In his haste to provide his side of the story, Paul Tucker has drawn attention to the questions of what did the Bank of England know about Libor and when did it know it.
In a previous post, the Wall Street Journal provided some insight into the answer to these questions:
Nearly four years ago, Bank of England governor Mervyn King said Libor was "the rate at which banks do not lend to each other."If my timeline is correct, this comment came before the conversation between Mr. Tucker and Mr. Dimon.
This supports Mr. Reece's observations in his column
But there were a few simple truths that emerged with a little more definition.
Clearly Andrew Tyrie, the TSC's chairman, believes Diamond's infamous memo which emerged on Tuesday does read as Tucker giving Barclays the nudge and wink to lower its Libor submissions in October 2008. "It reads that way to anyone that looks at it," he said.
So Tucker needs to address that. Tucker also knew that "not all banks were providing quotes at the levels that represented real transactions" because Diamond told him – unless he claims Diamond's memo is false.
Similarly, Whitehall – be it ministers or officials – knew Barclays' Libor pricing was higher than other banks'. However, Tucker appears to have refused to pass on Diamond's explanation for this to Whitehall, saying, "oh, that would be worse", unless, again, Diamond's memo is misrepresenting the facts.
But it beggars belief that if Barclays knew other banks were rigging Libor in October 2008, the Bank of England didn't.
Yet the central bank allowed this situation to continue, for how long we don't know, but without any apparent intervention or concern. And all the time it was merrily making secret loans to other stricken banks (HBOS, I believe) and helping to arrange the nationalisation of RBS and Lloyds Banking Group.
Despite Wednesday's TSC muddle, one thing is clear to me: the Bank of England knew the Libor market was broken in 2008 – as did the Treasury according to George Osborne – but did nothing to get a grip of it, reform it or warn the public that the heart of the financial system was rigged.
As one exasperated investor said to me yesterday: "Where were all these geniuses when the rates were being rigged?"
Let's hope the MPs can get an answer to that question when Tucker visits them to clarify events.