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NewsNotables – Issue 81

Barclays’ Former CEO Blames Regulators

Bob Diamond blames regulators in rate-fixing scandal
(The Seattle Times, July 5, 2012)

Fallen banking titan Bob Diamond, Barclays’ former CEO, described regulators on both sides of the Atlantic as “party complicit” in a scandal involving the manipulation of a key interbank lending rate, telling a British parliamentary committee that government watchdogs had failed to act after his bank informed them of industry wide irregularities during the U.S. financial crisis.

The allegations highlight the relationship between financial institutions and regulators at a time when risk-taking and misdoings at big banks are the focus of heated debate in Washington, D.C., Wall Street and London. Diamond resigned as Barclays CEO on the heels of a U.S.-British investigation that resulted in a $450 million fine on the bank for manipulating key lending rates between 2005 and 2009.

Barclays and a number of other global banks are under investigation for tainting the creditability of Libor, the benchmark figure that largely determines the adjustable lending rates for U.S. credit cards, student loans and various mortgages. The scandal has touched off a firestorm engulfing the London financial world. Prime Minister David Cameron announced a broader inquiry into banking standards that is set to haul some of the globe’s most powerful financiers before a parliamentary committee.

Diamond, a 60-year-old American, insists he learned only last month about the extent of wrongdoing among an “abhorrent” but “small” group of 14 rogue traders at Barclays who had been manipulating rates for personal gain. Diamond also stated that government regulators were “at least partially to blame”. Documents released by Barclays said the bank had “raised concerns” with British regulators, the Bank of England and the U.S. Federal Reserve that other financial institutions were not being honest about interbank lending rates during the financial crisis that peaked in September 2008.

John Mann, a lawmaker from the opposition Labor Party, pointed out to Diamond that the Quakers who founded Barclays had done so with the motto “honesty, integrity and plain dealing.” He then offered to have that statement tattooed on Diamond’s knuckles.

Comment: Accusations are being made between Barclays, the Bank of England, other major banks and regulators. Diamond in particular, is blaming the Bank of England and the regulators for the scandal. Each claims it’s someone else’s fault. I thought John Mann, summed it up well, speaking to Diamond. “You’re in charge,” Mann said. “People were suggesting impropriety. And you did not investigate it. Either you were complicit, or you were grossly negligent or you were grossly incompetent.”

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Saint’s Bounty Program …

Leaving a stain that will last for years
(The Desert Sun, March 24, 2012)

The NFL got it right, but they got it wrong. Former college and NFL head coach John Machovic stated, “When you walk into a department store such as Nordstrom’s or Neiman Marcus to purchase a cashmere sweater, there is never the suspicion the materials used or workmanship are anything except the finest. So it is with the NFL.”

When fans, advertisers and others pay exorbitant prices to attend, sponsor or watch the greatest sports in the world, they expect that competition is among teams being managed, monitored and played to the highest level of authenticity. Machovic stated, “The New Orleans Saints with Sean Payton, Gregg Williams, Mickey Loomis and Joe Vitt at the helm destroyed the very fabric of the game over the previous three years by establishing, condoning, and carrying out their bounty program to maliciously injure their opponent’s star players in an effort to succeed.” Cash bonuses were paid for big hits that either knocked opponents out of games or left them needing help off of the field.

Williams was the mastermind who now says he is remorseful for doing so. Payton, the head coach, gave his tacit approval for the program and then lied to investigators about it while asking his coaches to cover it up. Loomis is the general manager who is the owner’s direct link into the team and Vitt is an assistant head coach who apparently had significant knowledge based upon his suspension of six games.

NFL commissioner Roger Goodell moved quickly to hand out his punishment. In addition to Vitt’s six-game suspension, Payton was suspended one year without pay, Loomis was suspended eight games without pay after the pre-season, and Williams was suspended indefinitely. The New Orleans Saints were fined $500,000 and forfeit two second-round draft picks.

Machovic goes on to say, “The actions of these individuals have impugned the integrity of every single player and coach who has ever been in the NFL. Granted, my time in the NFL was brief, but I feel the sting of this as if a rattlesnake had bitten me.”

Comment: Commissioner Goodell acted quickly and accurately with the tough penalties. He has proven to be a no-nonsense leader who defends every facet of the NFL with the authority of his position. The question remains whether Goodell went far enough. Also, are the Saints the only NFL club with a bounty program or are there others?

By Roger Eigsti
Board President,
Institute for Business, Technology, and Ethics

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