Banking explained

People may not like it, but the answer is simply that there was no discernible offence, even of knowing recklessness and negligence, let alone criminal misconduct. Bankers have not been sent to jail because they didn’t do anything illegal.

Being wrong, enthusiastic, ill informed, going bust, none of these are crimes.

27 thoughts on “Banking explained”

  1. Can’t comment on the HBOS case but to state *in general* that “Bankers have not been sent to jail because they didn’t do anything illegal” is flat out wrong. It’s not even clear that’s true at the board level given there is some evidence that the former CEO of DB knew about LIBOR rigging.

    Examples of illegal behavior:
    LIBOR / EURIBOR fixes
    WMA fix (collusive behavior)
    LBMA fix
    HSBC and CS laundering money for cartels
    HSBC / CS (and others?) illegal wire transfers for “axis of evil countries”
    Numerous instances of mortgage securitization fraud

    I could go on.

    Had you or I laundered money for a Mexican drug cartel, I sincerely doubt the punishment would have been a fine that was some negligible percentage of our annual income. Yet that was the punishment for HSBC. And yes, I get the argument that you can’t shut down JPM or Citi in the US because of the wider economic impact, but you sure can revoke CS’s banking license.

    Bit rich to be a libertarian and talk up the rule of law then expect it to be selectively applied.

  2. Didn’t Barclays repeatedly point out the LIBOR gaming and was ignored ?

    I’m waiting for *one* of these people who write “hang all bankers” endlessly to admit their partial responsibility in voting in a Labour government which stoked debt to create an illusion of prosperity.

  3. Hmmm…..
    Oct 2004: A report by head of group regulatory risk Paul Moore warns that the bank’s sales-obsessed culture and inadequate internal controls mean it is headed for collapse. The report stated that HBOS is “going too fast” and had become “a serious risk to financial stability and consumer protection”. According to evidence later submitted to the Treasury Select Committee, the bank’s finance director Mike Ellis ensures that neither the audit committee nor the HBOS board has sight of Moore’s report. (See: The Moore Memo)
    Nov 2004: When Moore, who was only doing his job, complains about this, Crosby personally fires him. A business manager at Bank of Scotland, Alistair Wilson, is shot dead on the front doorstep of his home in Nairn. Despite suggestions that Wilson may have uncovered serious financial irregularities at the bank, his murder remains unsolved to this day.

  4. LIBOR definition : The rate at which an individual Contributor Panel bank could borrow funds, were it to do so by asking for and then accepting inter-bank offers in reasonable market size, just prior to 11.00 London time.

    At the time of the LIBOR fixing, there *was* no inter-bank lending. Therefore everyone was guessing. The Bank of England indicated that it wanted rates kept low to avoid a panic. So the banks did so. In reality, LIBOR should have been infinity at that point. Imagine what *that* would have done to the people bleating about being “conned” by LIBOR fixing of a few basis points.

  5. A mate of mine worked at Hornby’s place for a while.

    He was amazed to find a huge glossy tome arrive on his desk one morning.

    Had loads of stuff in it about employees’ lifestyles, drinking, diet, smoking, cycling to work, etc.

    But fuck all about banking.

  6. @Corvus,

    Stealing one penny from everyone in the country is still theft on a grand scale. It’s also still theft if you steal it from some people and give it to others.

  7. “It’s also still theft if you steal it from some people and give it to others.” Must you drag politics into it?

  8. So why did the Labour government, with Gordon Brown as chancellor, ignore the excesses at the Royal Bank of SCOTLAND, or Halifax Bank of SCOTLAND?

    Can’t see any link whatsoever….

  9. “If you read the linked piece you will see that he made these points.”

    His relevant points are “some minor traders have been convicted for Libor rigging and other misdemeanours” and “there was no discernible offence, even of knowing recklessness and negligence, let alone criminal misconduct”.

    I guess he didn’t read about the BaFin report on DB.
    http://www.wsj.com/articles/germany-blasts-deutsche-bank-executives-over-broken-culture-1437068759.

    And I guess he didn’t read this: http://www.bloomberg.com/news/articles/2015-11-05/rbs-executive-told-hedge-fund-about-libor-rigging-lawyer-says

    Or indeed many other similar examples. What they suggest is “knowing recklessness and negligence”, if not more/other serious offences (e.g. obstruction of justice in the DB case).

    Further to that, there’s plenty of evidence that both government and regulators are incentivized not to bite the hand that feeds them, which might well have kept senior execs out of jail.

    e.g.
    https://theintercept.com/2015/07/06/eric-holder-returns-law-firm-lobbies-big-banks/

    http://www.foxnews.com/politics/2015/07/30/ubs-donations-to-clinton-foundation-increased-after-hillary-intervention-in-irs.html

    Etc.

  10. Ireland is seeking to extradite David Drumm, CEO of Anglo Allied bank to face criminal charges.

    (and yes I know that we aren’t part of Britain since that little kerfuffle 99 years ago and subsequent events)

  11. and that should read

    Ireland is seeking to extradite David Drumm, CEO of Anglo Irish Bank to face criminal charges.

  12. The banks are Igor to the state’s Frankenstein. Yes the banks played fast and loose but against a background of scummy states who wanted cheap money to promote bogus prosperity free of boom n’bust. The drive to declare the bankboys off the hook is because their fall might just throw a little light on the bungling socialistic antics of the state. If the state could have held closed trials and packed all the bank hacks of to the Chateau D’iF without a word they would have been pleased to do so and play the blame game to the hilt. But like Victor Frankenstein they can’t heap shit on the bankers without it hitting themselves also.

  13. The idea that you can criminalize bad business decisions, or ones that didn’t work well, is just another attempt to inject government into business. It won’t turn out well.

    Too bad we can’t criminalize political decisions.

  14. I appreciate they aren’t crimes but it still irks that Fred Goodwin isn’t doing time. Bloody chartered accountants.

  15. @ Bernie G and diogenes
    We have no evidence that Fred Goodwin broke any laws. It might be interesting to put him in a confrontation (I’m not saying a cage fight) with the widows of some of those who died as a result of his actions, sacking a lot of good people innorder to boost RBS profits (I’m not saying all the guys he sacked were good but quite a lot were and some died as a result and left widows. He should face their widows.

  16. @john77: A friend’s father was an RBS lifer; starting out at 16 on a branch counter and working his way up through branch management and beyond. A proper old fashioned local banker who knew all his customers – a pillar of the community, an elder of the local church and a genuinely good man.

    The vitriol he has for Goodwin hasn’t diminished over the last few years. It’s quite shocking to see a gentle and kind man become almost incoherent with hatred about what he saw go on at RBS. He tells stories of the disgusting treatment of people by Goodwin and his cronies. It wasn’t just bad management of a bank; it was vindictive, evil bullying of ordinary decent people who were trying to do a good job.

  17. So the fact he was an accountant was the prime factor. If you believe that, then just fuck off with Arnald and Ritchie.

  18. What is it about having an accounting qualification that people want to blame you for things usually accompanied with a derogatory beancounters comment

  19. Bloke in North Dorset

    @GD,

    That chimes with a similar story. The husband of one of my wife’s best friends works in the operations side of banking and was very senior at RBS, he may even have been a direct report to Goodwin. He left because he was so appalled at what he saw. He’s normally mild mannered but can’t refer to Goodwin without some expletives and spitting.

  20. I wasn’t a direct report to Goodwin, not by a long shot (counting on fingers, I think the closest I got was four layers down) but, because of my role, I did have to work with him (occasionally) and his direct reports (regularly).

    He deserves all the vitriol above.

  21. @ GlenDorran
    A very mild-spoken friend of mine quit Lloyds as a senior bank manager to take on a low-paid job when aged about 50 with a wife and family to support because of the way Eric Daniels was running Lloyds so, given the general public’s relative views of ED and FG, I can readily believe that. Your friend’s father was betrayed by Goodwin’s mistreatment of the bank’s culture as well as its staff.

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