This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Barclays Scandal Was Born of Diamond's Derivatives Bet

Stocks in this article: BCS GS JPM MS C

"The external pressure has reached a level that risks damaging the franchise - I cannot let that happen," said Diamond in his resignation statement on Tuesday. To be seen is what Barclays' reputational damage will be. Chairman Marcus Agius, who temporarily took back a Monday resignation, will lead a search process for a new CEO.

In a Tuesday statement to the BBC, U.K. Chancellor of the Exchequer George Osborne called Bob Diamond's resignation the "right decision."

Financial sector investors should be weary that Barclays problems are just a tipping point of widespread industry malfeasance. "The credit crisis has already claimed the jobs of many CEOs and post the revelations from Barclays of the Libor issues, may yet claim more," wrote Bank of America Merrill Lynch analyst Michael Helsby in a Tuesday note. Agius of Barclays also underscored concerns of the impact of a widespread Libor probe, in a Tuesday conference call.

Other large banks that set short-term rates such as Citigroup (C), Bank of America (BAC), RBS (RBS), Lloyds Banking Group (LBG), Credit Suisse (CS) and UBS (UBS) may also be brought into an ongoing manipulation probe by regulators around the world.

Still, Diamond's departure is particularly tragic because of his contribution to Barclays and his instrumental role in pulling the bank through the crisis and transforming it to a leading global player.

When Diamond took the helm of Barclays Capital in the late 1990s, the unit was a small investment banking operation within Barclays - Britain's second largest bank by assets - and an even smaller piece of the global capital markets and underwriting community, where the likes of Goldman Sachs (GS), Morgan Stanley (MS), JPMorgan (JPM), Deutsche Bank (DB) and Citigroup (C) have long held top positions. Impressively, Diamond spearheaded growth at the investment bank and a separate unit called Barclays Global Investors, taking on Wall Street's largest players.

In fact, it was the investment banking and investment management businesses that Diamond grew and oversaw, which helped Barclays weather the 2008 financial crisis as peers like Royal Bank of Scotland (RBS) were forced to take bailouts from the British government.

In 2008, Diamond made what may be the boldest bet of the financial crisis, buying Lehman Brothers U.S. investment bank, in a move that transformed Barclays Capital into one of the key players in global finance. Shortly thereafter, Diamond sold the Barclays Global Investors investment management and ETF unit he helped build to Blackrock (BLK) for $13.5 billion, in a capital raise that averted a government bailout.

Diamond was rewarded for molding of Barclays Capital into a key part of Barclays overall earnings, and at the start of 2011, he took over as chief executive of the entire bank. In 2012, Diamond rebranded Barclays Capital so that it wouldn't stand separately from the larger retail banking operation centered in Britain, shaving off the "Capital" moniker from Barclays U.S. headquarters.

3 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,331.05 +262.18 1.54%
S&P 500 2,004.25 +31.51 1.60%
NASDAQ 4,623.9320 +76.0980 1.67%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs