28/06/2012 Daily Politics


28/06/2012

Andrew Neil and Jo Coburn with the latest political news and debate, including the Barclays interest rate rigging probe, and former Foreign Office minister Lord Malloch-Brown.


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Morning, folks. Welcome to Daily Politics. The chief executive of

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Barclays Bank, Bob Diamond, is under huge fire after traders

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manipulated a key interest rate. The bank's been fined nearly �300

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million. MPs are calling for Mr Diamond's head on a plate.

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This story is huge and it won't stop at Barclays. Other banks are

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under investigation and there are those who want criminal charges to

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follow for those who are proved to have been rigging the markets.

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Is it time to intervene in Syria? Or at least arm the rebels who are

:01:12.:01:16.

getting slaughtered by the Assad regime?

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Back to the Cold War. The BBC has discovered that the Czechs had a

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Tory Minister working for them back in the 1960s, he even gave them

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floor plans of the Houses of Parliament.

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All that in the next half an hour. Joining us for the programme is

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Mark Malloch-Brown, once the deputy Secretary General of the United

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Nations and Labour Foreign Office Minister and now works for FTI

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Consulting which provides advice to businesses around the world.

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Welcome. If they had they had floor plans of

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the House of Commons, I am amazed they lost the Cold War! Information

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like that. Something that's no laughing matter, the scandal that's

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engulfing Barclays this morning, threatening to spread to other

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banks in the City. Pressure is mounting on the boss of Barclays,

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Bob Diamond to resign after the bank was fined �290 million by US

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and British regulators for trying to manipulate the price of crucial

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interest rates, actually the price of money they were trying to

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manipulate in something called the LIBOR, an interest rate set in

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London. The George Osborne -- the Chancellor, George Osborne, will

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make a statement in the Commons. Bring us up to speed.

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Bob Diamond took over as boss of Barclays in October 2010. The abuse

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in question took place at the investment arm of Barclays, known

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as Barclays Capital or BarCap. It happened between 2005 and 2009 when

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he was in charge of BarCap, quite simply, the allegation is that

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traders at the bank lied about the interest rates it was paying to

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borrow money from other banks. The rates in question are the London

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Interbank Offered Rate or LIBOR or EURIBOR. These rates directly

:03:06.:03:16.
:03:16.:03:24.

influence the value of trillions of tkhras of -- dollars of of

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financial rate. It's believed other banks are also

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being investigated, including Royal Bank of Scotland, HSBC. Bob die die

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-- Diamond has already said he will waive his bonus as a result of this.

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Joining us now is Allister Heath. It looks bad for all banks and it's

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a disaster for the City's reputation. This was a central

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asset in the City, because the City still has control of the price of

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global money, that's what an EURIBOR is about and the City's

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reputation is as a trustworthy marketplace, that's why consumers

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and banks and institutions from all over the world trusted that price

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that was set in London. Everybody thought it was a fair market, a

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fair value of the cost of money of interbank lending. It turns out it

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wasn't. In fact, it was a farce. You had various traders, not just

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from Barclays, but almost certainly from other institutions

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manipulating this to their own advantage and to be honest, they

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all thought it was a bit of a joke and actually wrote it down in e-

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mails, which is astonishing when you are breaking the rules in that

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way. So it's a real blow for London this, a much bigger blow than

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people realise. The evidence will be there if it was in e-mails and

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they won't be surprised in the City there will be another round of

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banker-bashing. This time it will be deserved because there's no

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justification or excuse. In many ways this central part of what the

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City does was run like a 1980s- style club, where it was not

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serious, it was amateurish really and rules weren't enforced,

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regulators were careless or didn't know what was going on. I think

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it's a big problem indeed. What our viewers might want to know is what

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would it mean for mortgages, have people been paying too much for

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mortgages or loans or too little? It's a very complicated question.

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In some cases they might have paid too much, in some cases too little.

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The difference was probably not that massive, but still significant,

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maybe a 10th of a percentage point at times. It's not a simple

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question that some people lost, some you won. It's a question of a

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central price at the heart of the global economy was wrong and wasn't

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put together in a serious manner. Stay with us, but thank you for the

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moment. With us now, former banking

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Minister, Lord Myners and from the Treasury Select Committee, Jesse

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Norman, who once worked at Barclays, but we won't hold that against him!

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Welcome. This goes to the heart of the integrity of the City of London,

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which is probably its most important asset, its reputation.

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It's another example of Labour having failed to regulate it

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properly. I think there were very significant shortcomings in

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regulation, both when Labour was in power and now the coalition is in

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power. Andrew, we need to be realistic. Regulators will never be

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able to completely eliminate risk. The responsibility for that must

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lie with the board of directors, senior management and shareholders.

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The regulations allowed banks to set LIBOR on their word. It wasn't

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done independently. It wasn't done on the basis of trades carried out

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at a LIBOR rate, the banks could say LIBOR today was 2.1%. How could

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that be allowed? The process for fixing LIBOR was under the

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supervision of Thompson Reuterss and British Bankers' Association,

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it was well documented, well published. We have been raising

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questions about LIBOR for sometime. I put down a number of written

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questions. You didn't when in power and you had a chance to do

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something about it. That's absolutely not true, Andrew. This

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happened when you were in power. am saying that there were failures

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of regulation. We know that. Regulation simply wasn't good

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enough t wasn't intrusive enough, it wasn't smart enough. But the

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regulation won't stop this happening T didn't stop it

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happening in America, in the Far East. Remember, this failure in

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Barclays was not just in London, it was global. Worldwide. It was

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systemic. It was - it involved a significant number of senior

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managers. Who are the victims? if the rates have been pushed down

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there will be savers and Allister is right that the amounts in each

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case may be small, but when you have hundreds of thousands or

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millions of savers, there may be some people who have suffered, if

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not individually, collectively... Borrowers will be beneficiaries.

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Most of the action seems to have been to push LIBOR down, people

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will be getting lower rates. There were beneficiaries from this

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manipulation. Well, it's manipulation against the reference

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rate. It benefits some and hurts others. For savings, that will be

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be pensioners, people like that. Bob Diamond was head of Barclays

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Capital, it was where this was taking place, this manipulation,

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the investment arm. He was the boss then. He's now the boss of all of

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Barclays, including the retail and the banking. Shouldn't shareholders

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say it's time for him to go? Well, I think we should wait to see what

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he says in front of the Treasury Select Committee. There are

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obviously huge questions about that. Barclays now, I can tell you it's a

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different organisation from when I joined in 1991 and left in 97,

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which was a very stodgy one, which had not by the way given up. These

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institutions, Barclays and Lloyds were set up with a kind of moral

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purpose, that's what makes this so ironic and sad. It's not a matter

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for the Treasury Select Committee, whose grilling is mixed when it

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comes to these things, sometimes it's good, sometimes it's pretty

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poor. It's a matter for the shareholders who employ this man.

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And the board of directors and they need to think carefully about this.

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The chairman of the board of directors, also a director of the

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BBC... Can he survive? Has been there since 2007. Bob diamond was

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responsible for this throughout. Very big questions will be asked by

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the shareholders. Of both of them? Of whether they need significant

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change. The man now going to run the building of the ringfence

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between the retail bank and a casino bank was one of the most

:09:46.:09:56.
:09:56.:09:58.

senior people who have given up a small part of their long-term

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performance bonus benefits, given up a small part of their bonus.

:10:00.:10:03.

Hardly... If they were really contrite about it they would give

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up all long-term benefits. You may recall that in Barclays case one of

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its strategies for getting out of the crash in 2007-8 was to take a

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lot of assets and put them into special vehicles in which some of

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its own executives were shareholders in their own right.

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There is a systemic picture which needs to be investigated. What is

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your take on this? As a bewildered owner of a bank account at Barclays

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since I was 16 I am astonished what's happened to my bank. The

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pwrouder -- broader point is it's clear other banks are involved. We

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outside suddenly stumble across these things, some hard-living, big

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talking traders are setting the daily interest rates through this

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process, you think how can a practice survived? Why is LIBOR not

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set by the amounts - by the rates actually prevailing in the market?

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Why is it not just fixed against the rates that have been used that

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day? It's astonishing. Allister Heath, my understanding is that

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what has happened to Barclays is kind of the tip of the iceberg,

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that many other banks were involved in this LIBOR scam and Barclays may

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get off relatively lightly because they ended up co-operating with

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authorities and they have fingered others who were involved, so more

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to come, bigger fines or other banks s that true? Yes, it's

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absolutely true. Barclays is just one of the many banks that are

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being investigated by this and I am convinced other banks will also

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have to settle in a similar way, perhaps have to cough up more.

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Barclays co-operated faster and more more quickly and fully with

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the authorities, that's why they're fine -- their fine was announced

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first. This was a systemic issue in this market. This market wasn't a

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proper market. It wasn't a serious market. That's the great failure.

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This LIBOR manipulation did not cause a credit crunch or recession,

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but it's a very, very damaging scandal and damaging blow to the

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City's reputation. Ed Millie -- Ed Miliband has called for criminal

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prosecutions to follow against those who broke the law, but is it

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career that what they've done was criminal as opposed to a civil

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breach of the law? I am not a lawyer, Andrew. It's hard to tell,

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isn't it? I do believe the police and Crown Prosecution Service

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should look at this. It's lamentable that white collar crime

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seems to suffer such little consequence in terms of action.

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That's part lay because the authorities are so -- partly

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because the authorities are so useless at imposing it. Look at

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what happened when there were 120 police outside Mayfair for

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financial crimes and those brothers will win a lawsuit. I know nothing.

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It's example... This has come from the American authorities. They've

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been far tougher on this. Always have been. If there's been a breach

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of the Fraud Act these people should be prosecuted. It's a

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serious problem. If you think about, the average person who has a bank

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account or a share in Barclays is going to be outraged by this. If

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they did something of similar kind, slow payments, any breach of the

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Fraud Act, they would be vigorously prosecuted. Can I also add the

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Government is to pump more money into Barclays through their funding

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for lending programme. The Government is using banks as their

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principle agent to get the economy going. They're using organisations,

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at least in one case and several others, where there are serious

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moral failings at the heart of those organisations. There has to

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be a change in the constitution of those banks. There has to be change

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in the senior leadership of Barclays. Allister Heath, should

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there be criminal prosecutions now and given this country's past track

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record from Mr Maxwell, young Mr Maxwell skwrpbwards -- onwards,

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would the prosecutions get anywhere? It seems apparently, I am

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reporting what others are saying, it seems that these were not crimes,

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that's why they're not prosecuting them. The question is should they

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be crimes? Is the UK doing enough to prosecute white collar crimes?

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Over the last two years they have started jailing and prosecuting

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some white collar crimes, for example insider trading deals, and

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actually people going to prison as a result. This hasn't happened in

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the past. But of course this is is a massive setback and it will be

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strange indeed if this particular set of circumstances wasn't

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criminal. But apparently that's why there's merely a fine and not a

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criminal prosecution. The problem is it's a Government's

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responsibility to write the laws. It's absurd that you can do

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something like that and it's not a crime. I don't understand why the

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Government doesn't change the law in this case if that's what the

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problem is. A lot of these fines will be going to America. A large

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chunk is going to the UK. Where does the money go, do we get any of

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it? To the FSA. Basically, a lot more banks are going to be hit by

:15:11.:15:21.
:15:21.:15:22.

fines here. What is the law, and is I suppose this is tax-deductable?

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suspect it may well be. Barclays don't pay much tax, as we know, so

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it may be they are being caught out by their own cleverness here.

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right. Well, gentlemen, sometimes if you don't laugh, you would cry!

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Thank you very much. I hope we will see you on This Week tonight.

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I think that is a yes! Syria. Kofi Annan has put forward a plan for

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the formation of a national unity government. This could be get the

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backing of Russia. It is not clear whether Moscow shares the Western

:15:59.:16:01.

interpretation that it would exclude President Assad. Russia's

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backing might come as a bit of a surprise. Up till now, the Russians

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have blocked several initiatives at the United Nations. Should those

:16:11.:16:19.

countries that want to intervene get on and do something?

:16:19.:16:23.

The new home of the General Assembly is ready for business.

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Some things haven't changed much since then. The Security Council is

:16:27.:16:32.

still based on something called rate power unanimity, meaning the

:16:32.:16:38.

permanent five members - the US, UK, France, China and Russia - have a

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veto. The Russians have used theirs twice leading some foreign affairs

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analysts to wonder what is the point? There has to be a way around

:16:47.:16:55.

this, this deadlock, because people are dying. How many genocides, how

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many instances of "ethnic cleansing" have happened while the

:16:58.:17:04.

UN Security Council is feckless? We had Rwanda in the '90s, we had

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Darfur and now Syria. When can countries break the deadlock by

:17:08.:17:13.

going it alone and intervening militarily without any blue

:17:13.:17:18.

helmets? Never, unless there is a Security Council Resolution, or it

:17:18.:17:22.

is clear self-defence. There is no other just and legitimate way of

:17:22.:17:26.

using force internationally. Jeremy should know. He was our man

:17:26.:17:32.

in New York when Britain and America failed to get a second

:17:32.:17:37.

resolution authorising the invasion of Iraq. The co-sponsors reserve

:17:37.:17:41.

their right to take their own steps to secure the disarmament of Iraq.

:17:41.:17:45.

Nowadays he says it isn't fair to blame the UN when things go wrong.

:17:45.:17:51.

Or don't happen at all. There is a ceiling to these things. The UN is

:17:51.:17:55.

its member states in the political arena. It is not a separate

:17:55.:17:58.

government, or agency that you go to when there is a fire in your

:17:58.:18:03.

house, that has its own fire engine. The member states provide the

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solutions. The UN is the forum for that under certain rules. Even the

:18:10.:18:13.

institution's critics don't think it should be circumvented

:18:13.:18:19.

altogether? Doing that is risky. What is the point of having this

:18:19.:18:21.

international institution, international legal system in place,

:18:21.:18:26.

if people are going to run roughshod over it? It is not just

:18:26.:18:32.

the United States and Britain that could do that, any country could do

:18:32.:18:37.

that. Joining us now is David Mellor, who served in as many six

:18:38.:18:41.

Departments of State including the Foreign Office with responsibility

:18:41.:18:46.

for the Middle East. Welcome. This idea of a national unity government

:18:46.:18:49.

in Syria, is that going to work? is probably the only way forward.

:18:49.:18:56.

The fighting is really reaching quite a peak now. A TV station got

:18:56.:19:00.

seized just last night, a government TV station on the

:19:00.:19:03.

outskirts of Damascus. I felt throughout that the only

:19:04.:19:09.

alternative to fully-fledged civil war with huge consequences for

:19:09.:19:14.

civilian life is a negotiated solution which takes Assad out but

:19:14.:19:19.

leaves elements of the regime in. The Russians think that Assad would

:19:19.:19:23.

be included in some sort of national government. That would not

:19:23.:19:28.

succeed? I think they understand... They do? That he is on his way out.

:19:28.:19:32.

The other elements they have backed will still have a part in it.

:19:32.:19:37.

view? Many people have said it would cause more problems. Now, we

:19:37.:19:43.

are hearing today that the Turks are sending military reinforcements

:19:43.:19:47.

to the border after what happened last week. It is getting to that

:19:47.:19:52.

pinch point of potential military action? It is. The point was well

:19:52.:19:57.

made in a discussion I had the other day that Syria possesses

:19:57.:20:00.

quite potent anti-aircraft weapons and they demonstrated that with the

:20:00.:20:04.

Turks. I think though it is inevitable that countries like

:20:04.:20:09.

Qatar, Saudi Arabia - they will continue to arm the rebels. It is

:20:09.:20:12.

obvious if problems continue with Turkey, the Turks would at least

:20:12.:20:17.

rattle their sabres even if they don't do anything about it. They

:20:17.:20:20.

wouldn't probably privately want a full-scale military action. That

:20:20.:20:23.

brings us to the point of arming the rebels. Is that the way

:20:23.:20:29.

forward? It is a very bad second choice. It may be inevitable. But

:20:29.:20:32.

the fact is Qatar and Saudi Arabia evidently already are arming the

:20:32.:20:37.

rebels, which is why they are putting up a much better fight of

:20:37.:20:43.

it now. I think we are into - it is a minute to midnight, there is a

:20:43.:20:48.

last chance for diplomacy. If it doesn't work, it will be a fully-

:20:48.:20:53.

fledged conflict. I agree. I think that Kofi Annan has called this

:20:53.:20:59.

meeting in Geneva and that is a last-ditch. Otherwise, I do think

:20:59.:21:03.

that serious efforts have to be made to persuade the Russians to

:21:03.:21:06.

take a more constructive view. Experienced people in the region

:21:06.:21:13.

have been telling me, like the founding General Secretary of The

:21:13.:21:18.

Gulf Co-operation Council. He said, "Don't worry, he will be gone by

:21:18.:21:22.

Christmas." The worry is, what is there left? I had the privilege of

:21:22.:21:28.

knowing his father - a totally different character. You feel that

:21:28.:21:32.

Bashar was thrust into government. There is a big issue as to whether

:21:32.:21:36.

he is the frontman or whether he is the man of power. I suspect it is

:21:36.:21:40.

the people behind him who pose more of a threat. People continue to be

:21:40.:21:44.

killed in quite large numbers. It does draw attention then to whether

:21:44.:21:50.

the United Nations really is any more a forum... I agree. This may

:21:50.:21:57.

be the one thing where he wants to believe in the UN. I want to

:21:57.:22:07.

believe in the UN. If one or two members of the big five opt out,

:22:07.:22:15.

you can't, the UN becomes impotent. So should countries act outside

:22:15.:22:19.

that forum? They have to. It is a dangerous, slippery path. Then

:22:19.:22:24.

anything becomes allowable. The veto is rarely used now. It's

:22:24.:22:32.

tragic it's been used on Syria. Continually on Syria? Several times.

:22:32.:22:36.

Thank goodness it's been used on Israel. They teach the lessons for

:22:36.:22:41.

others of course. The fact is the veto, may when it is used by Russia

:22:41.:22:45.

or the United States, or China, we may not like it, but it

:22:45.:22:50.

occasionally has some purpose of reflecting the fact there isn't an

:22:50.:22:53.

international consensus. While the Russians have lots of bad ideas

:22:53.:22:58.

about what they are doing, they don't want the precedent of

:22:58.:23:01.

intervention because of their own Chechnya-like problems, they also

:23:01.:23:06.

in some ways may have a more realistic view of Syria being a

:23:06.:23:10.

fragmented, mosaic of a country, different ethnic groups, that if

:23:10.:23:13.

you break it, it is very hard to put it together again. All right.

:23:13.:23:18.

Thank you very much. You are staying with us, David Mellor.

:23:18.:23:22.

Don't go. We are all staying! We are keeping them hostage for

:23:22.:23:27.

another five minutes. We are familiar with the names of Cold War

:23:27.:23:31.

traitors - Kim Philby, Guy Burgess, Anthony Blunt, John Stonehouse -

:23:31.:23:37.

and many others, too. We can add a new name to that list -

:23:37.:23:42.

Conservative MP, Ray Mawby, who a BBC investigation has discovered

:23:42.:23:46.

spent a decade stalking the House of Commons all the time working for

:23:46.:23:51.

the Communist Czechoslovakian Secret Service. He even gave them

:23:51.:23:56.

floorplans showing where the Prime Minister's office was inside the

:23:56.:24:04.

building. I think these are also on tourist maps! LAUGHTER Mr Mawby, a

:24:04.:24:08.

junior minister in Harold Macmillan's Government, and he was

:24:08.:24:13.

a staunch defender of right-wing traditional values. Here he is on

:24:13.:24:17.

BBC Television opposing the legalisation of homosexuality

:24:17.:24:24.

without a hint of irony on the grounds that it might be a security

:24:24.:24:28.

risk. He is more liable to blackmail as

:24:28.:24:38.
:24:38.:24:38.

we have seen in many of the security cases in the past. Most of

:24:38.:24:44.

the people have been found to be male homosexuals and they were not

:24:44.:24:47.

blackmailed, I believe the main thing was not because of the danger

:24:47.:24:51.

of them being brought into a police court, the danger that their

:24:51.:24:55.

friends and relatives and parents would in fact be told by the

:24:55.:25:00.

blackmailer if they refused to either pay the money or hand over

:25:00.:25:06.

whatever they were asked for. man who exposed Ray Mawby's

:25:06.:25:10.

treachery is Gordon Corera. Welcome. Thank you. Congratulations, too.

:25:10.:25:14.

Did this guy ever hand over anything of any use? Well, none of

:25:14.:25:19.

it was top secret, in a sense. He never had access to national

:25:19.:25:23.

security information. What is fascinating is the Czechs were

:25:23.:25:27.

fascinated with Westminster. They wanted the political gossip. They

:25:27.:25:31.

asked him for information on the personal and financial

:25:31.:25:34.

peculiarities of other Tory MPs, looking to see if there was anyone

:25:34.:25:39.

else they could target. Then there are these interesting floorplans of

:25:39.:25:42.

the Prime Minister's office where he points out where the security

:25:42.:25:46.

guards might be. The implication is they were going to bug it or do

:25:46.:25:51.

something like that. So not top secret, but inside Westminster.

:25:51.:25:55.

They thought it was useful. Why did he do it? Very simple answer -

:25:55.:26:01.

money. He didn't have much money. He wasn't a fellow traveller?

:26:01.:26:07.

at all. He was gambling in clubs. He would lose money and the Czechs

:26:07.:26:17.
:26:17.:26:19.

would be there to cover his losses... Have a cheque! LAUGHTER

:26:19.:26:23.

There is a bonus if you get some extra staff. You met him, David?

:26:23.:26:29.

knew him very well. I was elected in 1979. Was it still black-and-

:26:29.:26:39.
:26:39.:26:41.

white television then? No! LAUGHTER He was a member between '79 and '7.

:26:41.:26:46.

-- '7. Ray was more likely to be found in the bar. He was a very

:26:46.:26:50.

jovial character. If you had to spend a long night having a laugh

:26:50.:26:55.

and a joke with Ray and others of similar dispositions so when I

:26:55.:27:00.

heard this morning on the radio that this man had been exposed by

:27:00.:27:10.
:27:10.:27:16.

our friend here, who - watch out for poisoned umbrellas - I never

:27:16.:27:23.

thought Ray would be the one. our authorities know, did MI5 - MI5

:27:23.:27:28.

is paid to stop this from happening? It is. No comment from a

:27:28.:27:34.

Whitehall official is all I got. They certainly know then! Maybe he

:27:34.:27:42.

was a double agent? Who knows. If there were warnings to him - but

:27:42.:27:45.

I'm not sure they knew about it. You must have come across a few

:27:45.:27:52.

spies at the UN? Quite a lot. place is full of them! LAUGHTER

:27:52.:27:58.

They mainly live in my building! phone had been tapped which my

:27:58.:28:03.

reply was, "Hell, I worked at the UN, my phone was tapped by

:28:03.:28:08.

everybody!" LAUGHTER How did you get this story? I was looking for a

:28:08.:28:14.

story about Ted Heath. I didn't find any evidence of a blackmail

:28:14.:28:23.

plot against him. I found evidence of Ray Mawby. Hundreds of secrets...

:28:23.:28:27.

I would have been much better value! LAUGHTER I would have

:28:27.:28:32.

charged more than 400 quid! Why didn't anyone ask me? They will now.

:28:32.:28:36.

Listen, thank you to all of you. I will be back tonight with This Week

:28:36.:28:43.

on BBC One at 11.35pm. We will have a sad man on a train, Michael

:28:43.:28:47.

Portillo, Alan Johnson and Hollywood film star, Danny Devito.

:28:47.:28:51.

Andrew Neil and Jo Coburn with the latest political news, interviews and debate including the Barclays interest rate rigging probe, and former Foreign Office minister Lord Malloch-Brown.


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