Why Bob Diamond, London’s Adopted Banker Son, Had to Go

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Diamond, looking rough. Photo: Simon Dawson/Bloomberg via Getty Images

The best Bob Diamond story, the one everyone tells, is the one about how he informed the rank-and-file employees of Lehman Brothers that his bank, the British giant Barclays, had purchased Lehman in 2008, saving many of their jobs and giving the deathbed bank a Pulp Fiction-style adrenaline injection to the heart.

Diamond, an aggressive Irish-Catholic who played linebacker at Concord-Carlisle High School in his native Massachusetts, didn't just send out a press release announcing the acquisition. He showed up at Lehman's New York headquarters, the story goes, and played “God Save the Queen” over the trading floor’s loudspeakers.

The move was classic Diamond — waggish and self-assured, but with an undertone of sincerity. Though it never quite welcomed him back, Diamond, who adopted dual citizenship in the U.K. as he climbed the ranks at Barclays, did take pride in his adopted country. (When he moved his office to London’s Canary Wharf, he added English soccer memorabilia to his collection of Red Sox and Patriots kitsch.) Buying Lehman’s capital markets business, he reasoned, was a step towards establishing Barclays as a British peer to American investment banking giants like Goldman Sachs and Morgan Stanley.

So it’s fitting, in a way, that Diamond, who resigned early Tuesday morning on the heels of a Libor-rigging scandal, was undone in part by the British culture he had worked so hard to absorb.

Since the financial crisis, the U.K. has treated its bankers as harshly as we've coddled ours. While our Congress has been letting our scandalized big-bank CEOs tell us how to regulate them, British authorities have clawed back executive bonuses, taxed others at eye-popping rates, and stripped failed bank executives of their knighthoods.

And so, when it came to light that Barclays traders had knowingly submitted fake borrowing rates in order to skew the Libor, the world’s most important interest rate, Diamond must have surmised that the American solution to financial crisis — a passive-voice, "mistakes were made" posture of ignorance, coupled with a hefty settlement, a forfeited bonus, and a mash note to employees — wouldn't be enough. He had to take the fall.

It was no doubt a painful decision for Diamond, a former Colby College frat boy who clawed his way up from the back office at Morgan Stanley to assume one of the most prestigious positions in global finance. In comparison to his big-bank CEO peers, who have a bad habit of pretending that making millions of dollars a year is an Atlas-like burden, Diamond seemed to maintain a sunny attitude about his job, which rewarded him with eight-figure paychecks and enough free time to get his golf handicap down into the single digits.

"I wake up every day with a smile on my face," he told the Daily Mirror in 2010.

Perhaps because of his happy-go-lucky disposition, Diamond believed, despite all evidence to the contrary, that megabanks of the City in London, and Wall Street in New York, could steer themselves back into the public's good graces.

“The only way that banks will win back the public’s trust is to become better citizens,” he wrote in a soul-searching op-ed earlier this year. “That starts with how banks behave, and in demonstrating that we act with trust and integrity.”

Diamond's words ring hollow now, and for good reason. Barclays isn’t the only bank implicated in the Libor-fixing scandal, but it is the one with the most damning evidence that has come to light thus far — a flood of e-mails and instant messages from traders urging colleagues to tweak their submissions to the authority that calculates Libor. (One particularly poignant reply from a Barclays submitter, “Done … for you big boy," seems likely to become the lasting image of Diamond's downfall, the Barclays equivalent of the John Thain Commode.)

Could Diamond have kept his job? Probably not, especially because Sir Mervyn King, the British equivalent of Ben Bernanke, reportedly gave him the nudge. If he'd been at the helm of an American bank — like Lloyd Blankfein during the Abacus hearings and Brian Moynihan throughout the Countrywide mess — he might have been able to wait it out until a new rage-target emerged. But as an adopted Brit who was subject to the City's culture of accountability, Diamond didn't stand a chance.

Liborgate will continue to unwind for months, throwing many other bank executives into the spotlight. (HSBC, RBS, Citigroup, UBS, JPMorgan, and Bank of America are among the many banks that are alleged to have participated in the rate-fixing scheme.) And as it does, make sure to keep a mental list of the C-suite power players who resign in shame.

Odds are, they'll be the ones who are chauffeured to work on the left side of the road.