Banks: one step forward, many more to go
The washing of filthy linen continues apace in the City’s square mile. Battered Barclays has now added yet another $1bn to the sums having to be set aside for mis-selling of interest rate swaps and PPI.
Other banks aren’t so lucky. Other banks – including our taxpayer-owned entities – are much more exposed to the interest rate issues and will have to set aside far more.
Amid the slurry of excessive bonuses and the exploitation of unsuspecting small and medium-sized businesses, desperate to secure investment loans and being skinned for doing so (via those interest rate swaps), the government has had a dramatic change of heart.
Ever since Sir John Vickers report on banking reform, there has been ferocious political resistance to his recommendation that retail and casino banking be separated. After all, the 2007-8 financial meltdown was in a large measure a result of nation states having to bail our entire banking sectors precisely because banks had gambled with their retail customers’ cash. Hence the need to bail them out. No government could stand idly by whilst millions of citizens lost everything.
Intriguingly, public revulsion against the banks, which has built by the day, has had its affect upon the political classes. It is proving a rare and fascinating moment. In fact I find it hard to find a parallel in our recent political history.
The chancellor’s original response to Vickers was to “ring fence” retail from casino banking. Yesterday, Chancellor Osborne announced “the electrifying of the fence”. Electrification gives the Bank of England - now the bank regulator – the power to order the break-up of any bank found gambling with retail customers’ cash. In other words, an admission that banks still cannot be trusted to respect a fence. Trust now has to be enforced by law.
With legal cases on almost every continent – with the implications of the Libor interest rate fiddling by bankers still posting unquantifiable amounts of liability for virtually all the banks, and with mis-selling consequences also unquantifiable – whatever individual banks may THINK they are, we are still at the beginning of resolving this element of the banking crisis.
Plight of small businesses
In the meantime let me finish with the case we highlighted on Channel 4’s Dispatches last year. The Harrison family have run a brilliant business making advertising signs - “For Sale” signs and that sort of thing. Over time mum and dad retired in their late sixties and the next generation took over, employing perhaps 10 workers at premises in south London.
In 2006 they went to the bank for a loan to enable them to expand and embrace new printing technology. The bank gave them the loan but insisted the business took out an interest rate swap. They were told they had to take it on or wouldn’t get the loan.
The sheer costs of servicing the swap all but overwhelmed them. Workers had to be laid off. Mum and Dad by now in their seventies, and Mrs Harrison far from well, had to come back to work for nothing. The bank only stopped forcing them to pay the charges on the swap last November.
How are they ever to be recompensed for the hundreds of thousands of pounds they have lost, let alone the grief and socio-economic pain and loss they have suffered. How do you cost that?
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There are 5 comments on this post
Jon,
Congratulations on last night’s interview. Anything that makes the two-faced lying hypocrites squirm has my backing.
AND STILL NOT ONE OF THEM IN JAIL. I wonder why?
But, as I have said before, it will all happen again. You need only read J.K.Galbraith’s “The Great Crash, 1929.” We have been here before, and several times. And it isn’t as though there were no warnings – try Mihir Bose’s “The Crash” about the financial disaster of 1988.
Anybody who thinks the Shiny Suited conmen and spivs in Corruption City won’t find a way around Georgie Boy’s battery of pea shooters is living in south east cloud cuckoo land. It may take some time but it is as sure the sun rising.
And it will stay that way until we are rid of the whole rotten-to-the-core, disgusting, thieving, cowardice of capitalism. Just one example: in the USA, total student debt is greater than total credit card debt. How many more lessons are required before we ditch this corrupt system that is now even stealing from the poor, young, sick and the elderly?
As matters deteriorate it would be no surprise to see another war somewhere, led, as usual, by the USA. They have to deflect attention somehow. After all, wars are good for business and profits.
Never too big to fail. Toxic losses poisoning the future. Do an Iceland. And I don’t mean deep freeze the problem
“fractional-reserve banking is the practice whereby banks retain only a portion of their customers’ deposits as readily available reserves (currency or deposits at the central bank) from which to satisfy demands for payment. the remainder of customer-deposited funds is used to fund investments or loans the bank makes to other customers. most of these loaned funds are later redeposited into banks, allowing further lending. thus, fractional-reserve banking permits the money supply to grow to a multiple of the underlying reserves of base money originally created by the central bank.”
quite how we got to the position where inanimate slips of paper, tiny lumps of pressed metal and numbers on computer screens being deemed more important than living sentient beings i do not know other than to say banking is basically a giant scam. most money is created out of thin air, the bank loans it out and charges interest on that thin air. oh i know it is all very complicated with this rate and that rate and complex algorithms and you need a degree in economics to comprehend it all but above all that guff is the simple fact… i repeat… it is a scam.
everyone on this planet has a fundamental right to shelter, to sustenance, to medicine. and if you can’t see that as self evident then you are doomed. the one thing that is and has always been in the way of those fundamental rights? yeah money, both the nefarious entity itself and the more so nefarious entities that willfully in full knowledge perpetuate it.
the saints will soon be marching in and there will be no where for them to hide. nowhere.
Debates around the economy, banking crises and austerity have been going round in circles for over 4 years now and the ONLY voice that makes any sense to me is that of Positive Money (positivemoney.org). I strongly urge anyone who feels we’ve reached a dead-end and have to accept impoverishment, declining public services, polluting growth and neglect of the environment as an inevitable consequence to visit the website and read a well-researched and revelatory account of the problem and a sane solution. I heard Ben Dyson on Radio 4’s Forethought in November and learnt more in 15 minutes than I ever have watching or listening to endless interviews on the main TV and radio channels. My only plea is for the editors, producers and economists of these channels to give the guys from Positive Money a fair airing and viewers and listeners a counterpoint to conventional economic wisdom so we can decide and research for ourselves the value of this particular alternative.
03/02/13 – I SENT THIS TO H.M. TREASURY:
Directors have a duty of care to consider the impact of their decisions upon the wider community including; customers, staff and suppliers. Not doing so may amount to Misfeasance.
1.To what degree have you investigated the potential evidence for misfeasance by directors and former directors of; UK Banks, The British Bankers’ Association and the Financial Services Authority?
2.Will H. M. Treasury be pursuing action for misfeasance against directors and former directors of; UK Banks, The British Bankers’ Association and the Financial Services Authority?
3.If no action is being taken in relation to potential misfeasance, please explain why.
06/02/13 – I GOT THIS REPLY:
We are not able to proceed with your request, because it is too broad and unclear. Please consider presenting a more specific request that would enable us to identify keywords and time periods so as to delimit our searches.