Gov report: Actually, evil City traders DIDN'T cause the banking crash • The Register

Re HBOS collapse:

' This was a traditional bank failure pure and simple. It was a case of a bank pursuing traditional banking activities and pursuing them badly.'

More here at the Register http://www.theregister.co.uk/2013/04/05/hbos_collapse/

There is nothing I can add

Fraser Nelson's piece in The Telegraph is a must read. It contains all that the Labour/BBC alliance are desperately trying to keep hidden from the British public. Do read the whole article, here's a few excerpts:

'No matter what Balls’s title may have been over the 13 years of Labour’s government, his main job was as Gordon Brown’s de facto chief adviser. Together they bear more responsibility for the crash than perhaps any two people in Britain. They personally designed the regulation system which failed so spectacularly. They reprogrammed the Bank of England only to worry about inflation, rendering it blind to the massive asset bubble. They came up with the “golden rule”, which saw Britain’s debt rising massively even in the boom years. And while Brown paid the price at the ballot box, Balls had thought he’d got away with it. ... The fractured Brown/Balls regulation system had left massive gaps, which allowed the Libor crisis to emerge. And worse: London, in fact, became the Wild West of global banking. While Brown and Balls would lose no opportunity to say that the crisis “started in America”, the Americans are now beginning to wonder whether London was, in fact, the source of contagion. Just last month Carolyn Maloney, a New York congresswoman, asked why “all the problems appeared in London”. AIG, Lehman and UBS are all foreign-owned banks, she said, but it was in their London divisions that the rot set in. Why? And she might have added: why is there no equivalent of the Libor crisis elsewhere? The answer is that Brown’s regulators had, in effect, backed off from the banks – at least in terms of their dealings with each other. The Financial Services Authority fretted about life assurance policies, not people buying life insurance companies. When Howard Davies was appointed to the FSA, Mervyn King, now Bank of England governor, told a friend: “Howard will get so bogged down with regulating ISAs that he’ll miss something.” So it was to prove. The FSA took a caveat emptor approach to the bank’s dealings: let the buyer beware, and these men in pinstripes could do what they liked with each other. “With Libor, the feeling was that these were grown men, quite capable of dealing with each other,” one senior regulator tells me. This is why the Libor, the average of the rate at which banks lend to each other, was unregulated – and, therefore, wide open to manipulation. Now, it is seen as a matter of great outrage that traders were fiddling the figures. But then, it was seen as part of the rough-and-tumble of everyday life. During the parliamentary investigation, it may emerge that the Bank of England knew that Libor was corruptible, and did nothing about it. Its officials, too, believed they had found a magic formula in the City, where the banks were given freedom and profits churned in. Throughout all of this, Balls was widely credited for what Brown called a “golden age” for the City of London. Even when he was Children’s Minister, the City would take his word as gospel. He was seen as the real architect of this strange new deal where Britain had become what can, in retrospect, be seen as a bankocracy. For a while, bankers even wrote government policy. The late Sir Derek Wanless (NatWest) conducted the NHS review and Sandy Leitch (Zurich Financial Services) wrote the skills review. Labour did not just befriend the banks, it was – in effect – governing in coalition with them. This was corporatism, not capitalism.'

That's it, no more blogging from me todayu. I am tired of fighting against forces more powerful than I who set the agenda in the interests of their friends and allies and trample over freedom.

I don't see how LIBOR could be fixed by one or even two or three banks acting alone or in cahoots

Thomson Reuters is the designated calculation agent for BBA LIBOR. Data submitted by panel banks into the bbalibor process is received and processed by Thomson Reuters and the data is calculated using guidelines provided by the FX&MM Committee.
Each cash desk in a LIBOR contributor bank has a Thomson Reuters application installed allowing that institution to confidentially submit rates. Each morning between 1100 and 1110 a named individual responsible for cash management at each panel bank formulates their own rates for the day and inputs them into this application, which links directly to a rate setting team at Thomson Reuters.  A bank cannot see other contributor rates during the submission window - this is only possible after final publication of the BBA LIBOR data. Thomson Reuters run a collection of automated and manual tests on the submitted rates before they are sent to the calculation engine, and after calculation the data is released to the market via Thomson Reuters and other licensed data vendors.
Every bbalibor rate produced by Thomson Reuters is calculated using a trimmed arithmetic mean. Once Thomson Reuters receive each contribution submission they rank them in descending order and then exclude the highest and lowest 25% of submissions - this is the trimming process. Details of this are shown in the table below. The remaining contributions are then arithmetically averaged to create a bbalibor quote. This is repeated for every currency and maturity, producing 150 rates every business day.

No. of Contributors	Trimming methodology	No. of Contributors on which BBA LIBOR rate is based
18 Contributors	top 4 highest rates, tail 4 lowest rates	10
17 Contributors	top 4 highest rates, tail 4 lowest rates	9
16 Contributors	top 4 highest rates, tail 4 lowest rates	8
15 Contributors	top 4 highest rates, tail 4 lowest rates	7
14 Contributors	top 3 highest rates, tail 3 lowest rates	8
13 Contributors	top 3 highest rates, tail 3 lowest rates	7
12 Contributors	top 3 highest rates, tail 3 lowest rates	6
11 Contributors	top 3 highest rates, tail 3 lowest rates	5
10 Contributors	top 2 highest rates, tail 2 lowest rates	6
9 Contributors	top 2 highest rates, tail 2 lowest rates	5
8 Contributors	top 2 highest rates, tail 2 lowest rates	4
7 Contributors	top highest rate, tail lowest rate	5

The decision to trim the bottom and top quartiles in the calculation was taken to exclude outliers from the final calculation. By doing this, it is out of the control of any individual panel contributor to influence the calculation and affect the bbalibor quote.

That's all from the British Bankers Association explanation of how the LIBOR rate is calculated. Note that outliers are excluded as they use a trimmed arithmetic mean which excludes the highest and lowest 25% of submissions.

This being the case, the current attacks on Barclays seem a touch excessive. For LIBOR to be reduced there must have been other banks involved, who were they. Also for other banks to be involved I sense a direction or at least a 'steer' from the Bank of England or the Treasury that this is what was wanted/needed.

Now do you see why the BBC are relentlesly attacking Bob Diamond?

From today's Metro newspaper

To quote Kevin Keegan "I would love it" if Ed Balls went down for his part in this affair, should he have had a part of course. The trouble is Blair, Brown, Mandelson, Balls et al are so slippery that nothing ever sticks.

Well that didn't take long

When the 'LIBOR fixing' story broke, I immediately wondered who else stood to benefit from lower interest rates. The government was my conclusion and so I tweeted my thoughts but no more. Today I read in the Mail that:

'Leaked documents last night brought the interest-rate fixing scandal that has shaken Britain's banks closer to the heart of the last Labour government. They suggest that Baroness Vadera, a former Cabinet Office minister and one of Labour's chief economic advisers, told officials in 2008 that bringing down the rates which determine how much banks lend to each other would be 'a major contribution to the stability of the banking system and to the health of the economy'. A paper prepared by the peer with former colleagues at the bank UBS was headed 'Reducing Libor' – the name for the inter-bank lending rate at the centre of the scandal. The document was circulated among officials and Lady Vadera's ministerial colleagues at the height of the credit crunch in 2008 and concludes: 'Getting Libor down is desirable.' But the briefing note was prepared only days after Barclays boss Bob Diamond, who is fighting to save his job after traders at the bank were revealed to have made millions by fixing the rate, discussed the issue with Bank of England deputy governor Paul Tucker.'

As far as I am aware nothing, so far, points to Lady Vadera or her bosses Gordon 'light touch' Brown and Ed 'bully boy' Balls in any way requesting LIBOR rates be lowered artificially. However it is worth asking if this document shows how keen the labour government was to keep Libor then if/how that concern was communicated to bank bosses and how did they respond.

Are you ashamed of being a banker? How ashamed?

In London I hear tell that some bankers are shy of admitting this. In Madrid I read that 'bankers have made some pitiful attempts to use their services by pretending to be engineers or architects.' In Madrid there is another reason why some bankers are hiding their chosen profession and according to Russia Today it is all down to another profession (the oldest profession):

'Madrid’s high-class escorts have found a way to regulate the Spanish banking sector. The ladies want to have their say in the economy by withholding sexual pleasures from bank employees.

The largest trade association for luxury escorts in the Spanish capital has gone on a general and indefinite strike on sexual services for bankers until they go back to providing credits to Spanish families, small- and medium-size enterprises and companies.

It all started with one of the ladies who forced one of her clients to grant a line credit and a loan simply by halting her sexual services until he “fulfills his responsibility to society.”

The trade association's spokeswoman praised their success by stressing the government and the Bank of Spain have previously failed to adjust the credit flow.

"We are the only ones with a real ability to pressure the sector," she stated. “We have been on strike for three days now and we don't think they can withstand much more.”

She has revealed that bankers have made some pitiful attempts to use their services by pretending to be engineers or architects.

“But they don't fool anyone since it has been many years since these professionals could afford rates that start from 300 euro an hour," she continued.

The bankers reportedly became so desperate that they even decided to call in the government for mediation.

The Mexican website SDPnoticias.com, which initially published the story, cites the Minister of Economy and Competitiveness as admitting that the lack of legislation regulating the escort sector makes it very difficult for the government to intercede in the conflict.

"In fact, there has not even been a formal communication of the strike — the escorts are making use of their right of admission or denying entry to…well, you know. So no one can negotiate," he was quoted as saying.'

A fascinating story that reminds me of the Aristophanes play Lysistrata in which one, Lysistrata, persuades the women of Greece to withhold sexual privileges from their husbands and lovers as a means of forcing the men to negotiate peace and thus end the Peloponnesian War.

Blame the bankers, always blame the banker and the UK's debt is not serious

Mark Littlewood, of the Institute of Economic Affairs, versus Paul Brandon of the Right to Work Campaign. One seems to be talking sense and one nonsense. However I really don't think that David Cameron and George Osborne are ready for the hell that the left are prepared to unleash on this government later this year. Neither David Cameron or George Osborne look like they will have the bottle that got Margaret Thatcher through the miners strike.

Putting it in perspective

The bash the bankers brigade were out in force attacking Barclays Bank's boss Bob Diamond for the size of his bonus yesterday. Is it my imagination but was there an excess of the letter b in that sentence? Alex Masterley puts the bonus into perspective:

'£6.5 million bonus and £250,000 salary.  Pathetic.  That's less than the £175k a week that Fernando Torres is paid for not scoring at Chelsea, and that's doesn't include appearance money, win bonuses and image rights.'

Something that seems not to get a mention on 5Live.

Fact-checking The Guardian, the BBC and particularly Labour MP Chuka Umanna

FCA Blog has found even more flaws in the story I fact checked last week. Taka a read of Christie Malry's piece and wonder whether The Guardian and BBC's preference for headlining accusations rather than checking the facts behind the headlines says more about them or Chuka Umanna?

Here's an extract from the FCA Blog article, a point that I had totally missed when I read the Labour party's propaganda piece:

'3) Barclays 2009 consolidated profits include a significant disposal which is taxed differently under UK law
(HT here to The Pedant-General and Alex, who first commented on this over at Tim Worstall's blog)
In arriving at a profit before tax figure of £11.6bn, The Guardian has added the profit from the ongoing business (£4,585m ¹) to profits from a disposed business (£726m ²) and the gain made on disposal of that business (£6,331m ³) to reach a total of £11,642m.
In 2002 (yes, under Gordon Brown), the UK government introduced the Substantial shareholdings exemption, a corporation tax exemption for UK businesses disposing of a substantial shareholding in part of their business.  The idea was that businesses should be more able to restructure their businesses without having to worry about unfortunate chargeable gains implications.
As explained in note 39 to the accounts, this means that the bulk of the gain on disposal isn't chargeable to UK corporation tax at all.'

I can see that FCA Blog (a FCA being a senior Chartered Accountant) will have to become regular reading.