Assessing Criminal Damage Versus Financial Damage At Barclays

Jamie Dimon is probably glad to hear that Barclays PLC (NYSE: BCS) is more prominently in the news over LIBOR manipulation.  The reaction in shares of Barclays has been similar to the multi-billion losses seen by J.P. Morgan Chase & Co. (NYSE: JPM).  After all, losing money in trading and hedging is rarely something which can cross into criminal territory.  But what about manipulating or fixing LIBOR for higher mortgage and lending rates?

The hint from overseas politicians and regulators of potential criminal inquiries is not a good developement for Barclays.  The bank is already a shell of its former power and to prove a point its ADRs are down about 80% from the highs seen before the great recession came along.  The 11.5% drop on Thursday to $10.91 is on what is nearing 20 million shares with only about 20 minutes until the close of trading in New York.  That is more than 4-times normal volume in New York.  The London trading volume of over 220 million shares was almost 5-times normal trading volume.

What is amazing about the LIBOR manipulation is that this has not taken Barclays down to challenge 52-week lows.  The ADRs are at $10.91 and the 52-week low is $8.38.  A drop of this magnitude is far worse than what a negative headline would be. It signals that more fallout can easily be seen.  Even the news that J.P. Morgan Chase & Co. (NYSE: JPM) could now be facing a loss of $9 billion has its shares down less than 3% at $35.74.

There is not an assurance that any criminal charges will come to Barclays nor to its employees involved in LIBOR-fixing.  Still, there is no assurance at all that charges will be avoided.

JON C. OGG