The BBC as Apologist for Lying about Libor

By William K. Black

The right has a reservoir of writers who can be relied on to defend and even praise elite white-collar criminals, but the center has managed to produce eager apologists for lies.  This column discusses the BBC’s Business Editor, Robert Preston.  The title of his article emphasizes his view that it is exceptionally difficult to know whether the banks’ lying about Libor was desirable: “The elusive truth about Barclays’ lie.”  Preston frames the question in a fashion that favors finding Barclays’ lies desirable.

“Aside from the forensic analysis about who said what to whom, there is a very simple question at the heart of the furore of Barclays’ involvement in the LIBOR-rigging scandal: is it ever acceptable to lie?”

That question rigs the answer.  Of course it is acceptable to lie in some circumstances.  Had the Nazis successfully invaded England and demanded that the banks identify their Jewish customers it would have been an act of moral courage to lie and forge documents purporting to show that the bank had long refused to do business with Jews.

Preston makes clear that the City of London is amply stocked with senior bankers who think it was noble for bank officials and (faux) regulators to lie in setting Libor.

“As it happens, a number of senior figures in the City who are unconnected to Barclays think this lying was the right thing to do in the circumstances. They think Mr [Paul] Tucker [Deputy Governor of the Bank of England] encouraged Barclays to lie and they applaud him for doing so.

You might well say that is evidence of a cancerous moral relativism at the heart of the City. Or you might applaud their common sense realism.”

Where does Preston come out on this “elusive” moral question?

“Barclays’ defence is that it was dreadfully unfair that its perceived borrowing costs were higher than other banks. And it is convinced that many of these banks were even bigger liars than it was about what they were paying to borrow.”

Barclays’ defense asserts the existence of what economists, criminologists, and (real) regulators describe as a classic “Gresham’s dynamic” in which bad ethics drives good ethics out of the markets.  The paramount function of financial regulators is to serve as the “cops on the beat” who engage in vigorous regulation, examination and supervision, enforcement, and who make the essential criminal referrals to the prosecutors in order to prevent the unethical from gaining a competitive advantage.  The alternative is that markets become perverse and fraud can become the dominant strategy.   A Gresham’s dynamic is “cancerous,” but it does not produce “moral relativism.”  It produces endemic immoral conduct, not for the greater good but to enrich the senior officers leading the fraud.  It also requires the evisceration of effective governance and setting an aggressively “immoral tone at the top.”  The senior officials who set the immoral tone at the top can be relied upon to “applaud” fraud.  Over time the most moral employees leave in disgust and the moral dregs rise to the top of the septic tank.  The employees often find that additional lies will increase their wealth.

Once lying becomes common and “applaud[ed]” by senior management the euphemisms for and “jokes” about the lies proliferate.  Robert Preston’s article demonstrates both of these characteristics:  “We need Paul Tucker’s side of the story to evaluate whether he did indeed nudge Mr Diamond to a policy of economy with the truth on the bank’s borrowing costs….”  Diamond manages to combine a classic English euphemism for lies with irony and a banking pun: “economy with the truth.”

The BBC promo box the reader clicks on to read Preston’s full article makes clear their answer to the “elusive” question of morality.

The elusive truth about Barclays’ lie

10:35 UK time, Wednesday, 4 July 2012

Was Barclays’ lie about its borrowing costs for the legitimate purpose of trying to save itself from collapse? Or was its instinct to lie at the very heart of the problem, the reason why it was so little trusted in markets and was having to pay more than others to borrow?

Manipulating Libor through lies to produce a false reported index is a “legitimate purpose.”  The BBC’s position is that any financially troubled firm (or individual) can “legitimate[ly]” lie in order to deceive its creditors and investors and prevent them from learning that it is financially troubled.  The banks can kill whistleblowers under this “logic” because their action in telling the truth must be “illegitimate.”  (If this seems over the top make sure you read my next column.)

Tony Blair got a bad rap.  His “Cool Britannia” effort succeeded – England is now so cool that the drunken lads having public sex in Greece cannot hold a candle to the City of London’s top bankers when it comes to moral depravity.  The top bankers are so cool that they openly “applaud” fraud in their on the record (but never for attribution) interviews with the BBC’s business editor.  The UK is channeling its good old days when it gave letters of marque to privateers and sent them out to loot the world’s commerce.   Sir Walter Raleigh is the very model of the modern City of London banker.  They even get to help depopulate Ireland again.

Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.

Bill writes a column for Benzinga every Monday. His other academic articles, congressional testimony, and musings about the financial crisis can be found at his Social Science Research Network author page and at the blog New Economic Perspectives.

Follow him on twitter @williamkblack

10 Responses to The BBC as Apologist for Lying about Libor

  1. Robert Peston is generally an alright guy, though his reports don’t tend to deviate from the mainstream “understanding” of what’s going on. He doesn’t give much clarity – QE is always pointlessly described as the BoE “pumping money into the economy”, for example, as if this explains anything at all. I think a problem with Peston is that he’s too close to City types, as that’s where he gets seems to get his info from, mainly. Paul Mason (BBC, Newsnight) is much better.

    • Peston is a grade A prat. He’s built a career on being accidentally in the right place at the right time to pick up on the bank collapse.

      He makes Rory Cellan Jones’ technology reports look competent.

      • Here’s a nice impersonation of Peston by Rory Bremner (from a show on the gfc).
        Having said that, what I find more bothersome is Peston’s choice to ignore the period prior to the start of the GFC, in which they most certainly did not have this “approval” of Whitehall.

      • Yeah, ok Neil, I agree Peston gets alot either muddled or wrong. I guess I was trying to make a lame-arsed defence of him based on the fact that I think he seems ok, if wrong.

        Plus I think the BBC is a relatively diverse source of information which contains people like Peston and Ferguson whilst also giving airtime to people like Steve Keen, Slavoj Zizek and Alain Badiou.

  2. roger erickson

    Conflicted. Is nothing simple?
    Had just concluded that we’re all LIBORtarians now.

    But are we really liebortarians?

    You say LIBORtarian, I say liebortarian, …. let’s through the whole cast out?

  3. http://the-scientist.com/2012/07/01/alls-not-fair-in-science-and-publishing/
    Science is deep in the immoral tone set by officials territory. And still dithering about whether or not there should even be ethical targets.
    A very good article Mr. Black.

  4. Prof. Black, thanks for your profound integrity. You may be the Last Man. The following consequences of “Gresham’s dynamic” won’t surprise you, and I’ll bet it won’t be good for “bankers.” This is Germany’s most “explosive” export, beyond Siemens and BigAuto:

    “Rammstein Buck Dich (Uncensored)” on You Tube (bmwRZKruspe on Feb 23, 2012) – with crucial NOTES:
    http://www.youtube.com/watch?v=b_LVaHHNcP4

    The cheap video of their performance, “Rammstein at Toyota Center in Houston Texas on 2012-05-25” (on You Tube) shows apparent preparation of the rabble for the Nuclear Holocaust.

    Sad to say, I guess it can go lower than this. History shows it can.

  5. In case there was any doubt, just wanted to confirm.
    Yes…. Peston is a prat !

  6. Following Robert Peston’s logic, I think I’m going to start lying about my TV license fee. it’s plainly in the interest of the greater UK economy to sell as many TVs as possible, whereas the license fee is a tax on TV purchases which restricts the market and props up a public cartel whose programs I may or may not watch. Plainly therefore I am contributing to the greater good of the economy if I lie about how many TVs I have in my household and whether I or anyone else has paid the license fee – wow! Moral relativity made simple, courtesy of Barclays and the BBC….

    What could possibly go wrong?

  7. Dominic Connor

    As someone who has been interviewed by the BBC about this, one factor is the way banks do press relations, which has led to an unintuitive result….

    Banks don’t do PR.
    I’m a 3rd or 4th tier journalist, hardly one at all, being a headhunter who writes occasional articles on rogue trading, C++,etc.
    On Friday I was offered a trip to Paris to watch Bradley Wiggins win the Tour de France, I have never written a sports article, never will and I’ve never written about the computer vendor who offered to take me.
    They wanted a bit of goodwill and to be in the loop when a story broke, be it a good or bad one about them.
    All sorts of dinners in the Gherkin, lunches in Monaco etc come to me, even though I’m only just this side of unknown.
    Last month I needed to talk to someone from Microsoft about an article, he was found at the conference in another country and put on the phone to me. That’s because MS wants good coverage, no one in the process though this was unusual because it isn’t for MS or anyone else (except IBM whose PR is spitefully bad).

    I wrote my first piece about finance more than 25 years ago, yet never not once has a bank contacted me about a story, usually they won’t even return my calls. They’re not my friends. Never do I get anything that makes my life as a writer easier, or more pleasant. I don’t just mean nice dinners, to any journalist, a good PR response is worth any amount of good food.
    You need good PR for when the shit hits the fan.
    If MS or HP had done something 1/10th as bad as LIBOR, there would be useful people contacting me to put their spin on it. Banks don’t do that. I would expect to know someone at MS or HP who would at least give me a credible lie to work on. Not so with the banks.
    If I wrote a piece that slagged Cisco, I’d be expected to have contacted them and given time for a response, but not with a bank, it is accepted that they won’t respond, so to a large extent you can write what you like.

    Thus the BBC displayed a thing that most people think doesn’t exist.
    Journalistic integrity.
    Yes, they are all Guardian reading artsgrads who think the only people who should earn more than 50K a year are media celebrities, but as a decent journalist if all your sources are telling you one thing, you need to look for the other point of view.
    In the case of banks that is hard because they are shit at PR *on purpose*
    Good stories are about conflict, not just stating facts, that when those corrupt morons at G4S screwed up, they got their CEO on TV to give his side of the story. With banks they can’t do that because their PRs would stop it, not because they are incompetent, but because they are competently executing stupid instructions.