Barclays CEO Bob Diamond steps down
President of Barclays Bob Diamond looks on during the final round of The Barclays Scottish Open at Castle Stuart Golf Links on July 10, 2011 in Inverness, Scotland.
David Brancaccio: Check your adjustable rate mortgage. What interest you pay is often pegged to something called the LIBOR rate set in London. The allegation is that banks colluded to fix the rate instead of letting the market do its thing and top managers at one bank in particular are paying the price. The CEO of Barclays is being forced out effective immediately.
Joining me live from London is Marketplace's Stephen Beard. Good morning, Stephen.
Stephen Beard: Hello David.
Brancaccio: So, about 20 banks have been touched by these allegations of collusion. Why the focus on Barclays?
Beard: Well, Barclays in the first of them to be found guilty of this interest rate scheme by U.S. and British regulators and Barclays has been fined around $450 million. Bob Diamond, though, the CEO who's just resigned, has reaped the whirlwind of public fury because he was already unpopular. He's been widely portrayed in the British press as the archetypal greedy banker, awarding himself around $25 million in salary and bonuses last year.
Brancaccio: Now, Barclays paid the fine for apparently lying about this in some documents. But competitors setting interest rates as a group -- now courts will have to decide if that was illegal. What was the effect, do you think, Stephen, on consumers?
Beard: Well, as you were suggesting, the LIBOR interest rate -- which Barclays helped to rig -- is the basis for trillions of dollars worth of consumer loans and mortgages around the world.
Arlene McCarthy is a member of the European parliament, and she's pressing for this kind of interest rate rigging to be made basically illegal under European law. She says this rate rigging has probably harmed millions of consumers.
Arlene McCarthy: Consumers may have been paying, for the last five years, more for their mortgages; savers may have lost more. And therefore these activities definitely have to be covered by classic market manipulation rules.
And finally, David, perhaps the most explosive allegation so far has been suggesting the Bank of England (Britain's equivalent of the Fed) may have actually colluded with Barclays. If true, that would severely damage London's reputation as a financial center.
Brancaccio: My colleague Stephen Beard in London. Stephen, thanks.
Beard: OK David.