We must be completely barking mad!

This is a blog about lies.

Not little 'white' lies, but bloody great big black ones. The sort of lies told by politicians and their bankster friends. The sort of huge lies that hurt and damage you and me, and keep this country in thrall to the rich and powerful interests in the City of London. The vested interests that don't give a damn about this country, about its ability to employ its people or encourage its small business enterprise model to flourish and thrive. The powerful interests that took this country to the brink of financial disaster in a welter of uncontrolled speculation on ill-understood derivative and securitised contracts, who manipulated the LIBOR market and turned it into a thieves kitchen, who are now doing the same thing with the Gas price-setting market, who laundered drug money for the Mexican Cartels, and who routinely flouted the international sanctions intended to deal with terrorists and rogue states.

These are the power groups who when they got caught, called on their friends in Government to rally round, to defuse the ticking scandals, lean on the regulators and prosecutors, issue downright lies as press releases, and generally try and make the problem go away, for fear that the criminal banks might take their crimes elsewhere, to another jurisdiction who was less fussy about their dishonesty, so that they can continue to reap the rewards for their wrong-doing, the kind of rewards that would make an ordinary man or woman gasp in disbelief.

There are two particular stories in the financial press today which deserve a second look. They both deal with big bankster lies.

The first story deals with the decision of EU chiefs, who have agreed a package of financial laws that includes capping bankers' bonuses at a maximum of one year's basic salary. The bonuses will only be allowed to reach twice the annual fixed salary if a majority of a bank's shareholders agrees.

Yes, you read it right, bankers' bonuses will be capped at one year's salary unless the shareholders agree and then they can be doubled.

I know we are talking about the people in the investment banking divisions of the banks, I doubt if the average counter clerk gets this kind of bonus,  but hey, I'm sorry, but can someone enlighten me as to how this bunch of clowns who will already be earning somewhere in the region of £300,000-£400,000 a year as basic salaries, gets to deserve this kind of bonus in this present age? What do they have to do to secure that kind of money, apart from deliver even bigger sums to the bank itself, and where the hell is that money coming from anyway?

Well, we know where a lot is coming from. Mexico might be on hold for HSBC right now, but sure as hell there are other drug producing entities out there. The Pakistanis didn't appear to have slackened off from exporting vast sums of dirty money from the Afghan drug trade  through British banks based in Dubai, when I last looked!

Russian oligarchs don't appear to have fallen out of love with moving their dubious money through London, while the foreign tax evasion business is still thriving. Banks are routinely ignoring their legal responsibilities under the money laundering regulations to fully identify their customers and especially the Politically Exposed Persons (PEPs) (not my allegation, the FSA has said so), that they are required to pay special attention to, and the money keeps rolling in.

So, please, someone, anyone, tell me what it is these people do that is so valuable to the UK that they deserve to double their annual pay, every year, as a basic minimum?

Someone on Radio 5 Live has just said that they bring in £50 billion a year into the British economy. Well, that sum may hit these shores electronically, as part of a relocation process, but I seriously doubt if all of it stays here, in fact I suspect that a huge amount of it moves on fairly quickly to some other safer, palm-fringed location, having been discreetly disguised behind a British facade.

The same Radio commentator has said that these people bring in a lot of revenue for the UK, but as we all know that the vast majority of UK banks spend fortunes relocating their profits elsewhere, I seem to remember that all the British banks assessed together only contribute about 7% of the UK GDP, so I am not sure whether that is an influential argument to justify giving them these bonuses.

Currently there is no legal pay limit on top bankers and traders, who can earn performance bonuses many times their basic salaries. In fact, the bonus cap outlined  is just a part of a sweeping financial reform package introducing higher capital requirements for banks, the so-called Basel III rules. Othmar Karas, the European Parliament's chief negotiator, said: "For the first time in the history of EU financial market regulation, we will cap bankers' bonuses.

"The essence is that from 2014, European banks will have to set aside more money to be more stable and concentrate on their core business, namely financing the real economy, that of small and medium-sized enterprises and jobs."

So, the underlying function of this programme is really to ensure that Banks put a lot more money onto their balance sheets, to enable them to be more stable and resistant to financial seismic shocks, which proved to be so dangerous a few years ago.

The impact is intended to drive the banks into a situation where they must begin to focus on their traditional role as providers of capital to fund business and drive growth, instead of merely being casinos, speculating on derivatives and cleaning up drug money for dodgy Mexican banditos!

So, what is wrong with any of that, isn't that what every politician is calling for, isn't that what industry wants and needs, isn't that a desirable outcome, someone, please tell me what is so wrong with that ambition?

Well, of course, the EU is content to consider a 100% bonus package in the future, because they know perfectly well that no bank can make the kind of money that drives such a bonus by operating as a decent, wholesome, lawful bank, making transparent business loans to entrepreneurial customers. They have to continue to operate as 'fiducaires' to crooks and foreign dictators in order that get that kind of cash flow, and the banks, and the City and the Politicians know it, and that's why I say they are telling big lies.

Hear what dubious words our Prime Minister utters! 

“...We in the UK have major international banks based in the UK that have branches and activities all over the world...We need to make sure that regulation put in place in Brussels is flexible enough to allow those banks to continue competing and succeeding while being located in the UK...”

The UK has been battling to stop the Basel III accord on capital requirements, fearing the impact on the City of London as the EU's leading financial capital. The announcement represents a major blow for the UK Government, which has argued against a cap on bonuses over fears that bankers could leave the capital as a result.

This is such an old and hoary chestnut I am amazed Cameron still keeps trotting it out, but it gets another outing every time something like this happens! It's as if he can't think of any other reason, just like the other hackneyed excuses he rolls out. He has warned that '...European Union regulations could harm the City’s competitiveness...' after Brussels voted to cap bankers’ bonuses...'

This is what I mean when I talk about big lies. David Cameron is playing to the Eurosceptic  wing of his party. This isn't about economics or banking, this is just grubby politics. How on earth can European regulation possibly damage our competitiveness, surely it can only improve it? To be competitive means that you compete for business on equal terms with all other banks throughout Europe.

The uncomfortable reality is that the City doesn't give a flying fuck about fairness or competitiveness, it wants a monopoly, and it wants to maintain its hegemony over other European banks. It wants to keep the drug money and the foreign criminals' proceeds for itself!

Cameron has to come out with this crap because he has that other comic chancer and self-populist, Boris Johnson snapping at his heels like a demented poodle. He is also a delusionist when it comes to the competition argument. He states;

"This is possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman Empire," he said. (I Imagine that In Brixton, they speak of little else!) "Brussels cannot control the global market for banking talent. Brussels cannot set pay for bankers around the world....The most this measure can hope to achieve is a boost for Zurich and Singapore and New York at the expense of a struggling EU..."

Speaking in Latvia today the Prime Minister said he would look “very carefully” at the EU’s decision.

Is this the same David Cameron who only a year ago In a wide-ranging speech in London on the economy, said he wanted to discourage irresponsible bank bonuses and encourage firms to show "social responsibility" and said that the chancellor was considering new tax rules to prevent abuse.

He used that speech to discuss his vision for a transformed capitalism, based on two principles "The first is a vision of social responsibility, which recognises that people are not just atomised individuals, and that companies have obligations too.

"And the second is a genuinely popular capitalism, which allows everyone to share in the success of the market."

The government is consulting on new rules which would require the UK's 15 largest banks to reveal remuneration for their eight highest-paid non-board executives - board executives' pay is already published. Mr Cameron said hard work and success should be rewarded - and entrepreneurs who got rich should be celebrated. But he said the City bonus culture had "got out of control" in recent years.

This was the same speech in which the Prime Minister said he wanted "no rewards for failure".

Today, after hearing of the RBS decision to pay bonuses amounting to £607 million, the Government called this a responsible demonstration of laudable restraint! Well, if this year's figures are a success, then I am a chocolate frog! These are the so-called 'successes' that RBS staff got rewarded for.

An announcement that it made a loss of £5.16billion last year. In fact RBS has made a loss for five consecutive years, ever since it was largely taken into public ownership in 2008 during the global economic crisis.

The large hit RBS took over the past year was attributed to unusual costs such as the additional £450million it was forced to pay out to customers who were defrauded by payment protection insurance, bringing its total compensation bill to £2.2billion.

In addition, the bank has been fined £381million for its role in the Libor rate-fixing scandal, it must set aside £700million over fraudulent interest rate swaps, and it lost £1.3billion in restructuring costs.

RBS also had to take a £4.6billion accounting cost based on a revaluation of its own debt. Nevertheless, the announcement that RBS would nonetheless reward staff with 'bloated bonuses' worth millions was described as 'astounding', with the bank accused of 'turning a blind eye' to wrongdoing over scandals such as rate-fixing and the fraudulent selling of insurance.

Chairman Sir Philip Hampton tried to put a brave face on it all. He admitted that the bank could not guarantee that the taxpayer would ever see a return on its investment. 'We will do our best to see if the taxpayers' money can be returned, but the bank was in a terrible mess, if you go back four or five years, it needed substantial re-capitalisation,'

He confessed the decision to pay massive bonuses rather than returning taxpayers' cash was 'toxic for everybody', but insisted it was necessary to avoid haemorrhaging skilled staff.

Here we go again, the dodgy old 'skilled staff' argument. If bankers are so skilled, how did they manage to drop us in the financial doo-doo in the first place. Even Lord Lawson on the Banking Commission has publicly stated that there is nothing very special about bankers, and that they are ten a penny!

In an interview on BBC Radio 4's Today programme, Mr Hester refused to put a date on when the bank could be returned to private ownership, but predicted, 'RBS will be ready to be privatised within the next couple of years.'

He then proceeded to perpetuate another great big mis-statement about the banking sector. He attributed the company's losses to the legacy of mismanagement he inherited, saying: 'The clean-up of RBS is entering its last phases, and I'm hopeful that as we enter the last phases of 2013 and into 2014 the company will look more like a normal company. '2013 will be another tricky year for us and for the UK economy, but every year that passes we are chopping away at the bad inheritance we had.'

Well, excuse me, but isn't that rather the point. Hester knew exactly what he was getting into when he joined the bank, and anyone working for him must know the deal. When you inherit someone else's Augean stable, you have to shovel a lot of shit, in order to clean it up. That's the moral burden of responsibility he took on, whether he like it or not, when he adopted somebody else's screw-ups.

This is your big dilemma, Mr Hester. You can't turn round and claim you would have been making a profit if it wasn't for all the fines you have had to pay for all the crimes your predecessors and no-doubt some of your staff committed, some of whom may still be employed by you. If and when you get it right, then no doubt the glittering prizes and the bonuses will be awarded to you, but if you knowingly take on a problem situation in full possession of all the facts, then it seems ridiculous to be paying you bonuses when you are still making losses. You are in a secure job, and being paid a great deal of money anyway, and the same goes for your staff. In this era of deep recession, what more do you want?

Well, it seems Hester does want more!

Commenting on the EU's bonus restrictions, Mr Hester confirmed in an interview with BBC Radio Scotland that he would be taking his bonus of shares worth £780,000 next month, saying: '...Other people decided to award it to me - as you know it's the only bonus in four years I have taken...'

He doesn't get it, but he is not alone, none of them do! The bankers think that by continuing to threaten Government that they will move elsewhere, that this will permit them to maintain the comfortable sinecure they have so long been used to enjoying. Let us not forget, as taxpayers we own a significant chunk of RBS and we have a big investment in other banks as well.

Like I said, we must be completely barking mad if we agree to their getting one penny bonus more, before they have returned all our invested money with interest!.

Why are banks refusing to disclose suspicious activities?

"...Some banks appeared unwilling to turn away, or exit, very profitable business relationships when there appeared to be an unacceptable risk of handling the proceeds of crime. Around a third of banks, including the private banking arms of some major banking groups, appeared willing to accept very high levels of money-laundering risk if the immediate reputational and regulatory risk was acceptable..."

This is the opening paragraph of the FSA's report of June 2011, entitled  "...Banks’ management of high money-laundering risk situations..."

It helps to explain most succinctly why banks are refusing to disclose suspicious activities. They are not making disclosures to law enforcement because they are making huge sums of money from the practice of money laundering, no matter how high the risk to the individual bank may be.

What this tells us immediately is that banks and those who manage them, and this decision has to be taken at a very senior level indeed within the organisation,  have made a conscious choice to wilfully ignore a very important piece of legislation which is deemed vital to help law enforcement fight the activities of major criminals, drug traffickers, fraudsters and terrorists. I challenge them to say it isn't so, because I know it is.

This is a very simple issue. The law is there to require banks and financial institutions to disclose their suspicions of criminal wrongdoing  if and when they notice financial activities which are clearly out of the normal or usual range of their clients activities, being carried on, and for which there is no reasonable explanation.

 It is not an onerous duty, and merely requires the completion of a form spelling out certain information about the client and the activity which is then passed on to the relevant law enforcement agency. Such information is vital to an intelligence-led police agency, seeking to do its best to combat organised crime and terrorism, and it is mandated in law. It is a legal duty, for which criminal sanctions can apply for a wilful failure to meet the relatively simple requirements enacted in law.

We are all familiar with the myriad of cases of single women who have been imprisoned for claiming welfare benefit, but failing to inform the relevant authorities of the existence of a man who may stay with them on occasions in their home. These women lose everything, including their liberty, merely for giving in to the desire for some ordinary human contact and love, and our society punishes and marginalises them in the cruellest ways imaginable. They go to prison and their children go into care, and every time this piece of social calumny occurs, the Judge trots out the usual routine message that he is passing a custodial sentence to send a message that benefit fraud will be taken seriously.

I am unaware of many financial practitioners who may have received a prison sentence for failing to disclose relevant information of suspicions of criminal activity which may have come to their attention, and herein lies one of the major failings of the law, because it discriminates against the weak and the powerless and it favours the rich and powerful.

When it comes to money laundering and compliance with a simple piece of regulation, it is an issue which is completely ignored by the FSA, the regulatory agency with the responsibility to ensure that financial institutions are complying with this law. The FSA have taken their collective eye off an important element which is vital for ensuring that the money laundering regime in the UK is enforced strictly and fairly, as a result of which, the banks completely ignore the demands of the law.

You might be forgiven for thinking that it is not the FSA's responsibility to regulate bank's compliance with the Money Laundering Regulations, but it is written into the Financial Services and Markets Act 2000.

Section 6 of the Act is clear. It states that one of the FSA's responsibilities is;

The reduction of financial crime.

(1)The reduction of financial crime objective is: reducing the extent to which it is possible for a business carried on—

(a)by a regulated person, or

(b)in contravention of the general prohibition,

to be used for a purpose connected with financial crime.

(2)In considering that objective the Authority must, in particular, have regard to the desirability of—

(a)regulated persons being aware of the risk of their businesses being used in connection with the commission of financial crime;

(b)regulated persons taking appropriate measures (in relation to their administration and employment practices, the conduct of transactions by them and otherwise) to prevent financial crime, facilitate its detection and monitor its incidence;

(c)regulated persons devoting adequate resources to the matters mentioned in paragraph (b).

(3)“Financial crime” includes any offence involving—

(a)fraud or dishonesty;

(b)misconduct in, or misuse of information relating to, a financial market; or

(c)handling the proceeds of crime.

(4)“Offence” includes an act or omission which would be an offence if it had taken place in the United Kingdom.

(5)“Regulated person” means an authorised person, a recognised investment exchange or a recognised clearing house.

I have highlighted the relevant elements that apply to money laundering, and I have included the element at sub-para 4 which includes offences committed outwith the United Kingdom. Regular readers of this blog will remember how a senior City Grandee tried to claim that it was not the FSA's duty to regulate an HSBC bank in Mexico. This sub-section shows how wrong he was!

I will demonstrate later how the FSA are still trying to squirm out of their responsibilities for this requirement!

The requirements to disclose suspicious disclosures, later suspicious activities, were first enunciated in 1994. The banks all complained loudly and long about this requirement, because, as they tried to argue, it ran directly counter to their traditional privilege of keeping their clients affairs confidential. The British Home Affairs Committee which looked into the proposed changes in the law needed to implement the soon to be enacted European Money Laundering Directive, realised that something had to be done to make it easier for banks to make disclosures of their suspicions of criminal transactions, but without rendering themselves to be sued for breach of confidentiality.

Remember, at this time the only offence which was being considered to be covered by the money laundering law, was the proceeds of drug trafficking, which was becoming a significant issue in UK law enforcement.

The duty to disclose suspicions to law enforcement was enacted as a defence for bankers against any subsequent allegation that they had been knowingly engaged in the laundering of the criminal proceeds of such a drug offence. So where a banker made a disclosure of his suspicions to the relevant police agency, he could not subsequently be prosecuted for any money laundering offence related to those proceeds, because he had alerted the authorities to their potential existence.

The banks were hoist on a petard of their own construction.

They had previously declined to pass police information without the need for a cumbersome legal procedure to obtain an obscure Court Order, all the while maintaining their absolute willingness to cooperate with police enquiries, save only for the prohibiting effect of the confidentiality clause in their contract with their client.

In one stroke of the pen, the banks were relieved of that burden and the obstacle of client confidentiality was removed, in cases where the bank was making a bona-fide disclosure of their suspicions of criminal money in the client's account.

Perhaps unsurprisingly, very few disclosures arrived at the relevant police agency, indeed it quickly became obvious that the banks were very reluctant to make any disclosures at all. Whether this was born out of a sense of willing disbelief that their clients might be up to no good, or because, as I have always suspected, the banks never had any intention of talking to police in the first place, and resisted becoming suspicious, is merely a matter for conjecture. We do know that within a relatively short time, Parliament had to enact an amendment which made it mandatory for employees in the banking community to pass suspicions of criminal conduct to police, where the knowledge or suspicion came to them during their ordinary duties in the bank.

Nevertheless, the disclosure requirement still operated as a defence to any subsequent criminal charge, so the point is that any banker who does not make the relevant disclosure, can if an offence is subsequently brought against the client of the bank,  be prosecuted for willing involvement in the unlawful activity.

The point is you would think that any banker, coming face to face with such an eventuality, would want to make a disclosure to the police, in order to benefit from the defence provision, but for some reason, we know that banks are still very resistant to making any kind of realistic disclosures to the Police, and we need to understand why that is.

We only have the banks' actions and conduct to measure this particular failing, it's not as if they make a virtue out of telling us their reasons for flouting the law.

We can rely to some extent on their own words, as where I was invited to address the Group Heads of AML in a number of major banks in London, and they made their feelings about the AML regime perfectly clearly, they think it is a waste of time, effort and money!

They will all say, if asked, that their institutions spend a great deal of time, effort and money complying with the AML requirements, but in reality, their efforts are little more than window dressing, and they do not go near the implementation of the core requirements of the legislation. As the Group Head of one of the most egregious banks in London for money laundering said to me at the dinner, '...It's a total waste of time and money and I am not going to bother worrying about passing detailed transaction disclosures to the police....'

This man also gave me the answer to the second part of the riddle, because when I asked him if he was not worried about being dealt with for failing to do the job properly, his answer was that '...no-one gets dealt with for this issue, so he wasn't going to worry about it...'

I think that is where we have it in a nutshell.

The banks don't want to pass information about clients' affairs to the police, because they are making a great deal of dirty money out of the practice, but they believe that if the word gets round their client base that they are too compliant with the law on passing incriminating information to the police, then they will lose client share, and thus, client money.

The FSA don't regulate the financial sector's compliance with the AML Regulations or the substantive law sufficiently, to make their presence a real threat which has to be acknowledged, and as a result, the banks rest content that they don't have to do too much to comply.

So, they don't bother to train their staff in compliance skills, they don't train them how to properly analyse computer-generated alerts, they don't teach them how to maintain an effective client surveillance database which might be capable of recalling previously unusual episodes, they simply do the least possible to get a tick in the box from a complacent regulator, and they carry on as if nothing was happening.

The end result is a situation where a great deal of shareholders' money gets spent in creating the impression of compliance with the AML laws and regulations, but where, in reality, it is business as usual when the dirty money comes rolling in.

How else can you explain what happened at HSBC, when the 'Laundering Bank', (for that is how we must now christen it), went ahead and created a deliberate money laundering structure in Mexico, and used it for facilitating the movement of Mexican drug money belonging to the drug cartels?

This wasn't an accident, you don't let things like this occur without anyone noticing. It was deliberate and it was a business case decision, and they got away with it, because no-one in HSBC was sentenced to any term of imprisonment.

And why did they not get prosecuted here in the UK? Because the FSA has now made a conscious decision that they are not going to do anything about money laundering cases.

Earlier I set out the terms of Section 6 of the Financial Services and Markets Act which empowers the FSA to act in money laundering cases. Following the LIBOR scandals, the House of Commons Treasury Select Committee has criticised the FSA for their failings in dealing with relevant elements of  regulatory responsibility. The FSA has sought to rebut those criticisms, and what follows is taken from their report. The Select Committee's feelings are reported in the bold type.

"...The FSA has an obligation under section 2(1)(b) of FSMA to discharge its functions in the way in which it considers most appropriate for the purpose of meeting its regulatory objectives. Under section 2(2)(d) the reduction of financial crime is one of these objectives. Financial crime is defined in section 6(3) as including not only misconduct in relation to a financial market but also any criminal offence of fraud or dishonesty. The FSA took a narrow view of its power to initiate criminal proceedings for fraudulent conduct in this case. (Paragraph 202)..."

The FSA's response (in italics) states:

38.  The FSA has extensive powers to investigate specified offences, both regulatory and criminal (as set out in FSMA). These powers of investigation do not, however, extend to other offences not specified in FSMA such as theft, fraud and false accounting. The police and the SFO do have powers to investigate these offences so we cannot use our powers specifically to obtain material relevant to these offences.

This is not strictly accurate, indeed it is not true, the FSA have perfectly ordinary common law powers, the same as possessed by the Police and that feature has been made perfectly clear to the FSA by the Courts, and I don't know why they keep on trying to assert the contrary. On 29th July 2010 the Supreme Court confirmed FSA’s power to prosecute money laundering offences.

The Court of Appeal decision in R v Rollins, concerned a prosecution by the FSA for insider dealing and money laundering.  In that case, the Court of Appeal confirmed the FSA’s power to prosecute offences beyond those expressly set out in the Financial Services & Markets Act 2000 ( “FSMA”), including money-laundering offences under the Proceeds of Crime Act 2002 (“POCA”).  That decision was subsequently appealed and on 28 July 2010, the Supreme Court unanimously dismissed the appeal.

The Supreme Court observed the FSA’s objects include carrying out any functions conferred on it by statute.  FSMA sets out the FSA's functions and objectives, which includes acting in a way that it considers most appropriate to meet its regulatory objectives, including the reduction of financial crime.  In this regard, it has powers of prosecution.

The Court noted that as one of the FSA’s functions was to reduce financial crime, “Parliament would not have intended to deprive the FSA of the power to prosecute for offences of financial crime (of which sections 327 and 328 of POCA are examples)”.  If the FSA was limited to prosecuting solely the offences listed in section 402, this would be an “inefficient and unsatisfactory way of prosecuting crime”; there was no need to infer that Parliament intended to limit the FSA’s power in this way.

The FSA continued;

39.  We may of course discover evidence of these more general offences whilst conducting investigations under the powers set out in FSMA. For example, we may discover evidence of fraud whilst investigating whether a regulatory breach has occurred, or a market abuse offence has been committed. In these circumstances, there is a well established procedure for discussions to take place between the FSA and the SFO or other prosecutors about how to deal with that evidence. This is in accordance with the Prosecutors' Convention, to which both the FSA and the SFO are signatories. Such discussions might lead to the SFO opening its own investigation.

Well, yes indeed, they might do. But they might just as easily not take place. Pigs might fly, turkeys might vote for Christmas, but unless the FSA are going to be more willing to share their evidence with other agencies, it is unlikely that many prosecutions will flow. What happens if the specific case does not fit in with the SFO's terms of operation, as where the sums involved are under £2 million?

Let us just say that the FSA do not think they take a narrow view of their powers. Others might disagree with them!

The bottom line here however, is that the FSA clearly want as little to do as possible with the AML requirements, so as far as prosecuting financial institutions for breaches of the Money Laundering Regulations are concerned, we must all get used to the idea that such an event will be a triumph of hope over experience.

All the time the banks know they will not be called to account for failing to deal with the money laundering regulations properly, they will continue to permit vast amounts of criminal money to enter their books by money laundering for drug traffickers, tax evaders, thieves, fraudsters and terrorists. It's not rocket science, it's just the way it is!

The greedy crooked banksters who have ruined this country are still taking home even more money than anyone else!

I don't think there is much dispute that the financial crisis and the recession which has followed which has done so much to destroy the living standards and the future hopes of so many millions of working people in this country, was caused by the criminal antics of the investment bankers, who allowed their greed and their avarice to overcome any sense of prudence and sound banking judgement, they might once have possessed.

This period of scandalous mis-management, downright criminality, bankers' hubris, and coupled with gross regulatory incompetence has effectively brought this country to its knees, and now, thanks to another period of arrogant political misjudgement, it now looks as if we are going to experience an even greater period of financial upheaval.  As our Triple A rating starts to take lumps from the global financial markets, as the pound devalues possibly to parity with the Euro, inflation rises, and wages get squeezed even tighter, porky millionaire's son, Georgie Osborne flip-flops around like a beached bloater, desperately trying to persuade us that his policies are working, opening and shutting his mouth, but with nothing of value coming out.

It is obvious to anyone with a modicum of common sense or knowledge of social history that what Osborne and Cameron are really doing is using this financial crisis to wield the weapon of imposed austerity, as a deliberate attack on the Welfare State. They are seeking to finish what Thatcher failed to achieve, which is the wholesale removal of the welfare dependency culture. In so doing they are in grave danger of throwing out the baby with the bathwater, because they are ignoring the real cause of potential future social upheaval!

Amid all this financial turmoil, which is by now completely out of the hands of any of  the politicians of any persuasion to do anything sensible about it, a new report 'Bankers and Their Bonuses' is published by the London School of Economics, a study which reveals the growing gap between the fat cats who sparked the financial crisis and the workers who are now having to pay for their mistakes.

The report states among other unpalatable facts that:

Bankers' pay has rocketed 14% during the recession compared to 3.7% for the rest of us. This fact alone should be enough to set alarm bells ringing in Number Ten Downing St, and if I were David Cameron, I would be setting up an emergency meeting with the Commissioner for the Metropolitan Police and seeking assurances that the Met Police were fully equipped and ready for serious public order manifestations come the Summer.

London’s top 1,400 bankers take home an average £2million a year including £568,000 “basic” pay. This an obscene statistic and we are entitled to ask what this bunch of useless parasites do for the benefit of society which justifies their receiving this largesse.

Overall, City financiers received 14.2% more in salary and cash bonuses in 2011 than they did in 2008.

An astonishing £1 in every £7 earned in Britain now goes to the top 1% of earners, but In 1979, before Margaret Thatcher took charge, the figure was £1 in £20.

Inequality caused by soaring financial sector pay shows no sign of slowing. The report notes that  “...The sector which in some sense caused the whole crisis is the sector which seems immune to almost any employment effect...Traders earning millions are in some sense not replaceable so they have remarkable bargaining power...” This may well be true from a raw economic analysis, but these traders generate nothing of any discernible social value.

But despite widespread public outrage at the bankers' bloated pay, Barclays’ ex-boss Bob Diamond getting a salary of £1.35million in 2011 – 20% more than his predecessor,  David Cameron is bitterly opposed to any measure which would restrict their ability to continue picking up this money. This because he is hostage to the threats made by the banks that they will relocate their operations if they are baulked in their practices. Instead of calling their bluff and saying, "...Fine, we'll miss you...", he capitulates in the face of this crass bullying.

At the same time as caving in to his bloated friends in the City, partly because he doesn't want to put at risk the contributions they make to the Tory party, David Cameron is, perhaps not surprisingly also against raising the minimum wage for ordinary Unionised workers, despite huge backing in the country for such a policy, partly because they don't make any contributions to his party's coffers! Consider the following.

While City bankers' pay increased by 14.2%, average workers outside the City got 3.7% over the same period – equivalent to a 6% FALL after inflation, because prices went up a whopping 9.6% between 2008 and 2011. Unison, Unite and the GMB estimate that the cumulative effect of the local government pay freeze, now in its third year, coupled with high inflation has resulted in a 13% decrease in pay since 2009. 

As I truthfully cannot see the need for bankers in these numbers, nor do I genuinely understand quite what they contribute to the common weal, because the vast number of them are nothing more than gamblers, playing with other people's money, or money launderers offering a safe haven to drug cartels, (HSBC), third world dictators or foreign tax evaders (Barclays), market manipulators (RBS) and terrorist sanctions busters (Standard Chartered), I thought I would compare their grotesque salaries with those of certain groups of  workers who do contribute to the needs of this country.

Hospital medical and surgical consultants earn between £70,000 to £95,000 on NHS pay scales. It is true that some, not all, of them can earn more money privately, but the NHS commands their primary time and indeed, a vast number of them are committed to an NHS ethic which demands a great deal of their commitment.

Senior House Officers, the workhorses of the hospital medical fraternity earn  between £26,000 and £36,000 a year. The starting salary for a qualified state registered nurse is just over £21,000 a year.

Teachers, the people who are hopefully going to ensure that future generations can enter the workplace with the skills needed to maintain this country's future as a functioning democracy earn, in London, £27,000 when they start, although that figure is significantly reduced outside London. After 6 years in London they will be earning £36,000. This is not enough money to be able to buy even a small flat at today's inflated property prices.

Police constables starting on the beat, and the only people who will provide the line of resistance to the urban rioters who are building up their numbers and stoking up their anger for a series of targeted riots and public disorder situations in the near future,  are going to have their salaries reduced, under new Tory plans. Mrs May, the Home Secretary, said the starting salary for police constables in England and Wales will be cut by £4,000 to around £19,000 in the first major overhaul of police pay and conditions for more than 30 years.

She told MPs she was accepting the recommendations of the police arbitration tribunal which would help “modernise police pay and conditions so that they are fair to both officers and the taxpayer”.

Quite how reducing pay for the men and women who do this increasingly dangerous job is making it fair for them is beyond my understanding, but we should watch the way in which the politicians will demand the police manage the civil unrest which will soon become a leitmotif of public dissatisfaction with Tory policies.

Even Chief Constables in the major urban areas, Greater Manchester and West Midlands earn only £175,000 a year, while the Commissioner for the Met earns £240,000. These sound like good salaries, but compared to the earnings of some cocaine-stoked Short-Sterling Options trader, they are chump change!

The Fire Service earn on average between £18,000 to £35,000 for active ranks, and the inner cities will be looking to them to do their bit when the warehouses and the shops selling training shoes are in flames, and the mob is gathering to indulge in a bit of free shopping!.

The purpose of providing these comparisons is to demonstrate the ludicrous disparity in salaries between just a few of those men and women who really do provide society with essential services, and without whom ordinary daily life in this country would not function, and the salaries of those bloated, criminogenic   banksters whose actions have done so much to damage this country and which savage the reputation it once had, for integrity and honest dealing, but no longer.

As a remarkable example we can review the case of Lloyds Banking Group, whose latest news on pay is a case study in greed.

A recent report in the Daily Telegraph reports the following.

"...The loss-making Lloyds Banking Group is poised to reignite rows over executive excess and rewards for failure by giving a £1.4m bonus, on top of £1m basic salary, to its chief executive, António Horta-Osório.

The remuneration committee of the bank, which was bailed out with £21bn from the taxpayer in 2008, meets next week to recommend the payout despite Lloyds being expected to report a loss for 2012 of more than £500m..."

So, that's a good start. They are facing a huge loss but still they want to pay bonuses. What is wrong with these people, what parallel universe do they inhabit. By what standard of fairness or reasonableness does Horta-Osório. deserve another penny on top of his already grossly over-inflated salary?

"...Lloyds bank, which remains 40% state-owned, would not comment publicly and insisted privately that no decision had yet been made about the chief executive's payout, but sources confirmed that a figure of around £1.4m was under consideration, to be paid in shares and deferred until the taxpayer broke even on its stake..." Without tax-payer's money, the employees of this bank would be out of work, in a sense, they are public sector workers too!

Lloyds is understood to have taken soundings from the government on the payout to ensure it will not face immediate opposition from ministers.

However, other critics pointed out that the UK's financial regulator has just fined Lloyds £4.3m for delays in compensating customers for mis-sold PPI policies while they also complain the executive bonus and wider remuneration structure is too opaque.

The bank has been shamed for defrauding its customers through its dodgy PPI policy cheating, but they have failed to pay the compensation they owe their clients, so they have been fined again, and yet they want bonuses for bankers. There is no other business sector in the world that could demand this kind of special treatment for repeated failure and expect to get it! It claims to be working hard on business lending, but, as Lord Oakeshott has said; "Lloyds are making the right noises on net business lending but there is no evidence of it yet in the official funding for lending figures. It's a taxpayer controlled bank so Mr Horta-Osório's contract should be totally transparent with any bonus deferred until Lloyds has delivered for British business,".

Most analysts are expecting the bank to announce pre-tax losses of £544m for 2012 after having set aside £2bn in the year to compensate customers mis-sold PPI policies. The equivalent statutory loss for the previous year was £3.5bn.

Only in the corpulent world of City banking would bonuses be paid for failing to make profits, and for hanging on to criminal proceeds and not recompensing victims, but like their counterparts in the mafia crime families, the banking godfathers still expect to keep on receiving their due, it's a matter of respect!

The LSE Report 'Bankers and their bonuses' makes some unpalatable conclusions. It states;

"...The Occupy movement brought a new saliency to the issue of income inequality. Their key slogan – “we are the 99%” – dramatically highlighted the sense that a small elite have been the main winners in the decades leading up to the crisis. Top percentile workers have substantially increased their share of the income pie - in the 1970s they took around 6% of total UK income but by the end of the 2000s, this had risen to 15%.

On this measure, we have returned to levels of inequality not seen since the Inter-war years. But one key difference is that the high-income group used to be the rentier-class enjoying returns on their fixed capital. Now, the high-income group are primarily high-wage workers enjoying returns on human capital.

Among these high-wage workers in the UK, bankers feature heavily. In 2008, 28 percent of all top percentile earners in the UK were London bankers. But this dramatically understates their importance in the rise in overall wage inequality during the last decade.

We estimate that somewhere between two-thirds and three-quarters of the overall increase in the share of wages taken by those in the top percentile have accrued to bankers. More remarkably, the financial crisis seems to have been so far little more than a blip for the pay of bankers.

If we focus on all those workers in the top percentile, their average wage rose from £277,800 in 2008 to £284,100 in 2011, a rise of 2.3% and their share of the overall wage bill fell, as the mean wage for all workers rose by 3.7%. In contrast, the bankers in the top percentile saw their average wage rise from £325,100 to £353,100, a gain of 8.6%.

From an equity perspective, the remarkable gains to those at the top of the income distribution over the last few decades, may call for higher marginal income taxes. The appropriate level at which to set such tax rates remains a matter of intense political and economic debate.

Salary and wage inequality leads directly to social inequality. These pay figures have a direct knock-on effect on house prices, community values, and rents, and inflate the costs of housing and everyday living for the hundreds of thousands of other people who don't receive anything like these sums. These pay scales fuel inflation because goods and services in these communities are priced to reflect the kind of returns the wealthy will be prepared to pay, but which squeeze the marginalised lower paid immeasurably.

Such conditions stimulate further criminal activities like fraudulent food mis-labelling as manufacturers struggle to keep processed food prices in line with social expectations, and therefore use cheaper or socially unacceptable forms of food to fill their products. The  fraudulent labelling of processed meats in prepared foods containing horse meat but described as beef, is an example of the direct outcomes of wage inequality. Poorer people struggle to pay the costs of premium products sold in high-end outlets with elevated social class aspirations, and resort instead to cheaper products sold in down-market retailers, who, in turn have to source their products from increasingly dubious suppliers. This phenomenon provides yet another turn in the inflationary spiral.

Young people who have trained to work as teachers, nurses or police officers find themselves priced out of whole sectors of otherwise normal social housing areas because of the prices demanded to meet the deep pockets of socially worthless bankers, thus creating a series of sterile yuppie ghettoes, impacting the levels and value demands on local education and associated local community services, and attracting an increase in outlets which sell greater volumes of expensive clothing, designer accessories, bespoke kitchen fittings, and a host of other elitist products, but which create, in turn, a disincentive to social inclusion and community sustainablity.

Grotesque wealth, and particularly such wealth which shares nothing of value in its creation, breeds social inequality which fuels envy and jealousy. The have-nots will be increasingly forced to observe the possessions and life-styles of those who have, and we will reap the whirlwind of social disaffection and class warfare.

The fire next time (with apologies to James Baldwin), will not be easily extinguished, but we shall know who to blame!