Diamond Bob, Not Diamond Jim

So London gets religion all of a sudden, does it? Bob Diamond goes and half of the USA says 'we should learn from the Brits...'

The only thing you can learn from the Brits in these circumstances is how to push stuff under the carpet.

The media is covering the story at the moment as though it is about the collusion of several bankers from different brand name banks 'manipulating' the interest rate call between themselves (bank-to-bank rate, aka LIBOR, or the London Interbank Offering Rate), supposedly for a financial benefit to themselves.

Bar at the Savoy, London... Old men and...!

Uh-huh. Sorry. Let me remind you that the problem was that when the Lehman thing happened the LIBOR trade COMPLETELY DRIED UP ALTOGETHER. You know that was the position back then and I know it, and we both remember this coverage by the Bank of England's Governor put out into the media at the time. And with the subsequent effect of a global series of actions by Western Central Banks to provide liquidity TO BANKS to ameliorate the feared run on them and any prospect that they would not be able to meet withdrawals. We ALL remember this.

I cannot reconcile that story back then, with the current idea being floated that somehow, bankers or their designated LIBOR traders 'artificially' suppressed the cost of interbank money and 'artificially' dropped the interest rates with any kind of financial advantage to themselves. EVERYBODY knows that the plain and simple fact is that every single bank was asked at the time by the Bank of England to continue to lend to their fellow banks – and in order to catch a bid, as they say, I'm sure that it was a legitimate action to offer lower and lower interest rates until someone started borrowing.

And yet, even this characterisation begs the question of why, apparently, banks also at the same time were said to have feared the creditworthiness of other banks. So now we have this convoluted story that 1. banks conspired and colluded to create artificially low interest rates, wheras 2. no one was willing to lend in any case, and 3. no one apparently was seeking to borrow at the LIBOR rate (which is generally the lowest rate) in the first place.

And the only resolution to that cockamamee mix-up, is one to do with collateral and security, rather than lack of actual need to borrow money. Therefore, one must ask, is there already in existence, an independently scrutinized process whereby LIBOR borrowings HAVE TO comply with set collateral and risk ratings? And if so, isn't the problem rather more that the banks have no collateral left to hock? Or that all their collateral is purest rubbish?

So I guess then that when the ECB and others speak of 're-capitalising' banks, they must mean supplying them with adequate collateral... And where, one might ask, are they going to get this 'decent' collateral from, since the property valuations all over the place are now known to be wildly overstated.

Argh maybe just write properties down to what they should be and get on with things... You know deflation. Wait a minute, then governments would not be able to collect stamp duties, and rates and taxes at the usual exorbitant levels! We can't have that! So, what we must have then, is collusion between GOVERNMENTS and bankers to manipulate 'market' values and prices – but not between bankers and other bankers to do the same thing. Oh I get it: good old hypocrisy.

Not Nekulturny

Supposedly, Bob Diamond is worth around $650 million. He wears atrocious clothes for a fellow of that kind of wealth; they're cheap-looking in the sense of common and banal. And I would never have stuck my money anywhere near an organisation headed by someone common and/or banal. Vulgar, yes, common, no.

Best, Calvin J. Bear (nod nod, wink wink to the wise.)