Was Bob Diamond wrong to lie about the Libor rate when Britain’s banks were about to go bust?

The short answer is no.

Newly defenestrated Barclays CEO Bob Diamond (left) toed the politic line today in front of a House of Commons committee, saying that his bank’s fibs about the Libor rate (the rate at which banks lend to each other) was all about ‘rogue’ traders (them again) and nothing to do with the fact that, at the height of the banking crisis in 2008, people at the Bank of England, in the Labour government and Whitehall, were whispering in his ear saying: “Go easy Bob, if the truth comes out we’re all fucked, not just Barclays.”

But they were (whatever they say now). And with good reason. Britain’s banks were about to go bust (chancellor at the time Alastair Darling has said publicly that cash machines were about to grind to a halt in a couple of hours) and a certain degree of economy with the actualite suited everyone.

Now, of course, Barclays has been fined £290m, Diamond and chairman Marcus Agius have lost their jobs and there’s lots of hysterical talk about judge-led public inquiries into the matter – bank governance and restructuring – which was dealt with perfectly adequately by the recent Vickers Independent Commission on Banking. Whose main recommendation, that investment banks should be separated from retail banks (the main cause of this problem) was rejected by the Government after a ferocious lobbying campaign by Diamond and co.

So a few traders, who are alleged to have lobbied their Libor-setting chums in the big banks, will be sent to jail while the real culprits, if indeed that’s what they are, carry on running the country.

Fiddling the Libor rate downwards didn’t actually cost the country any money. It might be wrong to do such things but there are lots of things in the City that are worse: insider trading (illegal) and short selling (perfectly legal although allowing people to affect share and bond prices dramatically even though they don’t own the damn things has cost us all a fortune over the past decade), to name but two.

But the financial and political establishments always look after their own. That’s probably why Diamond, who doubtless contemplates a comeback at some stage, was willing to propose a fiction today.

They might still come after him. In which case the truth may come out.

But fibbing about Libor in 2008 was in everyone’s interest.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.