In April 2010, Labour Business Secretary Peter Mandelson called Barclays Plc’s then-President Robert Diamond the “unacceptable face” of banking in a dispute over his pay.
Now chief executive officer of Barclays, Britain’s second-biggest lender by assets, Diamond has become the target of the Conservative-led coalition after the bank this week was fined 290 million pounds ($450 million) for attempting to manipulate the inter-bank lending rate, known as Libor.
Prime Minister David Cameron yesterday called for accountability to go “all the way to the top.” Liberal Democrat Business Secretary Vince Cable raised the possibility of disqualifying him as a director. And Parliament’s Treasury Committee said it will summon Diamond, 60, to explain himself.
“Businesses and homeowners who have had their lives trashed by the greed of Barclays should not expect just an apology from Diamond but his resignation,” David Burrowes, a Conservative lawmaker, said in an interview. “Enough is enough. He should do the decent thing and go.”
Today’s newspapers urged Diamond to quit. “If he had an ounce of shame, he would immediately step down,” the Financial Times said. The Sun tabloid led on the story, telling him to join the unemployment queue under the headline “Sign on, you crazy Diamond.”
In a press conference today, Bank of England Governor Mervyn King added his voice, calling for “a real change in the culture of the industry” and “leadership of an unusually high order.”
The scandal doesn’t just threaten Diamond’s job. It has wiped out his efforts in 2011 to make the case for the finance industry in the wake of the credit crunch that plunged much of the world into recession. Instead, Parliament heard calls for prosecutions of those involved in the latest revelations.
At the start of 2011, the Concord, Massachusetts-born Diamond told a Treasury committee hearing that the country needed to “put some of the blame game behind us,” saying that the “period of remorse” for bankers “needs to be over.” In November, he made a speech saying banks needed to “become better and more effective citizens.”
In a letter to Andrew Tyrie, chairman of Parliament’s Treasury Committee, yesterday, Diamond said he would “welcome the opportunity to provide answers.”
The CEO plans to highlight “what we have done and are doing to put things right,” he said in the letter. “It is clear that the control systems in place at the time were not strong enough and should have been much better.”
For Cameron, the chance to beat up a financier may be useful politically as he pushes through the deepest austerity policies since World War II amid the U.K.’s first double-dip recession since the 1970s.
Even before the Libor fine, the tide was moving against bankers. In January, Cameron’s government announced it was stripping former Royal Bank of Scotland Group Plc CEO Fred Goodwin of his knighthood.
“The temptation for Cameron to come out all guns blazing on this is huge,” Tim Bale, author of “The Conservative Party from Thatcher to Cameron” and a professor of politics at Sussex University, said in a telephone interview yesterday. “It’s an economic story where, just for once, the government aren’t the bad guys and it gives him a chance to show that the Tories don’t always take the side of the rich and powerful.”
Investigators concluded this week that traders at Barclays lied between 2005 and 2009 to make the bank appear secure during the financial turmoil of 2008 and to make a profit, sometimes colluding with workers in at least four other banks. At the time, Diamond was running Barclays Capital, the division implicated.
Barclays said this week that that Diamond and three other executives will forgo their bonuses as a result of the Libor scandal. According to his spokesman two days ago, Cameron’s initial reaction was that it was a matter for regulators.
By yesterday morning, Cameron stepped up his rhetoric, telling reporters in northern England that “the Barclays management team have some big questions to answer” before boarding a plane to Belgium to attend a European Union summit.
Ed Miliband, leader of the opposition Labour Party, went further. “First, we need criminal prosecutions, we need the full force of the law brought against those who have done wrong, and if they are found guilty and if their offenses warrant it, they should go to jail,” he told reporters in Brighton, southern England.
When Cameron arrived in Brussels, he further toughened his message. “People have to take responsibility for the actions and show how they’re going to be accountable for those actions,” he said. “It’s very important that goes all the way to the top of the organization.” A U.K. official, speaking on condition of anonymity, later said the prime minister thought Diamond specifically had questions to answer.
Diamond had little credit with British politicians to start with. Two years ago Mandelson attacked him after reading reports of his earnings in the Times. The bank subsequently challenged the numbers. Mandelson said that Diamond got his money “not by building business or adding value or creating long-term economic strength. He has done so by deal-making and shuffling paper around.”
In February the Treasury closed down a series of Barclays tax-avoidance plans. “They haven’t actually broken the law, but they haven’t acted according to its spirit,” Minister David Gauke said at the time.
Cable, Mandelson’s successor as business secretary, now says the government could dismiss Diamond as a director if he fails to provide adequate answers.
“There are last resort powers of director disqualification,” Cable told lawmakers yesterday. “Many hundreds a year are subject to that action and if the facts suggested action -- and we would be subject to legal advice and due process --indeed that could well follow. It is a sanction available to us.”