UK banking scandals behind economic crisis

The credit bubbles in the UK, Europe and the US have long since burst after decades of illusory economic growth in an under-regulated and over-leveraged global economy. But with easily the largest financial sector debt to GDP ratio in the world, Britain is nervously watching the eurozone crisis from the sidelines.

Many revelations have been brought to light in 2012 which have shown that financial malpractice, some of which has been sourced all the way to the Bank of England, cannot stay clandestine forever.

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Libor (London Interbank Offered Rate) rigging has seen major banks in the UK, the US and beyond profitably manipulate a market worth trillions of dollars by intentionally fixing the rates at which they borrowed from one another; news of this widespread corruption was preceded by public outrage at vast bailouts for the private institutions and the colossal bonuses awarded to banking chiefs in the midst of an economic crisis caused by the financial meltdown.

Last week, the Financial Services Authority (FSA) unveiled widespread deception by banks, building societies and financial firms; of the 22 institutions studied, all were involved in deliberately selling financial products to customers that were of little or no benefit to them - all to increase staff’s commision-based profits.

As the FSA seems to play down the mis-selling scandal, which stretches back for more than two decades, efforts to reform Libor have been warned against by giant corporate interests and investors.

Users of Libor, who have accrued an accumulated debt of over a staggering and incomprehensible $300tn face serious problems if the system is fundamentally changed.

Guy Sears of the Investment Management Association has said, “We need reform not replacement.”

The first bank to have its misgivings revealed was Barclays which was fined £290mn, shortly followed by the resignation of then-CEO Bob Diamond in June.

The reputation of Barclays bank has been undoubtedly smeared after its deep involvement in Libor-rigging emerged this year which provoked widespread public distrust and anger toward the banking industry.

A new YouGov poll, has shown the reputational score of Barclays has spiraled downward from +5 to -40 on YouGov's "favourability brand index”.

The Royal Bank of Scotland are the next of many high street banks to face Libor investigation; the Financial Times reported last week that RBS faces fines of between £200mn- £300mn for their role in Libor manipulation.

Scotland’s largest bank has already fired several employees over rigging allegations. However, one trader in Japan hit back, insisting that he did not have the powers to manipulate the rate-setting index, and successfully sued RBS for unfair dismissal.

More recently, Tan Chi Min claimed that the bank’s internal checks were so light that “anyone can change Libor”.

Moody's keeps UK banks on negative outlook

Rating agency Moody's has this week kept UK banks on negative outlook, citing reasons such as eroding margins, regulatory fines and legal costs as well as the uncertain UK economy.

Without fundamental reform and independent regulation, the UK is set to continue incentivising malpractice resulting in more scandals such as Libor-rigging and product mis-selling.

What may be more difficult to resolve is an inherent public mistrust of the financial sector, fuelled by decades of clandestine activity which more often than not, works in the interests of the wealthy at huge cost to the public.
http://www.scottishtimes.com/uk_banking_scandals_economic_crisis

Debt Strikers, Hoping To Launch A Movement, Burn Bills And Collection Notices

A few dozen people gathered in Brooklyn Inlet Park on the Williamsburg waterfront Sunday to talk about debt, have a picnic, and set some things on fire.

The mood was festive -- there was cake and lemonade, the air was crisp and clear, and the towers of Manhattan glittered across the East River.
But the purpose of the assembly was somber: to talk about the ways that different kinds of debt is strangling the people gathered there, and millions more across the nation.
Nick Mirzoeff, an NYU professor, explained that the Strike Debt group grew out of the Occupy movement over the summer.

Read more here...

Just what does a banker have to do to get arrested?

Money laudering, nope.
Rigging the Libor rate, nope.
Selling worthless debt articles for billions and derailing the global economy, nope.

Big Banks: Resolving the "Too Big to Fail" Issue

In the United States, just five banks issue half of all mortgages and two-thirds of all credit cards, and they control more than 40% of all bank deposits. They are anointed Too Big to Fail. But as recent scandals show, they aren't too big to make mistakes. John Prout offers some ideas for winding down the Too Big to Fail era.

That scandals keep emerging from the darkness of the shadow banking system underlines the extent to which derivatives have grown to an unmanageable size.

That we seem not to send bankers to jail for losing billions of dollars underscores the immense power of bank lobbyists to neutralize the regulators.

Read the article here...

Sometimes you find something on Facebook that says it all.....

Not all bankers might get away scot-free.....

A story on the Business Insider site gives some hope to all of us waiting to see justice served on the bankers who screwed with our world :
Iceland Has Hired An Ex-Cop To Hunt Down The Bankers That Wrecked Its Economy

Read more: http://www.businessinsider.com/iceland-has-hired-an-ex-cop-bounty-hunter-to-go-after-the-bankers-that-wrecked-its-economy-2012-7#ixzz26BQ5aHhd

Oh, it's going to get worse. Government Sponsored Poverty

Article by Bill Bonner of the Daily Reckoning tells us the scary truth of why Europe's financial situation will get worse. It's the bankers of course!

Big Bazooka Theory and Practice

Bill Bonner Reckoning today from Paris, France... This message is one of a series. It began when Mario Draghi, former Goldman man and now head of the European Central Bank, promised to do “whatever it takes” to save Euroland. The issue on the table: whatever does it take to bring a real recovery? First, whatever it takes, Mario Draghi didn’t seem to have it. Or maybe he did. The situation in Europe is so complicated it’s hard to tell. So, investors have been fearful one day and cheerful the next. At the beginning of last week they thought all was lost. Then, by the end of the week, stocks were rallying again. The Dow rose more than 200 points on Friday. Yesterday, it still had some forward momentum...going up another 21 points. What does Mr. Draghi have? This report from the Telegraph, which has been hard on the story from the beginning, suggests that at least Mr. Draghi has something: Mr. Draghi has secured a mandate for “unlimited open-market operations”, a far cry from the half-hearted and self-defeating bond purchases of the last two years. The ECB at last has a license to act with overwhelming force, like the US Federal Reserve. ‘Overwelming force’ is what Ben Bernanke has, which is thought to be the same as ‘whatever it takes.’ But is that enough? What force do central bankers really have? All they can do is provide the markets with more cash and credit. And even if they give it all they’ve got that still won’t be enough to cause a real recovery. Because you can’t cure a debt crisis with more debt. If you could, no one would ever bother with austerity. Households, governments, businesses — faced with too many debts and not enough money — sooner or later have to straighten up, reduce spending and reckon with their bad debt. On the other hand, we’ve never heard of a counterfeiter who failed to pay his debts. And since the bank of Ben Bernanke has the power to print money, investors are inclined to give him and the US some slack. That’s because he has ‘whatever it takes.’ At least, they give him more slack than they give to, say, Greece. When Greece is in a pinch, it defaults. That’s what it has done many times. Half its history since independence in 1828 has been spent in default. But when the US is in a pinch, it prints! That’s the Big Bazooka Theory in a nutshell, where it belongs. And here’s a forecast, too. Readers take note: this is not a formula for a healthy economy. Nor does it bring a recovery. It’s only a formula for blasting the can so far down the road that most investors and savers can’t see it, and therefore don’t worry about it. As for Mario Draghi, we don’t know. He may have the power to use unlimited force. Or he may not. According to the theory, you’re bazooka can’t be just big, it has to be infinitely big. Because, the only way you can hold off a default is by promising to print an infinite quantity of cash. And you have to mean it. If you just print up a few hundred billion, speculators take out their calculators. If they see you’re a little short, they sell your bonds, fearing that you will default. Then, other speculators buy them at low prices, betting that you will print more of whatever it takes. Then, when you do print more, prices soar and the speculator sells the bonds back into the market... ...and the whole process repeats itself...until you finally default. As long as the amount you print is limited, speculators can look ahead and see when it runs out. The only way to end this speculation against your bonds is to say: ‘don’t bother selling my bonds, I’ll print an infinite amount to protect them.’ Then, the whole drama goes away. Savers and investors just want to know they’ll get their money back. Your willingness to print, completely unrestrained by law or common sense, reassures them. In fact, in today’s world, they’ll buy so many of your bonds that your interest rates will fall below the level of consumer price inflation (which is usually falling too)...making the real yield actually negative! In other words, if you agree to act like a damned fool, they’ll lend you money and ask for no real yield. That’s because you will have ‘whatever it takes.’