Queen’s Speech — House of Lords, 2016-05-24
Topic: Macroeconomics
David James (Conservative, Centre-right): My Lords, I will talk entirely on the subject of LIBOR, but under separate headings. I am sorry that LIBOR was not in the gracious Speech, because there is an urgent matter which should get the close attention of your Lordships’ House. We are facing the prospect of an enormous smash-and-grab raid from the USA on our quite legitimate LIBOR interests. It falls to this House to take a very keen interest in this. I declare an interest: in 1958 I joined Lloyds Bank and was put on a LIBOR training course. I must be one of the very few people to have been on one of those. I do not recommend it, but it was something to remember At the moment, there are 10 international LIBOR markets. The London market trades in dollars, euros and yen. I am not too sure why we have the yen, but we appear to have a concentration of Japanese banks so we are big in that currency. The Americans do not like it; they want the yen entirely for themselves. So they have launched an initiative to persuade us that we are totally criminal and corrupt in our handling of this market. They have persuaded and leaned upon the Serious Fraud Office—of which I am not a fan—to move for the extradition of the leading yen market manager from this country to theirs, where they were promising him a 30-year prison sentence. He was not terribly happy with that. As a result, the SFO persuaded him, under great duress, to accept that it would put him on trial if he would rat upon his broker friends in this country. The SFO would then get a series of rapid convictions which would make it look very good—something it likes to do and has few opportunities for. It has all gone horribly wrong for everybody concerned We need to take note of where we are today. William Dudley is an American gentleman who is president and chief executive of the Federal Reserve Bank of New York, an organisation which some of your Lordships will be aware is neither federal, nor a reserve bank, nor a bank at all. It is a very dubious proposition indeed; you should take a very long spoon if you ever go anywhere near it. The LIBOR market is now running at $350 trillion a day—I did not know there was that much money in the world either—and Mr Dudley is claiming that this should be subject to an average rate of 0.37% per day. As far as I can see, the average rate throughout the entire period of his complaint has never varied by more than 0.1% either way, so what on earth he is talking about I do not know. But then we notice with great interest that he is proposing that the British, because of their corrupt and dishonest management of LIBOR in the yen sector, should hand it all over to something called the OBFR, which, would you believe, is the New York Federal Reserve Bank’s own overnight bank funding rate. Is that not a strange coincidence? Of course, it will then milk that market rotten Meanwhile, the Serious Fraud Office fell into the trap of believing that it should go along with this and started legal proceedings against the unfortunate man who was the principal yen manager for UBS in London. Eventually, he was put on trial under the threat of extradition if he did not go. The trial began at Southwark Crown Court in November last year, and it was followed by a second one. There have been three LIBOR trials and I will talk only about the first two because the other one is still sub judice and I will say nothing about it. But LIBOR 1 was concerned entirely with Mr Tom Hayes. His trial lasted 12 weeks, at the end of which he was convicted The judge had the great idea that he could get a bigger sentence by working on the basis that every dialogue that had taken place with a broker was a separate crime and that he could therefore tot these up into consecutive sentences, and he gave him 14 and a half years in the slammer. This was reduced on appeal to 11 and a half years, which is where it stands presently, but was then subject to a separate confiscation order, which the SFO originally claimed should be for £2 million—the entire lifetime earnings of Mr Hayes. Subsequently, that went back to court and it has now been ruled that the figure shall be £880,000 because the rest of it has been spent on legal aid anyway and that is all that is left, and if he does not pay it by 1 July this year he will incur the remainder of the three-year sentence which was taken off in the first appeal. The Supreme Court has refused any consent for a retrial or appeal on the facts of this case, but now we have two extraordinary things In the second LIBOR trial, the actual brokers with whom Mr Hayes was dealing were put on trial—they had not been allowed into the first court case, in which he had expected them to stand alongside him—and were acquitted by the second jury. So we have this odd situation that Mr Hayes has been convicted of conspiracy with six people who have been proven innocent of conspiracy with him. That, apparently, does not constitute terms for an appeal, which I think is extraordinary. The second thing is that the FCA has decided that this matter is so important—quite rightly, too—that it should conduct a separate investigation through its Regulatory Decisions Committee into whether this represents a bigger chain of dishonesty through UBS and whether it should now disqualify or proceed against it. I discovered only last week that the FCA has decided that there is no charge of dishonesty or malpractice against UBS at all, that the information that was given by Mr Hayes to his manager was correct, and that they have all behaved completely correctly. By my count—