Rebirth of England.

Chapter 667 Patriots

In Barron's previous life, Barclays Bank faced fines totaling more than $4.5 million for allegedly manipulating LIBOR.

UBS Group and Royal Bank of Scotland Group were also fined more than $25 billion by British and American regulators for manipulating interest rates. More than a dozen financial institutions around the world were also investigated for manipulating LIBOR and eventually received sky-high fines.

But the consequences went far beyond that. Ultimately, the British Banking Association was deprived of its responsibility to set and regulate LIBOR, and the British government re-selected the "new owner" of LIBOR.

At that time, those competing for the right to set LIBOR included the London Stock Exchange and Reuters Group. In the end, NYSE Euronext, the parent company of the New York Stock Exchange, acquired BBA Libor Ltd, the operator of the London Interbank Offered Rate (Libor), from the British Bankers Association for a symbolic price of 1 pound.

If we say there is no pressure from the US government as to the reason behind this, I am afraid no one would believe it.

After all, the competition for the right to set LIBOR is actually a battle for financial pricing power and discourse power.

In fact, as early as last year, Geithner, President of the Federal Reserve Bank of New York, put forward six suggestions to the Governor of the Bank of England on improving the LIBOR mechanism. The core of these suggestions is to strengthen the voice and pricing power of American banks on LIBOR.

Geithner's six recommendations include a strong demand to allow more American banks to join the pricing mechanism; to add a new LIBOR interest rate variety specifically for the American money market; and to eliminate the motivation for bank manipulation and misreporting as much as possible. The key is to increase the number of banks participating in pricing, especially American banks.

However, the British side at that time directly rejected these proposals.

Barron knew that the Federal Reserve was well aware of the many problems with the LIBOR mechanism, but was deliberately holding back, waiting for the best time to act.

After all, the Federal Reserve has always been dissatisfied with the British Banking Association and the Bank of England's long-term dominance of the mechanism. It has repeatedly strongly demanded that American commercial banks increase their pricing power and voice, but the Bank of England has always ignored it.

It was not until three years later, when the British banking industry was discredited by the LIBOR manipulation scandal and the fairness and effectiveness of LIBOR were widely questioned, that the Federal Reserve immediately seized the opportunity and quickly proposed to replace it with a new benchmark interest rate.

In other words, before the LIBOR manipulation scandal broke out, and even earlier, the British government, including Chancellor of the Exchequer Darling, had already heard about the British Banking Association's manipulation of LIBOR.

There are many reasons why they have not responded or conducted any investigation.

The first is that Darling and his colleagues underestimated the severity of the manipulation of LIBOR by these big banks. This needs no further explanation. After all, before the subprime mortgage crisis, perhaps these banks did not manipulate LIBOR on a large scale. At most, it was just a tacit understanding among some traders.

But after the subprime mortgage crisis broke out, due to massive investment losses and a liquidity crisis within banks, in order to increase profits and make their own banks appear to the outside world to perform better, this manipulation of LIBOR became increasingly serious - otherwise the United States would not have had to wait until 2012 for this scandal to explode.

In addition, the more important task for the relevant financial regulatory authorities in the UK is to ensure the stability of its banking industry. To this end, they even do not hesitate to take action against the media that report on the matter, and will not be able to take care of such "small things" as the possible manipulation of LIBOR for the time being.

Moreover, in the view of Darlin and others, perhaps these banks' slight manipulation of LIBOR is also forced to happen. After all, they need to ensure everyone's confidence in the banking industry. With this mentality, they also have reason to indulge it a little.

Finally, it involves the Federal Reserve - the United States has always wanted to increase or even completely control the formulation and supervision of LIBOR. How could the British side not know these thoughts?
Darling, who believed that the British Banking Association's manipulation of LIBOR was just a minor overstep before conducting a thorough investigation, naturally did not want to hand the Fed a knife and give them a reason to get involved by "exposing" this...

But Baron knew that the seriousness of this matter was not something that the British side could cover up just because they wanted to. No one understood that it might have been just an attempt at "manipulation" at first, but after tasting the sweetness, how could the bankers stick to the bottom line? Here we have to bring out the classic argument in "Das Kapital":

If capital can earn 50% profit, it will take risks; if it can earn 100% profit, it will dare to trample on all human laws; if it can earn 300% profit, it will dare to commit any crime, even the risk of being hanged...

Especially with intentional or unintentional connivance, the banking association's manipulation of LIBOR will become more and more excessive, until the Federal Reserve takes the initiative to expose it.

By that time, the result on the British side had already been seen in Barron’s previous life…

Not only did the credibility of the Banking Association and those big banks among the public collapse, but the United States also took away the right to set LIBOR from Britain.

What happens when the pricing power and even the regulatory power of LIBOR are controlled by the United States?
This means that Britain's importance in the global financial system has been greatly reduced, and then the status of London as a financial center has begun to decline.

This is naturally not in Barron's interest, which is why he raised this matter with Darling and hoped that the British financial regulator would intervene.

After all, although LIBOR is published by Reuters, Standard Chartered Merrill Lynch does not profit from the formulation of LIBOR - at least not directly.

If they continue in this way, their interests will be harmed in the long run.

I would rather die than the tour guide, that's it.

Moreover, if Britain had taken the initiative to correct this, it would not have reached the point of "death of poverty".

Anyway, at least institutions such as Barclays, UBS and Bank of Scotland will not receive sky-high fines like in his previous life. This can be regarded as Barron's deep love...

After Barron explained the pros and cons, Darling's expression turned serious and he said:

"If this is really the case, Your Highness, we will intervene..."

After a pause, he continued:
"In the most appropriate way, but before that, we will conduct a comprehensive investigation into this."

"You should know, sir, that this actually does not involve any interests for me, but for the position of our Great Britain in the financial industry, I have to step forward to promote this matter..."

"Thank you, Your Highness, you are a true patriot."

(End of this chapter)