Bob Diamond, newly sacked as CEO of Barclays Bank, came to represent everything the bank's founders detested. The Barclays motto is 'honesty, integrity, plain dealing.' To understand the origins of the Barclays imbroglio, we must consider two things -- first, the origins of Quaker business culture, and second, the nature of the man himself and what utility he represented to the Barclays board.
The whole Barclays imbroglio rests on manipulating the setting of Libor. Libor stands for the London interbank offered rate. Libor is set through a process of bidding by participating banks. Its essential function is to set the rate at which banks will lend to each other. Libor is also a reference rate for a whole host of other financial products. Many such products are quoted as Libor plus a margin. It is estimated that Libor influences some $800 trillion in financial products. The Bank of England does not fix Libor; it is a market rate. Thus, the controversy over Barclays fraudulently manipulating the setting of Libor is no small thing. It represents an assault on the core values of the City of London and the ethics of English business culture, summed up in the motto of the London Stock Exchange - 'My Word is My Bond.'
Barclays had its beginnings as a Quaker firm. The Quakers, or to give them their proper name the Society of Friends, are a religious group. They were perscuted mercilessly by Charles II. They had to stick together. Quaker firms believed that they had an obligation to their customers and employees. Perhaps the firm that most famously embodied these virtues was Cadbury's Chocolates. Barclays, founded in the early 1600s, was at the center of a web of Quaker banks that conserved and marshaled capital for the close-knit Quaker business community. Barclays business ethic was the Friends' ethic -- honesty, integrity, plain dealing.
Before we look at shamed CEO Bob Diamond, we must look at Barclays. Barclays holds assets of US$2.33 trillion, ranking only behind BNP Paribas, Deutsche Bank and HSBC. But the market is a lot less forgiving than the Quakers. The market demands growth. When the board of a solid, mature business but largely directionless enterprise like Barclays is offered the chance of new growth by a red hot entrepreneur like Bob Diamond, they will almost inevitably grab the opportunity.
If we wish to understand Bob Diamond, we should look not to American builders of business empires like J. Pierpont Morgan, but instead to Jay Gatsby, hero of F. Scott Fitzgerald's masterwork of the Roaring Twenties 'The Great Gatsby.' Like Jay Gatsby, Diamond is a chancer. He came from a humble beginnings. His Irish-American parents reared a family of nine of their teachers' salaries. Diamond went to mediocre educational institutions and until he got his chance with Barclays, his employment record was nothing to rave about. He is Boston Irish, right down to supporting the Red Sox and the Celtics.
Diamond's problem is that he is just too American. Well known for his extravagant pay packages, he infuriated public opinion by saying he would take all the 20 million pound severance package owed to him following his defenestration by Barclays. Barclays offered chairman Marcus Agius as a sacrifice instead of axing Diamond, but it was made clear Diamond had to go. Diamond did many things that just aren't English -- his lurid red scarves, calling peers of the realm by their first names in public and his cringe-worthy opening statement to the parliamentary committee that 'I love Barclays'. An Englishman loves his dog. He may love his football team. He may even love his wife, though he almost certainly wouldn't say so in public. But he almost certainly doesn't love the firm for which he works. Even his optimistic grin, when most Englishmen would look suitably glum, was irritating.
Put together a lumbering giant like Barclays and an ambitious man reared in a 'take no prisoners' investment banking culture and fireworks were bound to happen. As they did. The end result was that Barclays gained a reputation for being, as Labour MP John Mann put it 'a rotten, thieving bank.' Barclays Quaker forefathers must be turning in their graves.
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