A Hint at the Behind the Scenes Battle that has Resulted in the LIBOR "Scandal"

Rupert Murdoch has tweeted that the LIBOR "scandal" is about the British banking establishment going after an energetic competitor. Now we have a timeline of insider events from Murdoch owned WSJ, detailing how the LIBOR scandal evolved, including these juicy tidbits:

Mr. Diamond's downfall may have been hastened because the U.S.-born investment banker, who became chief executive at the start of 2011, had never won acceptance by Britain's political and financial establishment. When the rate-fixing scandal erupted, Mr. Diamond had few allies...

Mr. Diamond attempted to cultivate personal relationships with senior British politicians, including Treasury chief George Osborne. This spring, he helped coax former Prime Minister Tony Blair to speak at his son's graduation at Colby College, Mr. Diamond's alma mater in Maine.

But Mr. Diamond, age 60, was criticized for his lofty pay packages, as well as perceived risks in the investment-banking business he built. He sometimes appeared tone deaf in a country still angry about the role of banks in the financial crisis. "There was a period of remorse and apology," he told Parliament last year. "That period needs to be over."

Among those who Mr. Diamond failed to win over was Bank of England Gov. Mervyn King, who had long been distrustful of investment banking, Mr. Diamond's specialty.

In September 2007, Mr. Diamond publicly criticized the Bank of England for not doing enough to ease the nascent credit crisis. Mr. King later delivered a series of speeches attacking what he described as overpaid London bankers, an apparent reference to Mr. Diamond, who was one of London's highest paid....

As the bank sifted through reams of its own records, it came across a Libor-related phone call in October 2008 between Mr. Diamond and a senior Bank of England official, Paul Tucker.

According to Mr. Diamond's notes of the call, later released by Barclays, Mr. Tucker told Mr. Diamond that "it did not always need to be the case that [Barclays] appeared as high as we have recently."

Mr. Diamond passed the notes to Mr. del Missier. Barclays said Mr. del Missier interpreted the Diamond-Tucker conversation as a Bank of England instruction to understate the bank's Libor submissions. He then told deputies to do just that, according to Barclays. Mr. Tucker has denied that was his intended message. Mr. del Missier is scheduled to testify Monday to Parliament.

Barclays gave its Libor-related material to the CFTC. By 2010, as evidence of wrongdoing grew, the U.S. Department of Justice and the FSA, the U.K.'s main regulator, had joined the case. The Justice Department told Barclays' lawyers that Messrs. Diamond and del Missier must be excluded from any internal talks about the investigation because of their involvement...

On June 22, five days before the settlement would be announced, Mr. Diamond and his inner circle were briefed on the deal. To show contrition, they volunteered to waive any 2012 bonuses, said people involved in the talks.

Barclays' two top directors, Mr. Agius and lead independent director Michael Rake, considered whether executives would need to resign, but decided that would be an overreaction, these people said....

The settlement was announced in the early afternoon of June 27. Initially the market's reaction was muted, with Barclays' shares ending up slightly. The following day, Mr. Diamond met with Morgan Stanley analysts, telling them he didn't intend to resign, partly because of the FSA's backing.

Public Fury Erupts

Barclays' officials remained confident news of the settlement would end quickly. But politicians were just warming up.

"Frankly, the Barclays' management team have some big questions to answer," British Prime Minister David Cameron said on June 28. "Who is going to be held accountable for it?"

Barclays' senior officials were "shellshocked" by the political uproar, said one of the bank's advisers. The bank's shares plunged 15% on June 28, as investors started to worry that the settlement would cause upheaval.

Some Barclays' officials wanted to put Mr. Diamond on national TV or radio to express his outrage over the bad behavior of a small number of employees, who had since been fired or punished. They decided against the idea after testing Mr. Diamond with questions to gauge his preparedness for a live interview, people familiar with the matter said.

Mr. Diamond's advisers, looking for other ways to get their message out, eventually settled on a high-risk approach: releasing documents chronicling how Barclays repeatedly tried to warn British and other regulators about problems with Libor.

They also decided to publish the notes from Mr. Diamond's 2008 phone call with Mr. Tucker. Mr. Diamond and his close advisers viewed the notes as a "get-out-of-jail-free card" because it appeared to help explain why Barclays had lowballed interest rates, said a person involved in the bank's deliberations. Some Barclays' advisers, however, thought the release would appear a reckless declaration of war against regulators....


July 2, the Bank of England's Mr. King summoned Messrs. Agius and Rake to a meeting that evening. The two directors didn't know why. At 6 p.m., Messrs. Agius and Rake sat down with Mr. King in a private reception room at the central bank's headquarters.

"Bob [Diamond] has lost the confidence of regulators," Mr. King told them. He said Mr. Diamond should be gone within 24 hours and told them that the U.K. Treasury chief, Mr. Osborne, also agreed, according to a person familiar with the meeting.

Messrs. Agius and Rake were taken aback by the extraordinary dictate from the central bank's governor. They protested that the FSA hadn't objected to Mr. Diamond keeping his job and that his removal would be destabilizing to the bank, given Mr. Agius's decision to step down.

Mr. King said the matter wasn't up for discussion. The meeting was over in less than 30 minutes, the person familiar with the meeting said.