombonist, frequent visitor to Hong Kong, and senior bank manager for HSBC. Foreman’s suicide and its dramatic staging caused at least one onlooker to vomit and left a musician about to go on in the Tanks, the Tate’s newly opened exhibition space, too traumatized to perform. But no one learned anything more about why the banker took his own life—he might have been distressed over personal problems, professional troubles, or Damien Hirst’s diamond-studded skull For the Love of God, which the Tate was featuring as part of its popular Hirst retrospective.

In a sense, the mystery of Foreman’s death didn’t matter. All summer long, the bankers of London were locked into a different kind of Totentanz, pantomiming their profession’s moral vacuity. They were making headlines as interest-rate riggers at Barclays, Mexican drug-money launderers at HSBC, and accomplices to the systematic violation of U.S. sanctions against Iran at Standard Chartered.

By August the cascade of financial news had become so relentlessly grim that the British began spitting bile across the Atlantic, displaying all the telltale symptoms of a persecution complex. “I think it’s a concerted effort that’s been organized at the top of the U.S. government,” Labour MP John Mann told the BBC. “This is Washington trying to win a commercial battle to have trading from London shifted to New York.” An unnamed Standard Chartered group director, quoted in a New York State Department of Financial Services filing against the bank, put things a bit more succinctly: “You f—ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?”

Meanwhile, the rest of the world, or at least some of its better athletes, had come to town, and the Olympics had pushed the bankers off the front pages of every London paper but the Financial Times. The Friday after Foreman jumped, Danny Boyle’s opening ceremonies offered an image of Britain that ran from The Wind in the Willows through Chitty Chitty Bang Bang, Chariots of Fire, and Harry Potter, with nods to the Industrial Revolution, the National Health Service, the Tube, the Thames, black cabs, classic rock, the invention of ultrasound, the first clicks of the World Wide Web, and the fact that not all Britons are white. Stuntmen dressed as James Bond and Queen Elizabeth II jumped from a helicopter. Most reactions chimed with that of BBC sportswriter Tom Fordyce, who called the ceremonies “so gloriously daft, so cynicism-squashingly charming and—well, so much pinch-yourself fun.”

Other critics weren’t so inclined to gush. The Conservative MP Aidan Burley, who last year embarrassed his party by attending a Nazi-themed bachelor party in the French Alps, called the proceedings “leftie multicultural crap” on Twitter, and was told off for his somewhat vile honesty by Prime Minister David Cameron and London Mayor Boris Johnson. But the novelist and essayist Jenny Diski, writing on the blog of the London Review of Books (where I work), confirmed that Burley had a point: “I’m pretty sure that nothing more overtly political or antagonistic to government policy could have been staged in such circumstances, and Danny Boyle, his writer and the performers are to be saluted for giving the dissenting left a morale boost.” But still, “It was a wishful tale of things long gone.”

It’s true that Danny Boyle, a diehard Labourite of socialist leanings, seized upon the unlikely format of the Opening Ceremony to mount a popular-front period piece. In this vision of British history—equal parts détournement and wish-fulfillment fantasy—kinetic Mod music producers and fashion designers overlap indistinguishably with suffragists, striking miners, and Chartists. This scepter’d isle had become, in this postmodern confabulation, a beachhead of inexhaustible dissent, channeled through everything from mobile phones to Harry Potter novels.

f Boyle and his production crew had been intent on portraying the London of today, they would have painted the black cabs over with bank ads and shown a few Old Etonian MPs cutting £20 billion from the NHS budget and defunding universities while tabloid reporters hacked into the voice mail boxes of pols, comedians, and dead little girls. They would have featured legions of East European baristas and Scandinavian retail clerks attempting to duct-tape the windows of their Starbucks, Costas, H&Ms, and Topshops against a multi-ethnic horde of council estate–dwelling looters, rendered ravenous by austerity; and, for that element of swashbuckling Ian Fleming menace, they would have had an equally cosmopolitan group of bankers, hedge funders, and private equity managers drop 007 in a body bag from a private jet en route to Mallorca, placing bets whether he’d land zipper up or zipper down. The Queen would sit alone sipping tea, listening to Pink Floyd’s “Money.”

Not exactly the stuff, in other words, of pinch-yourself fun. Then again, the real institutional armature of the Olympic Games traced rather closely the broad, emerging contours of the Libor rate-rigging scandal—news of which broke in June, and kept on breaking, the taint soon spreading industry-wide.

The International Olympic Committee has engaged in more than its share of rate-rigging, whether via cash-in-the-envelope bribery schemes or ritual high-stakes graft. If London was putting its most jaunty, global-market face on the launching of the 2012 Games, the anxious organizers of the event had to be mindful of the distressing precedent of two Games past, when Athens went on a giddy spending and construction binge to burnish its profile as a bona fide global capital of, well, capital. After the final tab was tallied, Greece had spent $11 billion—roughly double the original projected budget. And the Greek economy, already spun into an unsustainable paper fiction to satisfy neoliberal reveries of debt-driven growth, became a full-fledged basket case six years later, threatening to drag down the entire Eurozone with it.

Anything for the Libor Boys

For a bracing parallel narrative to the antic faux-populism of Boyle’s Opening Ceremony, you would do well to glance at the U.S. Commodity Futures Trading Commission’s June filing in the matter of Barclays bank and its manipulations of the Libor and Euribor exchange rates. Here are notes from traders in London and New York in 2005 and 2006 requesting adjustments to Barclays’ rate submissions:

“WE HAVE TO GET KICKED OUT OF THE FIXINGS TOMORROW!! We need a 4.17 fix in 1m (low fix) We need a 4.41 fix in 3m (high fix)”

“You need to take a close look at the reset ladder. We need 3M to stay low for the next 3 sets and then I think that we will be completely out of our 3M position. Then its on. [Submitter] has to go crazy with raising 3M Libor.”

“Your annoying colleague again . . . Would love to get a high 1m Also if poss a low 3m . . . ifposs . . . thanks”

“This is the [book’s] risk. We need low 1M and 3M libor. Pls ask [submitter] to get 1M set to 82. That would help a lot”

“We have another big fixing tom[orrow] and with the market move I was hoping we could set the 1M and 3M Libors as high as possible”

“Hi Guys, We got a big position in 3m libor for the next 3 days. Can we please keep the libor 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.”

The frat-boy diction here suggests that the correspondents could be ordering pizzas—“Your annoying colleague again, I was hoping we could order two extra mushroom pies tonight. It would really help. Tks a lot”—or calling in computer repairs or dialing up strippers. Instead, of course, they were rigging interest rates that peg the disbursal of more than $700 trillion in credit contracts (including funds fed directly into Libor and Euribor). And here are the sort of replies they received:

“[Senior Trader] owes me!”

“For you . . . anything.”

“Always happy to help, leave it with me, Sir.”

“Done . . . for you big boy”

There are 150 Libors (London interbank offered rates) published every day, for ten currencies and fifteen durations (in the above chatty requests, 1M indicates one month and 3M three months). Thanks to the sheer volume of money routed through the Libor system, financial commentators have dubbed the rates the most important numbers in the world.

One could indeed make the case that there is as much edifying sport in tracking the composition of Libor rates as there is, say, in charting the reliably corrupt judging of the Olympics Boxing Committee—which, in the London Games alone, resulted in the expulsion of a referee who failed to calculate six knockdowns in one egregiously miscalled match, and the suspension of another referee who disqualified an Iranian boxer on trumped-up technicalities.


Sure, Libor-setting can’t really compete on the level of sheer spectacle: the rates get formulated in an office in London’s Docklands by a pair of employees of Thomson Reuters on behalf of the British Bankers’ Association (BBA). Every weekday morning around 11 a.m., the pair receives estimates from a set of banks—numbers that designate the rates at which banks believe they could borrow money from other banks for a given loan period on the day of submission. The top and bottom quarters of submitted rates are discarded; the remaining numbers, in distinctly unscientific fashion, determine the Libors-of-the-moment. (Often the Barclays traders were requesting that the bank’s rate “GET KICKED OUT” at the low or high end—a procedure that would still tilt the overall rate up or down by skewing the rest of the averaged sample.) The Libor benchmark then fans out across the global banking system; parallel rigging was happening with the European Banking Federation’s similarly calculated Euribor rate. The settled figure determines tens of trillions of dollars in adjustable-rate mortgages, student loans, and other loans—together with more than $500 trillion in interest-rate swaps. It was swaps that the Barclays traders in London and New York were betting on, and they were calling in requests to the bank’s rate submitters to ensure that their bets paid off.

Here, the Olympics analogy holds in another way: the clamor to rig Libor was a none-too-subtle brand of dousing the markets in performance-enhancing substances. It was, as the CFTC filing alleges, a simple case of gamblers rigging the game, and the submitters acquiescing, “for you big boy.” The agency also found that “led by a former Barclays senior Euro swaps trader,” Barclays traders called in rate requests for traders at other banks and had their favors returned in kind, submissive submitters “always happy to help” even if they were helping somebody at a bank across town. The con transcended institutional boundaries and thrived on fraternal cooperation. Usually the rigs, frequently arranged by instant messenger, were a matter of a hundredth of a point:

TRADER: hi . . . Sorry to be a pain but just to remind you the importance of a low fixing for us today.

SUBMITTER: no problem, I had not forgotton. The [voice] brokers are going for 3.372, we will put in 36 for our contribution.

In the narrative of the scandal that took hold over the summer, these two aspects of the Libor case—the rigged gambling in house and the bank-to-bank collusion racket—turned out to be minor next to the story of the manipulation of Libor during the financial crisis. Manipulation here was a side effect: the bank brass weren’t trying to alter Libor itself, but rather were fudging their submissions to place a fig leaf over their own impotence—to protect themselves, and their share prices, from a predatory market.

In September 2007, Bloomberg reported that Barclays had twice borrowed from the Bank of England’s emergency lending facility and noted that its Libor submissions had been relatively high. “So what the hell is happening at Barclays and its Barclays Capital securities unit that is prompting its peers to charge it premium interest rates in the money market?” Bloomberg asked. The Financial Times and the Evening Standard picked up the story. The irony, according to the documents, is that here Barclays was being honest in its Libor submissions—or at least perceived itself to be more honest than its peers. Barclays officials were reporting rates in line with the bank’s actual ability to borrow in the market. But once the bank realized its honesty was hurting its share price, as its high Libor submissions looked like the sign of a bank in distress, it started to shave its submissions to protect itself—in much the same way that Olympic weightlifters or Tour de France contestants start downing any and every substance on offer to keep pace with their amply doped, high-performing competitors.

The Barclays brass was well aware just how fraught this moment in Libor-rigging would prove to be. Senior managers instructed submitters that the bank shouldn’t seem as if it was “sticking its head above the parapet.” One supervisor told submitters that if Barclays was twenty points above “the pack,” “it’s going to cause a shit storm.” Supervisors said the same thing in 2007 to the BBA: “no one will get out of the pack, the pack sort of stays low”; “[s]ome banks are getting close to looking like they are actively not recognizing the actual market levels.” This is how a Barclays employee spelled out the scenario to a Fed analyst in an April 11, 2008, phone conversation:

BARCLAYS: Now, um, you know, obviously there has been a lot of speculation about LIBORs and, you know.

FRBNY: Mm hmm.

BARCLAYS: I’ve read some really interesting articles about them.

FRBNY: Mm hmm.

BARCLAYS: Um, and uh, w-, you know we, w-we, we strongly feel it’s true to say that.


BARCLAYS: Dollar, Dollar LIBORs do not reflect where the market is trading which is you know the same as a lot of other people have said.

FRBNY: Mm hmm.

BARCLAYS: Um, wha-, it depends on which part of the curve you’re looking at.

FRBNY: Mm hmm.

BARCLAYS: Um, currently, we would say that in the three months, um, if we as a prime bank had to go in the interbank market and borrow cash, it’s probably eight to ten basis points above where LIBOR is fixing.

FRBNY: So you’re above ten to fifteen?

BARCLAYS: About eight or ten above. If, if, if we had to go in the market and

FRBNY: Yeah.

BARCLAYS: Properly borrow money, it would be

FRBNY: Yeah.

BARCLAYS: About eight to ten above and in the one year

FRBNY: Okay.

BARCLAYS: It would probably be about twenty basis points in the market.

FRBNY: And, and why do you think that there is this, this discrepancy? Is it because banks maybe they are not reporting what they should or is it um . . .

BARCLAYS: Well, let’s, let’s put it like this and I’m gonna be really frank and honest with you.

FRBNY: No that’s why I am asking you [laughter] you know, yeah [inaudible] [laughter]

BARCLAYS: You know, you know we, we went through a period where


BARCLAYS: We were putting in where we really thought we would be able to borrow cash in the interbank market and it was

FRBNY: Mm hmm.

BARCLAYS: Above where everyone else was publishing rates.

FRBNY: Mm hmm.

BARCLAYS: And the next thing we knew, there was um, an article in the Financial Times, charting our LIBOR contributions and comparing it with other banks and inferring that this meant that we had a problem raising cash in the interbank market.

FRBNY: Yeah.

BARCLAYS: And um, our share price went down.


BARCLAYS: So it’s never supposed to be the prerogative of a, a money market dealer to affect their company share value.

FRBNY: Okay.

BARCLAYS: And so we just fit in with the rest of the crowd, if you like.

FRBNY: Okay.

BARCLAYS: So, we know that we’re not posting um, an honest LIBOR.

RBNY: Okay.

ARCLAYS: And yet and yet we are doing it, because, um, if we didn’t do it

FRBNY: Mm hmm.

BARCLAYS: It draws, um, unwanted attention on ourselves.

By this time—and indeed for many months—senior managers at Barclays, the BBA, the Bank of England, and the Fed all knew about these manipulations. Five days after that one-sided conversation between the Barclays employee and the Fed official, the Wall Street Journal published a report headlined “Libor Fog: Bankers Cast Doubt on Key Rate Amid Crisis” outing the low-balled rates, at least speculatively. On the phone, a Barclays manager told the BBA, “We’re clean, but we’re dirty-clean, rather than clean-clean.” “No one’s clean-clean,” was the reply.


An odd aspect of the CFTC’s Barclays filing is the difference in tone conveyed in different sorts of false Libor rate submissions. Because the brass were asking for enormous falsifications (relative to the traders’ petty point-shaving), when the Libor submitters at Barclay were instructed to lower their submissions to protect the bank’s share price, they sounded nothing like they did when they were hit up by a fellow trader.

“Following on from my conversation with you,” wrote one disgruntled submitter to a manager in the latter scenario, “I will reluctantly, gradually and artificially get my libors in line with the rest of the contributors as requested. I disagree with this approach as you are well aware. I will be contributing rates which are nowhere near the clearing rates for unsecured cash and therefore will not be posting honest prices.” Tks a lot.

Within days of the CFTC’s filing, Barclays chairman Marcus Agius resigned. The next day, American-born CEO Bob Diamond was out. Agius would tell Parliament that Diamond’s exit came about via the intervention of Bank of England Governor Mervyn King—a pointed contrast with the dilatory regulatory response to King’s stateside counterpart Geithner. “We had a conversation,” Agius drily reported, “in which [King] said that Bob Diamond no longer enjoyed the support of his regulators.”

Then again, there was a longstanding personal animus here. King and Diamond had been rivals since 2007, when King was blaming the crisis on heavy bonuses paid to bankers and Diamond was blaming central banks for allowing confidence to erode. The British papers enjoyed pointing out that they were both the humble sons of schoolteachers. “To paraphrase a great wartime leader,” King said in 2009, “never in the field of financial endeavor has so much money been owed by so few to so many. And, one might add, so far with little real reform.” The Tory/Lib Dem coalition that came to power in 2010 supported plans to give the Bank of England the regulatory powers of the Financial Services Authority, but in the face of the City lobby stopped short of King’s wish for the banks to be split up.

King at least displayed a healthy antagonism toward the banks of the kind you don’t generally see from Geithner or Ben Bernanke toward Lloyd Blankfein or Jamie Dimon. But if he was able to take on the role of enforcer in the public mind after the scandal had come to light, it was not so clear, as more documents emerged, that the Bank of England’s hands were clean in 2008. Specifically, in the midst of the financial crisis, King’s deputy and anointed successor Paul Tucker appeared to have instructed Bob Diamond to lower the Barclays Libor submissions. In late October 2008, Tucker had emailed Diamond to talk and Diamond had reported to his colleagues on the discussion’s substance:

Further to our last call, Mr Tucker reiterated that he had received calls from a number of senior figures within Whitehall to question why Barclays was always toward the top end of the Libor pricing. His response was “you have to pay what you have to pay.” I asked if he could relay the reality, that not all banks were providing quotes at the levels that represented real transactions, his response “oh, that would be worse.”

I explained again our market rate driven policy and that it had recently meant that we appeared in the top quartile and on occasion the top decile of the pricing. Equally I noted that we continued to see others in the market posting rates at levels that were not representative of where they would actually undertake business. This latter point has on occasion pushed us higher than would otherwise appear to be the case. In fact, we are not having to “pay up” for money at all.

Mr Tucker stated the levels of calls he was receiving from Whitehall were “senior” and that while he was certain we did not need advice, that it did not always need to be the case that we appeared as high as we have recently.

Did the last line indicate that Tucker had relayed an order from on high that Barclays should report lower rates to project confidence in the midst of the liquidity crisis? Diamond and Tucker said there was no order to lower the rates, but that the phrase “it did not always need to be the case” was interpreted that way by Jerry del Missier, president of Barclays Capital, who sent the order down the line. Del Missier was another of the summer’s casualties.


During an intense round of questioning from Parliament’s Treasury Select Committee over the summer, Tucker was able to maintain plausible deniability. Parliament’s report pointed out that the manipulation of the Libor rate by traders had only come to light in the first place because Barclays had cooperated with American authorities investigating the curious pattern of lowballed Libor rates over the course of the crisis. For his part, Diamond gamely sought to shift the blame down the corporate hierarchy, in the tradition of humiliated and scandal-tarred executives everywhere: he argued that the fourteen traders singled out in the Fed’s probe were rogues who were rigging the rates for the sake of their own personal books. In a neat pirouette, Diamond was able to argue that Barclays might have been a victim of its own traders’ efforts to rig an artificial Libor. New quotations from the traders showed again that they were on chummier terms with the bank’s pliant rate submitters than the senior managers were: “Dude. I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger.”

When Congress questioned Geithner on Libor in July, some Republicans chided him for not referring the matter straight to the Justice Department in 2008. Barney Frank came to his defense, joined by Tim Johnson, the South Dakota Democrat who chairs the Senate Banking Committee: “We cannot lose sight of the fact that the Libor issue, at its core, is about fraud. I want you to commit to me and the American people that the administration will make sure that those involved in Libor fraud will be held accountable and prosecuted.” “Absolutely,” Geithner replied. “I’m very confident that the Department of Justice and the relevant enforcement agencies will meet that objective.” But the Justice Department doesn’t tend to prosecute Wall Street, and the Barclays settlement with the CFTC for $200 million included a waiver on prosecution.

More than a dozen other banks are now facing Libor investigations, and the U.K.’s Serious Fraud Office has said that it may seek prosecutions. RBS is reported to be the next up, and as the summer wound down, the scandal intensified. In August Reuters reported that a fired trader in Singapore named Tan Chi Min had alleged in a wrongful dismissal suit that the minutes of his disciplinary hearing had been altered to conceal some damaging allegations, including a mention of a yen swaps trader who had interfered with Libor submissions and Tan’s own assertion that “the bank’s internal procedure in London seemed to be that ‘anyone can change Libor.’” Investigators are also reportedly trying to establish whether routine Libor rigging by traders had started earlier than the bubble-fueled instances that reportedly started in 2005. Douglas Keenan, a former Morgan Stanley trader, wrote in the Financial Times that it was common knowledge that “banks misreported the Libor rates in a way that would generally bring them profits” when he started out in 1991. He’d offered his testimony to the Treasury Select Committee and had been turned away because his story “contradicts the narrative.” In that narrative, financial malfeasance began in annus mirabilis 2005 and lasted until 2009, by which time the banks were broken and the game had turned out to be quite losable indeed.

By October, despite general resistance (or at least whining) from bankers, Libor reform was inching forward, under the aegis of the U.K. Treasury’s new Financial Conduct Authority. BBA would be out of the business of rate-setting, and replaced by—well, something. Banks would have to back up their submissions with evidence of some kind of actually existing transaction. And Kevin Milne, the former head of clearing at the London Stock Exchange, was setting up a rival benchmark rate in the capital markets of Singapore. Meanwhile, American municipalities bankrupted by Libor-poisoned interest rate swaps are lining up lawsuits against the London banking system. The Libor narrative was always harder to follow than HSBC’s money laundering for Mexican narcos or Standard Chartered dealings with the Iranians. Indeed, as the headlines have dragged their way across the British press, I’ve heard some people say that Libor is a fake scandal, a crime where there were as many victims as there were unwitting beneficiaries on either side of the rigged rates. Of course, you could say the same of the London Games—which had, among other things, yielded BBC footage of a Bulgarian member of IOC agreeing back in 2004 to exchange his vote to site the Games in London for a healthy bribe. The only difference is that it would be extremely difficult even for Danny Boyle to confect a populist allegory out of a scheme that compounded the penury of mortgage and student loan holders to pad the bonuses of the global financial elite. No, for a job like that you’d need a James Cameron—or better yet, a Tim Geithner.