John of
Gaunt's famous words in Shakespeare's Richard II, Act 2, Scene 1, are a fitting
introduction to this edition of my blog.
For many
years, I have been writing articles, letters, commentaries and blogs, warning
against the criminogenic character of the British High Street Banking Industry.
I have given evidence to a House of Commons Select Committee, I have written
reports for H.M.Treasury, and I sent detailed evidence to George Osborne before
the Coalition was elected, detailing the evidence which clearly demonstrated
that the financial sector in this country, and particularly the banks, were
riddled with a 'get rich quick at any cost' mentality, and that the private
citizen would increasingly get a bad deal, as the level of institutionalised
greed and white collar crime proliferated.
In my
evidence to Government and the Treasury, I demonstrated how the financial
regulators were failing to do their job properly, and how, by their
laissez-faire attitude, they were encouraging a culture of criminality to
flourish within the financial sector.
With the
news this week, first of the wholesale rigging of the LIBOR market by Barclays
and other British Banks, criminal activities which have been going on since at
least 2005, quickly followed by the news of concerted fraud in the sale of
interest rate swaps, the London financial market has plumbed new depths of
depravity and outright dishonesty, and downright criminality.
Let us not
beat about the bush, these activities are manifestly criminal and are dealt
with perfectly adequately within section 2-4 of the Fraud Act 2006. It is
disingenuous for the FSA to say that they are dealing with this matter civilly,
because there is no specific criminality designed to deal with these facts.
This is arrant nonsense and demonstrates the lamentable lack of personal
courage and moral fibre that permeates the apparatchiks at the FSA.
They should
have run an in tandem investigation together with the SFO, using both civil and
criminal powers at the same time. The SFO could quickly have identified the
identities of the leading traders who motivated these scams, and then they,
together with the relevant executives, up to and including Bob Diamond should
have been arrested and brought in for questioning. Diamond was the head of Barclays
Capital when this activity was at its height, for God's sake, and he was
benefiting hugely from the impact of the illicit profits being made.
This entire
sorry mess has been predicated by a wholesale lack of regulatory vigour. The
FSA has been allowed to develop a 'Good Chaps' syndrome, a 'safe pair of hands'
mentality, meaning that they employed people who would focus on the exact
letter of their brief, and who would never step outside the line of enquiry,
even though glaring criminal offences were staring them in the face.
This was
largely brought about by the policy of 'light touch' regulation, inaugurated by
Gordon Brown and Ed Balls, when they thought that the City was making money by
being left alone. Such tax as was being paid to the Treasury persuaded Brown
that the City was doing a fine job.
What this
stupid man never realised was that behind the flimsy facade of compliance, the
City was doing what all criminal gangs do, making money out of sight and out of
mind. They had completely bamboozled the politicos by paying superficial lip
service to compliance, thus deflecting criticism of their actions, while in reality, ignoring the rules
entirely.
Banks and financial
institutions are like the story of the scorpion who stings and kills the frog
carrying him across the river to help save the scorpion's family in their
blazing house. In stinging the frog, the scorpion, who cannot swim, knows he
too will drown, and as they are swept under the water he cries out, 'I couldn't
help it, it's in my nature'.
It is in the
nature of banks and financial institutions to cheat and steal from their
clients. It's in their cultural DNA. It is perfectly useless for politicians to
now demand enquiries into the culture of banking to assess why things have gone
so badly wrong. The culture of the financial sector is 'get rich quick', 'get
it now', and the devil take the regulations. Bankers despise regulators, they
treat them like muppets, and they will do everything in their power to avoid
the consequences of bank regulations.
They have an
army of apologists in the form of the British Banker's Association, the CBI,
the IoD, and assorted MPs and Lords. Old bankers are trotted out to opine that
things are not as bad as everyone seems to think, no doubt conscious of their
own place in the scheme of things.
High Street
banks and bankers are now nothing short of organised criminal enterprises. One NCIS
definition states that such crime consists of "...
those involved on a continuing basis, normally working with others, in
committing crimes for substantial profit or gain...", and Interpol's
interpretation is "..Any group having a corporate structure whose objective is to obtain money
through illegal activities, often surviving through the use of corruption."
Finally a UN definition refers to "...transnational,
national, or local groupings of highly centralized enterprises run by criminals among which are
the purposes of engaging in illegal activity, most commonly for monetary profit..."
Any of these
definitions fits the actions of Barclays bank and many others perfectly.
Even Lord
Turner of the FSA has belatedly woken up to the scandal he has been gaily
overseeing in his Lordly, mandarin-like
way! He has said of the banking community;
"...“There
is a degree of cynicism and greed that is quite shocking. I think we would be
fooling ourselves if we thought that some of the behaviour and culture
evidenced in Libor fixing are not found in some other areas of trading activity
as well.”
Well, he
should know, (well you would have thought he ought to know). In reality this
statement betrays the root of the problem, people like Lord Turner simply never
for one minute thought that the nice chaps in suits were really in the same
league as Don Corleone, but merely better at it!
That in
effect is one of the key indicators within the white-collar conundrum. Regulators
are simply not equipped to equate the activities of businessmen with those of
ordinary criminals. Edwin Sutherland, the sociologist who first coined the
phrase 'white collar crime' once said "...Probably much
more important however, is the cultural homogeneity of legislators, judges and regulators
with businessmen. Legislators admire and respect businessmen and cannot
conceive of them as 'criminals’; businessmen do not conform to the popular
stereotype of the 'criminal..."
William Chambliss, one of Sutherland's students said;
"…One of the reasons we fail to understand business crime is because we
put crime into a category that is separate from normal business. Much crime
does not fit into a separate category. It is primarily a business activity...’
That is what this activity is, it is simply criminal
and the only way these people can be dealt with is as the professional
criminals they are. We don't need another enquiry, that will just waste
important time. We already have the laws with which to deal with these
organised criminals and the Government must ensure that they are used,
aggressively, if they wish to retain any credibility.
Years ago, when I was a detective, I was sent to the
US to study financial regulation. I spent time with the SEC and the CFTC as
well as studying with all the major US Exchanges, and I returned a committed
admirer of their abilities to regulate their market. When I was leaving to
return to London, the Head of Enforcement of the SEC, who had just read the UK
White Paper which would become the Financial Services Act 1986,and with which
he was deeply unimpressed, said to me;
"...You British seem to believe that the
financial market can be regulated by gentlemen in their spare time, in between
deals. You assume that everyone who handles someone else's money is a
gentleman, and you are shocked and concerned when you find out the converse is
true. Here in the US, we assume that anyone who handles another person's money
has the propensity to be a thief, and we legislate for the possibility. When
you finally take the time and trouble to put in place a system of regulation
which will really work, then we'll take you seriously, but until then, don't
waste our time..!"
He was right.
