Barclays CEO Bob Diamond, who resigned Tuesday over the Libor-fixing scandal, narrowly avoided an insurrection among senior bankers in New York who were furious over Diamond’s attempts to distance himself from the affair.
Jerome Faver | Bloomberg | Getty Images
Robert Diamond, CEO of Barclays.
On Monday, Britain's third largest bank agreed to pay $450 million to settle allegations that it tried to manipulate the widely followed interbank lending rate Libor to bolster its bottom line and deflect concerns about its financial strength during the 2008 financial crisis. Chairman Marcus Agius also stepped down.
In a letter to employees on Monday, Diamond said he was “disappointed and angry” about the rate-fixing practice despite strong signs that Diamond himself and other senior executives played a key role in the activities, according to the New York Times.
- Click Here to Read Diamond's Letter
If the letter was intended to reassure employees or strengthen Diamond's position at the bank, it backfired. Interviews with 14 people at Barclays Capital in New York reveal that the letter was met with derision and disbelief by many in the bank.
"It was ridiculous that he thought he could stay on after the Libor scandal," one senior executive said Tuesday morning. "It made us look like crooks and fools."
Some even began plotting to force Diamond, who is American, to step down. Many of the Barclays Capital employees interviewed are former members of Lehman Brothers, the failed investment bank taken over by Barclays Capital during the financial crisis.
"We were like, 'What world is he living in?'" one trader said. "How could he not see the writing on the wall?"
"He was like a guy trying desperately to keep his girlfriend from breaking up with him. I was literally cringing reading [the letter]," an investment banker said.
Senior investment bankers in New York began to organize a coup on Monday. Several met in the New York offices, which were formerly the offices of Lehman, to figure out a strategy to force Diamond to step down.
The main obstacle they faced, many believed, is that the London-based board might not respond favorably to demands from New York-based investment bankers. Some feared it could be seen as a Lehman plot against the Barclays management.
"This was bringing up a lot of old wounds still festering from the acquisition," a person familiar with the situation said.
Some in New York believed that the damage to the bank's reputation if Diamond had stayed on would have been lethal.
"We're just recovering from the Dick Fuld fiasco," one senior investment banker said, referring to the Lehman CEO who presided over the firm's collapse in 2008. "We couldn't have another out of touch executive at the top."
The coup never really got underway because British banking regulators stepped in and told Barclay's chairman, who had announced he would step down, that Diamond would have to go, too.
"We were looking at a bloodbath, I think, if the Bank of England hadn't moved," one executive said.
One senior trader alluded to an incident from 2008 when then-Lehman CEO Fuld was reportedly punched in the faceand knocked-out in the company gym shortly after the investment bank declared bankruptcy. Fuld's people later denied the story.
"If Diamond had showed up in the company gym, someone would have clocked him," the trader said.
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