Barclays Shares Down Sharply as LIBOR-Rigging Scandal Revealed; E.U. Leaders Seek 'Euromess' Solutions at Summit
MICHAEL HOLMES, CNN INTERNATIONAL ANCHOR: Hello, everyone, Michael Holmes at the CNN Center with your headlines to the minute. E.U. leaders meeting in Brussels. They're hoping to find some common ground on some of the most critical issues facing the Eurozone. They include long-term proposals such as a single union who control the euro currency. But among the more immediate concern, the dangerously high borrowing costs of Spain and Italy. Big story in the U.S., the Supreme Court has upheld the health care reform law known as "Obama-care" to some. The Affordable Care Act is the official name. Now what it does is require every American to carry health insurance. The court ruling that while the federal government does not have the power to order people to buy health insurance, it does have the power to impose a tax on those who don't -- or a fine, rather. The Red Cross says the non-stop violence in Homs, Syria, has made it impossible for aid workers to reach trapped civilians. Now that video you're watching, posted online, appears to show recent shelling in that already ravaged city. Meanwhile a Syrian opposition group says security forces have killed 100 people this Thursday. Officials in the U.S. state of Colorado say hundreds of homes have now been destroyed in that huge, still untamed wildfire. The fire, near Colorado Springs, was only 5 percent contained at last report. The U.S. Forest Service says it could be mid next month before it is fully under control. And in just a few hours we'll know whether the Azurri or the Germans will advance to the Euro 2012 Final. Germany has yet to lose in this tournament. The game gets under way in about 45 minutes. The winner will face Spain in the championship game. Those are your headlines. I'm Michael Holmes at the CNN Center. QUEST MEANS BUSINESS, live from CNN London, right now.</s>RICHARD QUEST, CNN INTERNATIONAL ANCHOR: The rate rigging unravels. Barclays boss and Barclays shares are pummeled today. "Obama-care" stands and the only way to get rid of it seems to be to get rid of the president. And Murdoch does the splits. News Corp. will become two. I'm Richard Quest. Of course, I mean business. Good evening. He's Britain's most unpopular banker. And tonight, Barclays's Bob Diamond is feeling the anger of the British government. After Barclays record fine for fiddling interest rates, the prime minister, David Cameron, says its chief executive has serious questions to answer. The U.K. finance minister says criminal charges are not out of the question. George Osborne, the finance minister, says the market manipulation was typical of an age of irresponsibility. And he will be looking into making a criminal offense that would have serious consequences for Barclays. It was fined $450 million by the regulators in the U.K. and U.S. on Wednesday. Barclays manipulated interest rates. The interest rates on loans between banks, it's know as LIBOR, London Interbank Offered Rate, it was doing it for years to fit its own financial interest. David Cameron, the U.K. prime minister, said Barclays management must explain itself.</s>DAVID CAMERON, U.K. PRIME MINISTER: This is a scandal. It's extremely serious. They paid a very large fine and quite rightly. But, frankly, the Barclays management team have some big questions to answer. How did this happen? Who was responsible? Who is going to be held accountable for it? That is -- those are issues they need to determine, and determine quite rapidly. In terms of what happens next, I would say that the regulators should use all the powers and means at their disposal to pursue this in the ways that they feel are appropriate.</s>QUEST: Now shareholders would also want an explanation for Barclays's dismal performance on the stock market, particularly today. Look at the graph over the last month, and you really do see, whoa, let's just pull this into a bit of context for you. This is -- Barclays is one of those shares that has performed very well post the crisis. We bought some shares, remember, when they were down at 60 pence. They went up to over 3.50 pounds. Now they've come back again. And this is the very sharp fall that they've had, some 15 percent drop. Actually up slightly on Wednesday, but by and large, the scandal is clearly not going away. And that is why Barclays is under such pressure at the moment. Banking stocks overall in the U.K. fell very sharply with the LIBOR scandal. It sent shockwaves through the sector. Barclays had the biggest one day full, but other than that, the Royal Bank of Scotland lost more than 11 percent. HSBC and Lloyds also fell back. There are rumors, and it has been said that other banks are being investigated into this whole. Those other banks would not comment. LIBOR is one of the most important tools in the world of finance. So what does LIBOR mean, as we alluded to? LIBOR, London Interbank Offered Rate, LIBOR, it is the rate that banks charge each other for their loans overnight or for six-month money or as it is. So the banks get together and put in their bids for how much they will do to each other. It's a barometer of financial stability. And the rate that LIBOR is set each day, at 11:45 London clock time. The rate affects other securities such as mortgages, bonds, yields, and the like. LIBOR is a market worth hundreds of trillions of dollars because so many, so many contracts specify LIBOR, LIBOR plus two, LIBOR minus one. Tiny movements can be worth millions of dollars, which is why the British Bankers' Association, which sets LIBOR -- that officially does it, its outgoing CEO, Angela Knight, said Barclays actions weren't a proper representation of the City of London.</s>ANGELA KNIGHT, CEO, BRITISH BANKERS' ASSOCIATION: We do have to not only do the job well, but be seen to act with integrity. There is more than half a million people that are employed in the banking industry, and there are lots of others. They have families and there are lots of other jobs that are dependent on it as well. The overwhelming majority of those people, they operate with integrity. They operate in an ethical manner. They are people who live in your street or my street and others streets. And, you know, we have to remember that.</s>QUEST: Angela Knight there. So emails uncovered during this investigation shows just how cozy relationship between the Barclays traders who needed the help and who has made the bet on the interest rates, and the bankers who actually set the rates. One trader wrote to his banking colleague: "Your annoying colleague again, we would love to get a high one-month." Basically he wants a high LIBOR number because he has got a deal that he is about to do that's going to be based on an increased number for LIBOR. "Also, if possible, a low three-month." So, in other words, put the bid in lower. That's what that's all about. We don't know what the specific request was to the question</s>MICHAEL HANCOCK, CONSERVATIVE MEMBER OF PARLIAMENT: Well, there are two questions I think for Bob Diamond. Firstly, what did he know? And what did he do about that? But then there's a wider question. Because this wasn't just one or two rogue people. It was a culture in Barclays of devil-take-the-highmost, you know, chumminess with the authorities who were setting LIBOR. And that culture is clearly the responsibility of senior management in Barclays. And, of course, it was part of a wider culture of irresponsibility.</s>QUEST: Should Bob Diamond resign?</s>HANCOCK: Well, I think that he is going to come in front of the select committee in the House of Commons, and we're going to hear his answers then. But unless he has got some very good answers to the difficult questions, absent, of course.</s>QUEST: Right. But is somebody going to ask him, are you going to resign? And should you resign?</s>HANCOCK: I've no doubt that those questions will be asked, and not only by politicians, but also by shareholders, you know, there's a 16 percent drop in the Barclays share price today on the back of this. And it's clear that that share price performance hasn't been particularly good over the last couple of years. So, you know, it's shareholders who own the bank, and they need to be and are indeed asking the questions as well.</s>QUEST: Do you believe -- and we know the FSA is talking about systemic failures within the U.K. system, do you believe that, for want of a better unflattering phrase, what Barclays was up to, the rest of them were all up to as well?</s>HANCOCK: Well, we've certainly heard rumors of that and no doubt there will be more details in the future. But what we do know about is that the wider culture of irresponsibility and of not -- yes, certainly not thinking about the customer. You know, that culture was there across the city here and across finance and Wall Street as well.</s>QUEST: Couldn't happen at a worse time for David Cameron, the British prime minister. We have Van Rompuy's report on banking union, hoping to move towards the whole E.U. 27, very difficult for the British to say, well, no, we're going to stand aside, because we regulate our banks better through the FSA or now the BOE, when, frankly, you've got a festering sore and a cesspit on your hands.</s>HANCOCK: Well, I would take the opposite response, which is that we've already got legislation going through the House of Commons to change the regulatory structure. We're abolishing the FSA and putting regulation into the Bank of England and giving them more clout. We're making the changes that are necessary. And that will happen in London. So I don't think we need to be part of a banking union, which will be, after all, to support the single currency, which thank goodness we're not part of. So making sure we fix our regulatory system here is vital. It's work that's already in progress. And that's best done out of London rather than out of Brussels so we can really on and grip these things.</s>QUEST: The problems of Barclays. European stocks closed mostly in the red. Investors see no new ideas from today's European Union Summit. German unemployment is rising. Spanish bond yields are also hovering again at that dangerous 7 percent mark. In Madrid strong energy stocks helped the IBEX buck the trend. And it was the IBEX that really was the only one of the majors that were up. Coming up next, President Obama said it's a victory for the people of America, the Patient Protection and Affordable Care Act, "Obama-care," has been upheld by the U.S. Supreme Court. We're in Washington after the break.