Thursday, November 12, 2015

By their words shall ye know them!

Who is standing in the way of criminal charges being brought against City bankers?

Regular readers of my blogs will know that I have been regularly posing questions which ask why the Government is studiously ignoring the wrong-doing in the City of London.

The sheer volume of criminality which has been occasioned by the banks is breathtaking, yet Ministers say nothing and do even less.

I am at a loss to offer any kind of satisfactory explanation for this stony silence from the Government, and even when the losses occasioned have been so egregious, and the conduct so manifestly criminal, officers of the Crown still stay resolutely shtum!

It is as if the message has gone round Whitehall; ‘Say nothing, do nothing and in the end, people will forget’!

It is a major scandal that such a level of gross criminality has been occasioned and yet Government has not uttered so much as a murmur

The banks commit wholesale fraud on their customers. They steal their money, lacerate their accounts, inveigle them into crazy derivative products, and then manipulate them to death. 

Their traders play around with important global benchmarking products, manipulating them for their own dishonest ends.

They play around with the foreign currency values, they cheat clients using derivative markets, and the Government does nothing to punish them!.

Our laws on money laundering are regularly and routinely ignored. Foreign criminal money floods into London, and the banks casually accept it without turning a hair.

Our spineless regulators cower in the corner, like modern-day Uriah Heeps, claiming they can do nothing about the criminality of senior bankers, all the while imposing fines which do nothing but damage the interests of shareholders.

When I was a detective at the Fraud Squad, we had regular meetings with civil servants from the Department of Trade and Industry, which was just about the only other agency in those days that existed to deal with City fraud.

They would tell us in no uncertain terms if the cases we were investigating were ones which the politicians wanted investigated.

Under Margaret Thatcher, the Government of the day wanted to encourage a ‘climate of enterprise’, and they did not want criminal cases being brought which might give the impression that the City of London was a hotbed of criminality.

So any case which needed to be referred first to the Secretary of State for Trade and Industry (like Insider Dealing, or Fraudulent Trading) before charges could be laid, would join a long list of similar cases which were gathering dust while the time-wasting experts in the Department of Timidity and Inactivity did nothing to prosecute them.

My brother officers and I quickly learned how to charge City suits with ordinary criminal cases of theft and false accounting, charges which did not need ministerial approval to bring to court, and we began to get convictions, but they soon stepped in and stopped us doing that.

If this behaviour was being conducted by a Trade Union or a group of workers, you may rest assured that the Government would step in, but because it is being carried on in the stinking City, it gets ignored. 

I know perfectly well that when a minister or a Government department doesn’t want something to happen, then masterly inactivity will be the order of the day.

And this is what we have got right now, masterly inactivity of an order which we can only wonder at.

Well, my friend Ian Fraser has helped me to come up with some explanations, which may offer some insights, and they make for unhappy reading.

For answers, we must turn to the career and political motivations of Ms Harriet Baldwin. Ms Baldwin is not the sole perpetrator of this lack of action, she is just one in a long line of politicians who looked the other way, but she is in post right now, and her background ad cv are superb examples of the kind of people who hold down important posts intended to regulate the City!

She was educated at Marlborough School, and read Modern Languages (French and Russian) at Lady Margaret Hall, Oxford. She earned an MBA from McGill University in Montreal. 

Ms Baldwin was elected as the Member of Parliament for West Worcestershire in May 2010.  She was appointed to become the Prime Minister’s Trade Envoy to Russia before joining the government in February 2014 as Assistant Government Whip. In the July 2014 reshuffle she was promoted to Lord Commissioner.

Harriett Baldwin was appointed Economic Secretary to the Treasury (City Minister) 11 May 2015.

She had previously enjoyed a successful 20 year career in finance, working for J.P.Morgan Chase, and specialising in currency markets for pension funds. She was also on the National Council of Business for Sterling. Not that being employed by J.P.Morgan Chase was anything to boast about. A flaky record of dodgy dealings resulted in 2013 with an onslaught of endless investigations and scandals for the bank. By year’s end, news outlets reported the stunning $20 billion in fines the bank paid to settle cases in 2013 alone, some of which may not wrap up for many years. Counting back to 2009, the penalties number $30 billion. The wrong-doing by this one bank alone could have gone a long way to paying down the UK deficit !

So, not what you would call a inexperienced City player, and she no doubt enjoys the usual City memories and shares in its cultures! And this is the whole point! She is a creature of the Square Mile, she joined the City after Oxford. She is part of the elite group of young women who learned to compete with ‘the chaps’, while holding down a very competitive role in a major global investment bank.

All this is highly credible, and I intend no disrespect to her for her cv. But it also stereotypes her as a City insider, a free-marketeer, someone who knows where the bodies are buried! She believes in the City ethic,she knows what questions not to ask and this may mean that she is not entirely enamoured of the regulatory ethos!

Well, we don’t need to extrapolate from her history to see that she is no friend of financial regulation.

Back in 2005, when Ms Baldwin was still a City slicker, she co-authored a paper entitled ‘The Leviathan is still at large’, a report produced by a team from the Centre for Policy Studies, and addressed to the Financial Services Authority. It took the form of a big whinge and a lightly disguised dressing-down of the FSA’s coduct of affairs, and was clearly intended as a major shot across the bows for the regulator from its City constituency.
This paper contained all the usual bromides one would expect from the CPS, and in its introduction it moaned that;

“...The industry also feels that the FSA is vulnerable to political direction and influence. The FSA is seen as being unable to defend the industry it is intended to support against political or public criticism. This has created a sense of insecurity about future regulation. The ability of the industry to plan and to innovate is severely undermined.The industry fears that the FSA is an increasingly defensive and risk-averse organisation. This has contributed to a culture of prescriptive and increasingly complex regulation.

Such a culture is damaging to all the industry ñ but most of all to the small business sector. Innovation is at risk of dwindling, competitiveness falling and consumer choice declining.
The characteristics needed to succeed in the global capital markets include the following: expert, responsive, lateral-thinking, proactive, unbureaucratic, fast-on-the-feet, decisive, cost-conscious, imaginative, outward-facing and open. The industry expects its regulator to mirror these characteristics.

The industry’s expectations are not being met...”

In other words, the FSA is failing to back the City to the hilt and gives every indication of doing its proposed job properly, which we in the Square Mile would not wish to see!

In the document, Baldwin and co-author David Gauke now Financial Secretary to the Treasury, and others, called for a regulatory regime that "recognis[ed] the skills, sophistication and ability of senior management to manage their own business risks; and remov[ed] many of the prescriptive compliance burdens under which they labour"

Now remember, this document was written when the financial sector was behaving like a demented sociopath on Speed, engaging in just about every kind of dishonest and dirty financial practice under the sun. In just over 2 years, the Government would have to be throwing billions of pounds of tax-payers’ money at the collapsing banking industry, just to keep the flaky edifice afloat! Talk about “...recognising the skills, sophistication and ability of senior management to manage their own business risks...”

Nevertheless, the document contains a distillation of the views of a lot of unbridled free marketers, and we have to remember that the same people are now in positions of major authority!

As Economic Secretary to the Treasury (City Minister), her responsibilities include financial services policy and overall strategic relationship with UK financial services, including:
  • banking and financial services reform and regulation (at home and in the EU) including the PRA
    • financial stability
    • City competitiveness
    • bank lending and access to finance
    • Help to Buy
    • financial conduct and the FCA
    • asset management
  • RBS, Lloyds and UKFI
  • bank taxes
  • asset freezing and financial crime
  • retail financial services, including consumer finance, financial advice and capability, working with the DWP Pensions Minister
  • Equitable life
  • delivery of pensions reforms
  • foreign exchange reserves and debt management policy, National Savings and Investments and the Debt Management Office
  • departmental minister for HM Treasury Group
  • women in the economy
  • parliamentary deputy on economy issues
Whoops, among her other responsibilities is that of financial crime, so it is to Ms Baldwin we must look for policy determinations.

Now, it is perfectly possible that Ms Baldwin’s views may have softened somewhat since the publication of the Leviathan report, and she may now be in favour of a far more robust form of financial and City regulation!

She may be, but I don’t see any evidence of it, while I do see lots of evidence of a major slackening of a number of important constraints.

By their words shall ye know them!


Johnm said...

Maybe one of the new prisons is being built solely for them?
Dream over....

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