At 20:12 on October 21 2008 Paul Tucker, then head of markets at the Bank of England, received a quizzical email from the private office of former Prime Minster, Gordon Brown.
Only days earlier the government had announced the bailouts of HBOS and Royal Bank of Scotland, yet borrowing costs for British banks remained stubbornly high.
“Why are UK LIBOR spreads not falling as fast as US,” wrote Jeremy Haywood, principal private secretary to the Prime Minister.
Fifteen minutes later, Mr Tucker dashed off a response to Mr Haywood, now Sir Jeremy following his knighthood in January, explaining that while US banks were “lending fairly actively” the sterling interbank lending market was only being kept alive by the efforts of HSBC.
“One bank can’t turn a whole market. Hope that helps a bit,” signed off Mr Tucker.
October 22, 2008
The next morning, Mr Tucker sent a message to Barclays’ top managers, John Varley, the bank’s then chief executive, and Bob Diamond, head of its investment banking arm, with the subject line: “Cld I talk to one or other of you about libor pl.”
Just after midday he responded to an email from Mr Diamond telling him he was “calling right now” to say that he was in a meeting and would call later. The email chain does not relate when, or if a call took place.
However, fours hours after first contact Barclays, Mr Tucker received an email from Mr Heywood titled, ‘Might be scuttle butt – are u hearing this rumour’, in which he said he had been told “from the money market trenches” that sterling Libor was high “because Barclays are bidding it”.
At 22:17 he replied saying: “I know. But I don’t think that can be all of it. Cos I don’t think they’d be an influence on euro libor, which has also been sticky. But we are trying to monitor what’s going on.”
Thirty two minutes later Mr Heywood responded: “thanks. obviously we are v concerned that US rates are tumbling but we remain stuck!”
Eleven minutes later, Mr Tucker replied: “Yep, Dollar spreads still above ours at 3 months. But I’m concerned too, for both parts of our mission.”
October 24
In the afternoon Mr Tucker contacted Mark Dearlove and Jonathan Stone in the Barclays treasury department for an update on the bank’s funding. “I’d be grateful if we could meet to discuss the structure and sources of your money market funding before the turmoil began, please.”
Mr Tucker suggested setting up a meeting “over the next week”. Adding, “I mean a bilateral meeting”.
October 25
The authorities growing concerns over Barclays funding are clear from an email sent by Mr Tucker to Mr Diamond. Sent at 11:32, Mr Tucker titled an email to Mr Diamond with the subject line: “Struck that your govt gnteed bond was issued at around 140 over.” Adding in the main text, “That’s a lot.”
What this meant was that Barclays had sold a bond with a British government guarantee with an interest rate 1.4pc above the benchmark rate, a sign the bank was having to pay a high premium for its funding.
October 26
The next morning, a Sunday, Mr Diamond asked if Mr Tucker was “around for a chat”. “I am in London, may I can come to see you?”
Mr Tucker replied that he was abroad. “But cld talk by phone in about an hour. Or is it better face to face?”
In the afternoon Mr Heywood sent Mr Tucker a briefing from UBS suggesting ways to help reduce Libor.
Mr Heywood added his own fore note: “In summary Libor’s decline is in train but it will be gradual. To speed it up a change in the guarantee fee (to bring it in line with the Dutch scheme) is called for. I am an advocate for speeding it up.”
October 27
Mr Diamond emailed Mr Tucker in the morning to ask if he had returned to the country and available for a meeting or a telephone call.
October 28
Despite his earlier hope about falls in Libor, Mr Heywood appears to have still been worried by developments in the money markets. Heading an email to Mr Tucker “PERSONAL – IS THIS WRONG?” he stated: “There is a clear lack of short term money in the system.” He then went on to outline steps the Bank of England could take to ease funding pressures on banks. According to the email cache, Mr Tucker had not replied two days later, prompting Mr Tucker to send another message stating, “WOuld welcome a conversation on this at some point – plus a more general update.” Minutes later Mr Tucker replied “will be sure to call later”.
October 29
A copy of an email already released by Barclays records Mr Diamond’s notes of a call with Mr Tucker. It is this email, sent to Mr Varley and Jerry del Missier, a senior manager in Barclays Capital, that has become the centre of debate over how much the authorities knew about Libor rigging and were complicit in it.
The email ends with the following line: “Mr Tucker stated the levels of calls he was receiving from Whitehall were ‘senior’ and that while he was certain we did not need advice, that it did not always need to be the case that we appeared as high as we have recently.”
This was taken by Mr del Missier to be an instruction that Barclays should lower its Libor submission.
October 30
In the morning Mr Diamond emailed Mr Tucker telling him he had asked one of his staff, Andrew Jones, a Barclays Capital investment banker, to get in contact with him and give “some perspective” on a recent bond issue by the bank. “Quite a positive development actually that you and the government should feel pretty good about,” he added.
The email cache ends here, but the next day (October 31) Barclays announced a multi-billion pound investment by Middle East wealth funds that ended fears it did not enough capital to weather the financial storm.
The Telegraph
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