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Barclays fined for manipulating Libor rates

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As The Guardian has detailed, 2012 has been a bumpy year for Barclays bank. Barclays CEO (American) Bob Diamond had been as much of a wallflower as JPMorgan's Jamie Dimon. Never happy with staying in the background and focusing on business, Diamond has rarely been able to control himself. He just has to be the center of attention or he will seemingly burst.

The Lehman collapse must have been the best of times for Diamond, as he received a sweet deal on that purchase including plenty of government help. In what was shaping up to be a dream year for Diamond, his 2011 payout of $27 million was halted after shareholder complaints. And now, Diamond has agreed to forgo his 2012 bonus following the latest scandal where his bank has admitted to manipulating markets. Suddenly, there is talk about the end of Diamond's career. His golden touch is no longer so golden, as if it ever really was golden.

So what about the market manipulation? Diamond's team involved in the manipulation talked about being quiet though they left a long and detailed history of emails and chats where they openly discussed "favors" for each other. Regulators continue investigations of similar abuse with numerous other global banks.

Requests came in such as: "We need a really low 3m fix, it could potentially cost a fortune. Would really appreciate any help."

And: "Your annoying colleague again ... Would love to get a high one month. Also if poss a low three month ... if poss ... thanks."

Traders made their requests in person, via email and through electronic "chats" over an instant messaging system.

On a few occasions, some traders even made entries in electronic calendars to remind themselves what requests to make of Barclays' Libor submitters the next day.
The outstanding issue now is whether the banks will be deterred from such actions in the future. Are these fines enough to change behavior or are they a nuisance, but still cheaper than actually following the law? To date, most of the settlements with the banking industry have been favorable to the bankers. This may be an expensive fine and it may end up costing Diamond his job, but Barclays will be just fine. That's how it always works out.

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