Phil "Crushed" By Diamond's Resignation
Jason Sobel on Phil Mickelson's comments about Barclays CEO Bob Diamond's resignation while Diamond testified before Parliament.
Following the news conference, Mickelson told one Golf Channel insider that he felt Diamond was being made a “scapegoat” for the Libor scandal that surfaced four years ago. He did not disclose whether he has been in touch with Diamond since his resignation.
“Personally I’m crushed because I have really enjoyed my time with Bob,” Mickelson continued in the news conference. “I think the world of him as a person, as a CEO, and I think that these last 5-6 years that I’ve been associated with the bank, the time I’ve spent with him, I’ve really enjoyed and I’ve cherished and it’s been one of the most interesting parts of my career.”
Unfortunately, Diamond put things in writing that may prove problematic.
The good news?
Barclays no longer sponsors next week's Scottish Open. Boy would that have been awkward.
Wednesday, July 4, 2012 at 08:30 PM
Reader Comments (41)
Side Show Bob ... Meet Jail Time Bob.
Nice company for Phil. He might well listen to the record of Diamond's testimony before Parliament, which takes buck-passing to a new height -- or depth.
Wait till this redounds upn D-bank and all the other banking sponsors of the Tours, and the players. The whole pack of them might look for some slightly more seemly bedfellows.
Pre 2008:
Individual traders were opportunistically pressuring rate submitters to submit preferred numbers. Naughty and a bit stupid - it's very hard to rig LIBOR acting in this manner. But the practice was hugely widespread in the industry and not just Barclays. Net effect on consumers, probably very little. Still, off with their heads.
Post 2008: Systematic understatement of borrowing costs by all the UK banks (including Barclays). Party because the inter-bank markets had dried up completely so there were very little real numbers to work from when calculating borrowing costs. Mainly because a lot of banks were shit scared everyone would realise that they couldn't actually get ANY funding at ANY price. Ironically, Barclays were actually submitting much higher numbers in this period than the other banks despite being in much better shape (though even they were massaging their numbers downwards). The whole practice was blatantly obvious to the markets and the regulators who quietly encouraged it because of the need for stability in the banking sector and a desire to avoid banks passing the costs of their funding crisis on to consumers. Eventually, Barclays got warned by the B of E that their stance wasn't helpful and encouraged to follow the pack. Barclays then push their submissions even lower (though they are still some of the highest) and now very pissed to get spanked four years later by a different set of regulators . Why have they been singled out? Mainly because they self -reported earlier problems and then were the first to agree deal terms with the FSA. But also partly because the FSA have had a hard on for Barclays for a while now and because it’s a good opportunity for the FSA to embarrass the B of E who had lobbied for and won from the FSA most of the banking regulatory role. Net effect on consumers: lower borrowing costs. Hurrah. Tough not to feel a little sorry for Barclays. I genuinely think everyone at Barclays and the FSA are stunned this has proved a such a big deal politically.
I didn't say otherwise. My key points are: the regulators must have known about it and were turning a blind eye, it seems that the reason for this is that it was regarded as desirable by Whitehall for the UK banks to hide their weakness and, finally, it's not altogether clear that Whitehall was wrong. There would have been carnage if LIBOR at the time had reflected the real cost of funding over the period.
But sure purposefully defraud financial markets, no biggy, nothing bad ever comes of that.
The FSA is investigating other banks, including HSBC and RBS (btw, thanks for that snippet, c&c -- it would be great to see Fred the Shred, who is a sociopath, behind bars). But they are not the only people investigating: the Serious Fraud Office is also having a look at all this and criminal charges have been mentioned. The Treasury is also investigating the use of criminal sanctions.
There will be political fallout of a nasty sort from all this, and so there should be. That parliamentary committee should be investigated -- half its moronic makeup is on a CIty payroll, or so it seemed, though a good deal was probably due to incoompetence as much as conflicted interests. But they still got Diamond feeling sick about the allegations, and roundly blaming his juniors.
If Brian S thinks lowering mortgage rates to the point that people who can't afford them get mortgages, he perhaps ought to think on two words: sub prime. Overly available mortgages did a bit of damage to the world economy in recent years, starting in the US, where an awful ot of people lost their homes, and the financial reverberations are continuing around the world markets.
I don't think you will find much loan origination went on during the period in question!
A lot went on at that time with approval or even direction of Govts that, in other times, would have led to outrage and jail sentences. Just ask the shareholders of Lloyds and B of A.
Manipulating LIBOR is generally a "bad thing " - but I haven't seen (so far) anyone explain why in the context of the credit crunch it wasn't a "good thing".
John
"Likely he pays people to handle his wealth and to bring in a significant return on his investments. I don't see him as in anyway lacking intelligence but understanding money issues of this complexity is probably not on his radar. "
Other way around. Phil is a nice guy - but a world class "know all". Of any pro-golfer, he would be the one most likely to be up on all this stuff.
Look around. All the rich bankers who tore the respective economies of the world down starting in the US, where you had that genius George W. Bush deregulating as fast as he could chew, were bonused and paid up as they stood about looking red-faced. Same in the UK. I don't think the Americans have really grasped the nettle regarding their debt and deficit, but the British ordinary are paying through the teeth while the rich grumble in their luxury.
As for Phil: I suspect he can account to the last decimal point and is very canny about whom he pays to do the financial grunt work for him. Quite right too. But I agree: he's one of the ones that will "get" this. The types who don;t are like Stenson and Cabrera, who lost a lot recently through undeft acts of faith. Sure it's nice that Phil is loyal to a pal. But he could hardly be unaware that the pal condones very,very dodgy financial practices.
Not even close!
I hate to break it to you Ghilie but if you're angry about the credit crunch, you would really be better off looking elsewhere than the banks. Gormless though most of the banks were, they didn't create the asset bubble..
I actually think Matthew Paris nailed this one best:
“We have been living beyond our means. We have been paying ourselves more than our efforts were earning. We sought political leaders who would assure us that the good times would never end and that the centuries of boom and bust were over; and we voted for those who offered that assurance. We sought credit for which we had no security and we gave our business to the banks that advertised it. We wanted higher exam grades for our children and were rewarded with politicians prepared to supply them by lowering exam standards. We wanted free and better health care and demanded chancellors who paid for it without putting up our taxes. We wanted salacious stories in our newspapers and bought the papers that broke the rules to provide them. And now we whimper and snarl at MPs, bankers and journalists. Fair enough, my friends, but, you know, we really are all in this together.”
Justifying crime is a worrisome character flaw.
"Justifying crime is a worrisome character flaw"
Interestingly, it's not actually clear Barclay's actions in 2008 were criminal - in the UK at least.
There's a hole in the market abuse regime so it doesn't actually cover the setting of LIBOR. Which means you have to fall back on general offences like fraud etc which require some element of dishonesty and gaining of pecuniary advantage. That gets pretty complicated when you have plenty of evidence that the regulators and the Govt were encouraging your actions and that the actions might have been necessary.
In any case, I would like to think the points I have made are slightly more nuanced than just "crime is good" etc.
> If I were a Compliance Officer at a bank, @jono would be at the top of my list for surveillance.
> Justifying crime is a worrisome character flaw.
In other words, you disagree with him but don't want to enumerate why. Want to try again, but without begging the question AND constructing a straw man?
jono's providing an explanation as to what happened, and why some of the hate levied on Barclay might be misplaced. He hasn't "justified" anything so far.
> They have something called the 5th Amendment in the US. Judging from your proclivity for self-incrimination, you don't get the concept. Try digging yourself up and out, not down and deeper. Sheesh.
How is that relevant? He has exhibited no such tendency, and nothing about self-incrimination has even been mentioned.
I'm not so sure. You frequently see celebrities issue statements supporting friends/sponsors when they fall under some form of public disgrace. In general I don't automatically assume malice on the celebrity's part, because odds that they are well-acquainted with a complex situation are low, especially if it's outside their expertise. Phil is a golfer, not a financial guru, even if he does make a ton of money. He's probably heard about the situation, but he also probably hears about Barclay's side straight from them and they're obviously going to make themselves look good. If he's like most "people persons", if he doesn't do his own research then he'll probably feel obliged to take the word of his friends.
When it comes to celebrities, I take "don't attribute to malice what can be explained by stupidity" very seriously.
But he could also be spinning the situation to protect sponsor money, as it certainly seems like he has the potential motivation for that.
"They have something called the 5th Amendment in the US..."
I would have thought it was obvious that I have more than a passing familiarity with law and the legal issues involved but thanks anyway for your somewhat patronising legal advice!
In truth, my aim is not to convert those of you busy ripping apart their pillows and boiling up fresh tar - I don't think it can be done.
But I suspect there are plenty of others interested in the back story to all this.
I would love to hear your explanation of how or why this is acceptable behavior for a Bank head.
Also the back story that you infer makes all these wrongs right.
I was taught from the beginning that just because your friends or others were involved in an activity did not make it correct or right.
And, that honesty is the only correct action.
We know these men are liars and I believe we will find that they are thieves of the highest order.
Willing to sacrifice honesty and decency for greed.
I found it off putting that Phil would go on national TV and proclaim his deep understanding of the national and world financial situation with Mr. Diamond at his side and find it ever more gross after these revelations.
Stick to your golf game Phil.
1) everyone was doing it (and Barclays wasn't the only one, that doesn't make it right it prob makes it worse)
2) really by lying they were helping people (in post '08 world) bc it made lending rates lower, so we should be thanking them for committing fraud
He of course ignores all the pre-08 shenanigans, and ignores the implications and downsides of artificially low rates
I didn't say it was acceptable. I said there is a back story that makes the issue much less clear cut. That back story is in my first post.
@elf
You are determined to misrepresent what I'm saying.
1. The fact that everyone was doing it in 08 is important to my contention that regulators knew about it and encouraged it. If that is true, it would have to make a difference to the case against Barclays. It is your own strawman arguement that everyone doing it somehow makes it OK for Barclays to do it, .
2. I have no idea whether the UK banks faking their LIBOR rates helped people more than it hurt. It certainly kept down the cost of some forms (though not many) of consumer debt but I suspect the bigger test is what would have happened if these banks had reported their true funding costs (and by implication the reality that some of them couldn't fund at any cost) at the time. It seems to me that UK regulators and the Govt seemed to think it was better that they didn't. I merely point out that I haven't seen anyone address the question of whether they were wrong to think this. The only two points you have raised are that "it encourages borrowing by people who can't afford it, which causes serious financial problems (hey wait we just saw the consequences a few yrs ago). Also it doesn't let regulators know (and prepare) for a banks possibly crashing, which has serious ramifications." The first is irrelevant as no-one was originating consumer debt during this period and the second would only be an issue if the regulators didn't know that these rates were bollocks. Which I contend they did.
As my opening post makes clear, none of this applies to the "pre-08 shenanigans" for which, as I said, heads have to roll,
At what period, jono, was no-one originating consumer debt? I must have missed that decade.
But if the exposure of some of these banks is as great as some of the financial press is speculating, there could be some pretty nasty fallout.
I do not doubt the culpability, or at least the complicity, of Britain's (toothless) regulators. The problem in the City is that there is absolutely no incentive for either ethical or responsiblle behaviours, and loads for the wild risk-taking that goes on. The reason Canada and Australia are not up the creek post-2008 is because both have well-regulated banking systems. And, having them, their governments -- despite no doubt the temptation to go as wild as the rest of the G8 -- can't dare. But the government, whichever party, of Britain has very little motivation to rein in dodgy banking practices. The US may feel morally superior but there is little evidence that the post-2008 government has been any more effective in this -- if indeed it tried -- than in much else it has attempted.