Has a terrible wrong been done to Barclays and Bob Diamond?

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Has it? This is the way Barclays would have it. Its 'supplementary information' released yesterday ahead of Bob Diamond's appearance in front of the Treasury Select Committee today, paints a picture of an organisation which has done its utmost at every juncture to satisfy the perverse and intentionally opaque edicts of the British central bank, standing behind which was the British government.

Barclays points out that it's been conducting an expensive and exhaustive internal investigation into the Libor manipulation for the past three years. During that time, it has spent £100m and poured over 22m documents. Its efforts have been described as "extraordinary and extensive" by the US department of Justice. It was because Barclays put so much effort into getting to the bottom of the affair that it was able to settle before all the other banks involved. Singling it out for harsh treatment on the basis of so exemplary an investigation seems unfair and unreasonable.

Most exonerating, however, is the now famous note which Bob Diamond wrote following his conversation with Bank of England Deputy Paul Tucker on October 29th 2008. Reproduced as a thumbnail below (click to enlarge), this suggests that Bob Diamond told Tucker he thought other banks were manipulating Libor, that Tucker said it would be "worse" if they didn't, and that Tucker tacitly indicated that Barclays' Libor rate didn't always have to appear at the top of the range - thereby implying Barclays could also manipulate it downwards like the other banks if it liked.

Damningly, Diamond says Tucker cited "senior" Whitehall sources as being concerned at Barclays' comparatively high Libor rates. The clear implication is that people in the British government or Treasury wanted Barclays Libor rates lower to help negate concerns about the survival of Barclays at the peak of the financial crisis.

In this version of affairs, therefore Barclays has been wronged. And Bob Diamond has been wronged terribly.

The Libor setting came in two parts. In the first, mostly from 2005 to 2007, it involved a few rogue traders each of whom Barclays has hunted down ruthlessly, before sacking them and depriving them of their bonuses. In the second, from September 2007 onwards, the manipulation was more systemic and initially resulted from the concerns of "less senior managers" that Barclays was persistently submitting Libor rates above its rivals. At this stage, Libor was manipulated down, but Barclays was still higher than other banks (which appeared to be manipulating it down even more). Barclays kept complaining to the BBA that Libor was being manipulated by its rivals, but the BBA took no notice. Finally, in October 2008, there was the call between Bob Diamond and Paul Tucker in which Tucker appeared, very subtly, to take Barclays to task for continuing to submit high rates and to indicate that the government would like them to be lower.

This, in summary, is Bob and Barclay's defence.

Taken at face value, it does indeed appear that the bank has been wronged. But Tucker's supposedly tacit support for the Libor manipulation was very subtle and as the Guardian points out here, there are a lot of additional questions to answer - not least the involvement of Jerry Del Missier, who communicated Bob's conclusion from the Tucker call, and told Barclays' Libor setters rate could be lowered even though, "Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier."

Ironically, even if it does transpire that Barclays has been unfairly damaged in this and that shadowy forces in the British government were behind a plausible conspiracy to make British banks appear healthier than they were at the peaks of the financial crisis, it is RBS that may suffer most of all. Stephen Hester is seen as a perfect replacement for Bob Diamond. The British government may yet find it has shot itself in the foot.

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