One of the benefits of this new meeja approach to blogging the news is that we can tell the whole story, warts and all. Pixels are cheap and plentiful, and if we strain the patience of the reader they can simply click away.
So, here’s a little story about Barclays, a British bank that in our view could now unravel at frightening speed.
About four weeks ago, Neil Hume returned to the FT Alphaville HQ in a state of some anxiety: a well-placed source had informed him that Barclays was actively discussing the sale of Barclays Global Investors, the asset management business that has long been considered to be something of a jewel in the bank’s crown.
Neil didn’t have the name of the buyer (“It’s some sort of consortium; Roger Jenkins is putting it together, so presumably it’s Middle Eastern”), but he did have a price: £5bn.
That’s a big story for a young(ish) hack. It was not a story you could get wrong without some heavy reputational damage. So the checking calls went in – to the corporate financiers that sometimes help on these matters and to the public relations people, whose job it is to deal with such questions.
The response was a firm “no comment” and no off-the-record guidance on whether the story was fanciful or otherwise.
Confident of his sourcing and facts, but uncomfortable with the lack of a formal nod from the bank itself, Hume published what he knew here, using the journalistic device of a rhetorical question as the headline to the post. We were concerned that some sort of formal denial might follow and adding a simple question mark would offer a little room for manoeuvre later.
That post appeared at 10.41 on the day. By 11.19, two reporters from Reuters, Steve Slater and Sitaraman Shankar, felt confident enough to report the following:
Barclays is not in talks to sell its asset management arm Barclays Global Investors (BGI), a person familiar with the matter said, after a report the business could be sold.
Alphaville, FT.com’s blog, said Barclays was in detailed discussions with a consortium buyer to sell BGI for about 5 billion pounds, citing sources.
The person familiar with the matter told Reuters the bank was not looking to sell the business and was not in talks. Barclays declined to comment.
To decode that briefly, the Reuters hacks followed up the story here with a phone call to the Barclays press office, only to be told on an off the record basis that the idea of selling BGI was rubbish. Shares in Barclays, which had rallied sharply on the original news, retraced their steps.
We were told later, quietly, by Barclays people that the story was indeed wrong. Analysts covering the UK banks clearly got the same message, leading to the publication of various notes arguing that Barclays was unlikely to sell such a “core” business. Discussion of how the bank might fund its participation in the government’s asset protection scheme centred instead on the possibility of a capital raising.
Neil, feeling a little wounded, kept his head down.
Roll forward to this weekend and imagine our surprise in reading this and this.
The Sunday Times had discovered that Barclays was actively considering a sale of all or part of BGI, while by the time the Sunday Telegraph were on the case the disposal idea had narrowed to the possibility of selling the iShares exchange traded fund business.
Indeed, both papers were on the button, as this statement from Barclays on Monday morning confirmed, albeit in a typically dismissive manner.
We could speculate that the Sunday Times happened across the BGI/iShares story after the bank became aware the newspaper was running an aggressive piece on Barclays’ extensive involvement in corporate tax avoidance – as appeared here. ‘Buying off’ a reporter with an alternative story is an old damage-limitation PR tactic. But we have no evidence that that happened here.
Instead we must assume that, on the BGI front, while a denial suited the bank a month ago, confirmation now was in its interest. After all, Barclays’ stock was trading about 100p after the original story here and yet has dipped below 70p since then. On Monday the price jumped 16 per cent to 86p.
But what are the facts here – and why the long-winded recounting of events here?
Simple. Barclays has been scrambling to raise cash for a good two months now and one of the easiest ways of doing that would be to sell all or part of one of its best businesses, BGI. Yet all the time it has to continue spinning the line that its balance sheet is somehow less toxic than its rivals, RBS and Lloyds, which are now effectively state-controled.
State-interference must be avoided at all costs since that would cost Barclays its lucrative tax avoidance business and also cost Messrs John Varley and Bob Diamond their jobs. If that necessitates leading the stock market astray and/or flogging off large bits of the family silver, so be it.
To conclude here we’d refer back to what we will now call the Posen Doctrine – the bank crisis action plan recently put in front of congress by the deputy director of the Peterson Institute, Adam Posen.
This says, in short: sack ‘em. Sack the bank management, sack the regulators and sack the supervisors, because in a banking crisis all these parties are incentivised to lie and spin and obfuscate. Only then will you get the visibility and steeliness to decide which banks are going to survive and which should fail.
Related links:
Barclays in talks to sell iShares arm – FT
Is Barclays on the brink of selling BGI? – FT Alphaville
A Proven Framework to End the US Banking Crisis – Posen paper to Congress