On Monday we discover further evidence that the Bank Of England in 2008 was pressuring banks to manipulate the LIBOR rates lower as a result of the financial crisis.
At the time Mervyn King was the Governor of the Bank of England and his staff were said to be questioning UK banks — including Barclays — about why they were paying such a high rate of interest to borrow money overnight from other banks.
Tape recordings coming to light from the BBC detail a conversation between Barclays manager Mark Dearlove and Libor committee member Peter Johnson saying that the bank must lower its Libor rates because of pressure from the government and the BOE.
“The bottom line is you’re going to absolutely hate this… but we’ve had some very serious pressure from the U.K. government and the Bank of England about pushing our Libors lower,” Dearlove tells Johnson, according to the BBC.
Johnson objects, saying it’ll break the rules for setting the interest rate.
“The fact of the matter is we’ve got the Bank of England, all sorts of people involved in the whole thing… I am as reluctant as you are… these guys have just turned around and said just do it,” Dearlove replies.
The full BBC program will be aired later on Monday.
These recordings back up reports from then Barclays CEO Bob Diamond. In a memo, written on Oct 29, 2008, by Diamond and circulated to two other senior bank officials, said: “Mr Tucker [Deputy Governor of the Bank of England] reiterated that he had received calls from a number of senior figures within Whitehall (which is a reference to the UK government) to question why Barclays was always toward the top end of the Libor pricing.”
These tapes come a week after Federal Reserve Richmond governor Jeffrey Lacker immediately resigned after leaking information on what the Fed was going to release two days later.
Surely this is probably the tip of the iceberg on what central bankers were up to during the financial crisis and beyond.