Thursday, 28 June 2012
How did Barclays make it through that dark days of 2009?
However, if you were a Bank you could see the leverage wall collapsing, worse events took place as time wore on in 2008 and 2009; Banks started going to the wall for lack of liquidity. Fear of lending to one another gripped the market and we had a credit crunch.
The lack of liquidity could kill a bank, even a huge one like Wall Street leviathan, Lehman Brothers. It becamse crucial that Banks knew who could still borrow, who was still 'safe.' One such bank as risk was Barclays.
And now it come to light that they were consipirng to affect the LIBOR rate, to show them in a better light, to show the market they were still a trusted bank perhaps. Barclays makes much of its ability not to tkae a Government stake in 2008 - it did really via Qatar, just not a UK stake. Barclays share price went from 350p to 60p in a few weeks. How much of an imapct did this LIBOR manipulation have here (and follwoing this logic through, save the British taxpayer even more money, albeit by potential deception?)
Senior Barclays directors were conniving in trying to fix the market for Libor. It maybe that this will only ever be viewed as a kind of day trade strategy where they sought overnight margin from a rate that benefitted them and their loans versus other market participans - but I wonder if this does go higher up the Bank to support the macro position described above?
By whistle-blowing Barclays are probably covered against future investigations and the other Banks will soon get their own place in the limelight of shame. It's a sad story though and shows that even the heart of the markets cannot be trusted, a sad day for financial capitalism and the reputation of London - but a better day hopefully as it lead to positive changes at the Banks (or their regulators keeping a better watch).