Bank rate rigging ‘Everyone was at it’


The crisis resulting from the bank rate rigging scandal that has engulfed Barclays took a dramatic turn over the weekend with the revelation that the entire banking system, from top to bottom, is implicated in perpetuating a gigantic fraud.

In the words of one anonymous whistleblower working for another bank: ‘everyone was at it’; ‘it’ being giving false figures on the rate banks had to pay in interest on loans (the Libor rate), figures that form the basis for the interest rates charged on mortgages, credit cards and loans.

According to this whistleblower, this fraudulent practice was not just widespread but common knowledge, even to the extent of having its own technical term – ‘dislocation of Libor from itself’ – to describe the fact that the Libor rate bore no relation to the actual rate of interest being charged to the banks.

Nor were the supposed ‘regulators’ of the banks (the FSA) in the dark about this scam which was clearly endemic across the entire banking system.

Documents provided by Barclays show that these guardians of the banks’ financial probity and legality were informed about the systematic falsification of data in 2007 and then again in 2008.

The FSA’s defence was that Barclays had not told them the full extent of their lies at that time.

Nothing was done by the regulators to stop or even warn the banks about their fraudulent activities and they carried on under the belief that they had official blessing.

This belief was apparently strongly reinforced by a telephone call between Barclays’ chief executive, Bob Diamond, and the deputy governor of the Bank of England, Paul Tucker, that took place as the banking collapse began to emerge in 2008.

During this conversation the deputy governor of the Bank of England raised the issue of ‘the external perceptions of Barclays’ Libor submissions.’

According to both Barclays’ and the Bank of England this conversation resulted in a ‘misunderstanding’, with Barclays convinced that its staff should ‘under an instruction from the Bank. . . reduce Barclays’ Libor submissions.’

The reason why the Bank of England would be so interested in reducing the Libor submissions is not hard to fathom out.

In 2008, despite all the protestations to the contrary, the British banking system, along with banks internationally, was in a state of complete meltdown following the collapse of the US Lehman Brothers bank and of Northern Rock in Britain.

The fiction maintained by the then Labour government along with the Bank of England, was that UK banks had weathered the storm and that all was well with British capitalism, as proof they cited the low interest rates being charged to UK banks for inter-bank lending, the Libor rate, being 2%.

In fact, the rate the banks were being charged was 6%, a dangerously high figure and one not sustainable for any length of time – the banks stood right on the edge of bankruptcy.

By artificially lowering the rate of interest it enabled the government and banks to hide the depths of the crisis and provide a cover under which they could set about the real rescue plan for the banks – savage cuts to the welfare state, slashing hundreds of thousands of jobs and the privatisation of everything from the NHS to education, in short making the working class pay for the banks’ crisis.

The depths of this scandal that pervades the entire banking and political system is proof that even the jailing of fraudulent bank employees is not enough, the entire banking system and the capitalist system of which it is the bedrock is corrupt and criminal through and through.

The only solution to this historically outmoded and redundant system is the world socialist revolution that will consign capitalism to history’s dustbin where it belongs.