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Monday, December 9, 2013
- European media, political leaders, and the citizenry are bashing bankers again, overtly calling them at best accomplices of numerous illegal activities, at worst downright criminals.
The best example of this new wave of anger against bankers is the use of the portmanteau word “bankster” (a combination of banker and gangster), which has become commonplace in media, even in non English-speaking countries.
The term, first coined in the 1930s during the Great Depression and which resurfaced in British media in 2009, appeared on the front page of the French daily Libération on Jul. 18.
Political leaders critical of banks have so far refrained from using the word but everyone else has been having a field day with it.
In a short white paper on banks’ policies released Jul. 21, the head of Germany’s leading opposition Social Democratic Party (SPD), Sigmar Gabriel, accused bankers of “blackmailing governments and states with the (threat) of domino bankruptcy”, of “complicity with criminal activities”, such as tax evasion and money laundering, and of “screwing their own clients”.
Even those commentators who dismissed Gabriel’s banker bashing as political populism agreed that the managers of international private financial corporations have recently done large disservices to their business and their clients.
The list of genuine grievances is long: the HSBC bank is facing accusations in the U.S. of having laundered money for Latin American cocaine cartels and Muslim organisations allegedly involved in terrorist activities.
In a statement released Jul. 17, the HSBC acknowledged, “In the past, (the bank has) sometimes failed to meet the standards that regulators and customers expect. (We) acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong.”
The so-called LIBOR (London interbank offered rate) scandal revealed that numerous leading international banks, including Barclays, Citigroup, JPMorgan Chase, UBS, the Deutsche Bank and, again, the HSBC, conspired to jointly falsify information on the interest rates the banks demand from each other, to lure central banks into reducing their own leading lending rates.
The scandal led to a record 450 million-dollar fine against Barclays, imposed by U.S. and British regulators, and to the forced retirement of Barclays’ CEO, Bob Diamond.
Banks have also been embroiled in massive tax evasion schemes. The independent Tax Justice Network, which investigates international tax evasion and the role of banks in tax havens, estimates that some 11.5 trillion dollars in assets are held illegally in banks’ and funds’ vaults, leading to a global annual loss of tax revenue of about 250 billion dollars.
Similarly, the Organisation for Economic Cooperation and Development (OECD) underlines that “Tax avoidance and tax evasion threaten government revenues,” and recalls U.S. Senate estimates that 100 billion dollars are lost each year due to tax evasion by U.S.-based firms and individuals.
“In many other countries, the sums run into billions of euros,” the OECD says. “This means fewer resources for infrastructure and services such as education and health, lowering standards of living in both developed and developing economies.”
Such assets are held not only in offshore financial centres, such as the British territories of the Isle of Man, Guernsey, and Gibraltar, the Cayman Islands, and the like, but also in banks and funds operating in the city of London, in New York, and in countries like Switzerland, Singapore, and Monaco.
All these crimes have been occurring at a time when states in industrialised countries are facing a dramatic sovereign debt crisis, bringing many to the brink of bankruptcy.
The sovereign debt crisis originated or at least was aggravated after the financial crisis broke out in 2007, precisely because banks had brought themselves to the point of collapse and had to be “bailed out” by states in order to avoid a global financial meltdown.
But the bailout only set in motion a cyclical financial crisis, with Spanish, Greek, and Cypriote banks now demanding rescue from national governments, who are sacrificing their own populations by cutting expenses on crucial public services like education, health, and infrastructure.And all this is being done so that international financial markets can continue to operate practically unregulated, while the banksters pay themselves princely salaries and massive bonuses.
On Jul. 18, Libération revealed that the four leading French banks alone paid 1.1 billion euros in bonuses to their risk managers in 2011.
The list of banks’ crimes and their employees’ enourmous salaries have led political leaders to urge new regulation and controls on financial markets. The new French minister of finances, Pierre Moscovici, has launched a bank reform, aiming at separating commercial banking from investment banking, and capping salaries.
The SPD’s Gabriel also argued for caps on salaries and bonuses, and for personal liability of bank CEOs and managers in the event of losses caused by highly risky speculative transactions.
Similar measures have been proposed in Britain by the Independent Commission on Banking (ICB), created in 2010 to reform the local banking sector and to promote financial stability and competition.
However, the ICB proposals were not fully considered by the British government’s new plan, announced earlier this month, to restructure the local financial market and which, in any case, will not be implemented until 2019.
This led the ICB chair, distinguished economics professor John Vickers, to complain that the government measures have watered down key parts of his reform package. “International events keep underlining the need for fundamental reform to make banks safer and to shield taxpayers from future risk of loss,” Vickers said in a statement.
Actually, most of the measures discussed in France, Germany, and Britain are included in the so-called Basel III agreement, a banking regulation reform programme triggered by the evidence revealed in the aftermath of the international financial crisis of 2007.
The new regulation, still under debate at the Basel Committee on Banking Supervision, is supposed to be applied step by step starting in 2013, and be fully implemented in 2019.
For independent economists, such delay in establishing new regulation of an obviously rotten industry is proof of the lack of political will among governments to get to the root of the crisis.
“Five years into the worst financial crisis in history, all attempts to regulate banks and funds remain dead letter,” French economist Paul Jorion told IPS. “Despite abundant evidence that (banks and investment funds) cheat all over, again and again, no new rule has been introduced.”
Instead, he added, “the European Union and governments continue to deregulate, pushing their own citizenry into abject misery.”