Monday, 2 July 2012

2314 Damn casino bankers

I commenced to write about recent events with political and party political significance several days ago with the intention of a single coherent piece integrating all the issues and events which had arisen. But as someone said, seven days is a long week in politics and as a consequence of further happenings I have decided to   divide the writing into segments which my mental faculties can handle.

However I do want to begin with a proposition which has influenced my life and governed my thinking and my actions. The proposition is that when individuals, groups of individuals operating businesses and corporations, or governments on behalf of nations manage capitalism with the primary purpose of increasing their own wealth, and through that wealth their personal power and influence, then it is a system which corrupts, destroys and ultimately can end capitalism as a working system.

Capitalism like Christianity is based on beliefs in a free individualism combined with a collective conscientiousness that the overwhelming majority of people care and wish well others and that with justice as fairness, with a knowledge based education system, with the majority providing for the sick, the poor and the weak and with collective force only being used defensively, everyone will benefit and human kind will develop and progress is positive ways.

Capitalism should therefore be regarded as a means to an end with the accumulation of wealth whether by individuals, businesses, corporations, nations or groups of nations only undertaken on the basis that that it always seeks to restrict the harmful consequences upon others and that wealth is accumulated only for the development of human society and balancing out the mistakes and backward movements which inestimable occur. Former Chancellor Gordon Brown was wrong to believe it was and is possible to control the swings and this respect Tony Blair was foolish to say to Andrew Marr that his one time close  working colleague  but then bitterest political enemy was always right about the economy in this respect. I agreed with Tony when he said that Gordon was wrong on some crucial political matters and I believe disastrously so although I accept he believed and still believes in his good judgement. His ambition to become Prime Minister divided the Labour Party, ruined the opportunity of a fourth term and his pride prevented the possibility of a coalition between Labour and the Liberal Democrats.

Capitalism causes great harm and risks destruction when people act for themselves, their businesses, their corporations and their nations or groups of nations in without regard for any harm to others whether intended or not.  This means that expenditure of the wealth must be controlled and governed on the principles I have mentioned. If it is used to prop up an unpopular political party in a democratic government, or to improve one nation with the beggaring of others, or for uncontrolled and excessive personal pleasure and for the exercise of power regardless of the harm to others, then the individual, the business, the corporation, the nation or the group of nations become corrupt and the system is put in peril with disaster looming for everyone except those who cause the crisis because they have the wealth to survive such a situation.

I accept that capitalism by self evident definition involves the accumulation of capital and this means that incomes at all levels from share dividends, benefits to private Owners, Directors, Managers  Employers and for use by Central and Local government for the provision of public services must be less proportionally to the size of accumulation. I also accept that defining was is acceptable in its operation and what is not will be the subject of debate and that while the attempt should be made to establish and set down  rules with precision and a clarity which enables everyone to apply consistently there is need for ongoing review, monitoring with close inspection and the ability to adapt quickly to the always changing circumstances,

I accept that it is not always possible to work out the consequences of decisions and actions particularly consequences that are unintentional, although it is an inherent failing of humans to block out, put off or avoid the long term implications and consequences for immediate gain, pleasure and satisfaction. This is always so for politicians governed by the four or five year party political cycle although appointing individuals for as long as 15 years to a reviewing and advising second chamber( senate) carries even more longer term dangers with 7 to 10 being  more appropriate.

I write this because of recent examples where individuals, groups of individuals and indeed governments and their people have wilfully failed to stick to the principles which justify capitalism as a system bringing it to disrepute and peril for us all.

The so called crisis in banking may have been precipitated by Sub Prime lending in the US and the collapse of  Lehman Brothers but its causes were human greed  and here in the UK the decision of Gordon Brown as Chancellor, supported or at least not opposed by Prime Minister Blair to achieve electoral success for a third and fourth term by a combination of increasing public expenditure and state borrowing  to an unsustainable level and from giving entrepreneurial capital, especially in the financial sector continuing freedom by establishing the so called light touch approach to financial regulation and monitoring as well as also presenting the national accounts in the best possible light to the electorate, contributed greatly to the present critical position in which the people of the British nations find themselves in.
The Tories have always opposed public expenditure in principle as well at the expense of the private but this does not put them on the side of the Angels because it was the Tories under Cameron who pressed the government for an even lighter touch and less regulation not more. They did not demand that the existing regulation become more effective. This not only applied to Banking and  Casino investment gambling but in all aspects where the dogma  became more agencies and services from direct political control and less regulation and inspection. I understand why and in many instances the approach was necessary and  worked but as usual the pendulum swung from one extreme to the other and as we have seen with the newsprint media and banking self governance and self regulation has proved disastrous. The cry has become Bloody bankers on top of Bloody newspapers and Bloody Politicians.

I am commencing with the Banking scandals here in the UK rather than the future of the single European Currency, or the state and future of world capitalism, or the recent attempts by Former Prime Ministers Brown and Blair to exercise influence and possible power in British Domestic Politics once more, or the tie in with developments at Leveson, because it is the most recent disclosure and proof of my proposition that Capitalism like Christianity is not inherently and fundamentally flawed but it has the potential for both great good and great harm depending on  individual and collective human behaviour, its policing and its application of justice.

The context was admirably expressed by the second comedian to recently appear on Question Time within the past few weeks. The first Rees Griff Jones was surprisingly articulate, knowledgeable and spoke with a common sense and fairness which I was almost in entire agreement with what he said. I was in full agreement with Tony Robinson last Thursday evening who exploded with  communal anger at the beginning of the programme when he pointed out the that bankers had nearly bankrupted the country by gambling our money in ways they did not fully understand and then successfully pleaded with the government for more of our money to enable them to pay themselves bigger pay rises and bonuses saying they would lend more of it back to us to get ourselves out of the mess they had created and then refused to do this on the scale required and all with government connivance but I accept their reluctant support

The Banks insisted on putting us all on computer again creating a system they could not control with disastrous consequences the clients of one banking group recently experienced and now it now emerged they have been behaving corruptly for years in ways which would have led everyone else into court and prison but they have only been given a financial slap on their corporate wrists. He mentioned that the main reason why the bankers had got away with it was because of the threat they would leave the country and the importance of the banking and financial industry to the economy of the UK. This immediately led another member of the panel to say if they wanted go they should and good riddance to rapturous applause. There was no dissent from anyone on the night and silence which greeted Ms Greening for the Government when she attempted to put the blame on Labour  was deafening.

The truth about what happened and when has only gradually emerged and was confirmed by the chairman of the Financial Services Authority on the Andrew Marr Show this Sunday July 1st 2012 when he admitted that the scandal had taken place between 2005 and 2008 in effect leading up to and contributing the to great collapse of the banking system in the USA, the UK and in Europe more generally. The investigation commenced under the previous Labour Government in 2009 and has been continuing since then with the first negotiated agreement with one bank Barclays announced last week.  His admission confirms what I previously drafted that the announcement was timed by agreement with the British Coalition government to ensure they were well prepared in terms of the Party political position as well as having an immediate raft of measures to try and bring confidence immediately to the system and limit the party political damage.

What I suspect the Government did not anticipate was the universal agreement between everyone else that those directly involved should be prosecuted and imprisoned, that the Chairman and Directors of the Banks, the Chief Executive and other senior managers should indicate they accepted accountability and would step down as soon as replacements can be appointed and that if this does not happen then the Coalition will be held accountable at the ballot box.

Mr Cameron in particular on behalf of his own Political Party understood the potential harm the announcement would cause among Tory voters in general and to those within in Party at Westminster opposed to his leadership and therefore arrange to make a number of apparent shifts to right or appeasement statements to the right with the Daily Mail and the Daily Telegraph, first on clobbering welfare scroungers and this Sunday on Europe.  This is  no more than position taking as his statement on welfare makes it clear that what he said could be policy for fighting the next General Election  as William Hague, the Foreign Secretary made clear today, the same applies on the  Britain’s future relationship with Europe  and despite  implying that there would be referendum on Britain’s  ongoing membership, this  would be depend  on ensuring that Britain can negotiate a better deal for its self on domestic matters, restricting or eliminating controls on  Social Issues, Working Conditions and other Home Affairs  subjects as a condition of our supporting the proposed new centralization of Banking, Finance and eventually all economic management. This in turn must lead to a Federal system of overall government.  More on this in the next writing.

I want to deal with the latest banking revelations which came hot foot on the breaking down by one bank of its computer system which led to all accounts being  effectively frozen and some people having no money because wage transfers were not recorded or indeed made, which  some automatic payments may have been and others may not. The bank made loans to those in immediate financial need and promised to make good any loses arising although not compensation which may follow from civil claims. Some made find they incur financial penalties or damage to their credit rating which is more difficult to rectify. The damage to reputation to this banking group is likely to become greater and or longer lasting because of the revelations this week.

So what precisely was the revelation? It appears that a group of traders for Barclays Bank, I have the number given as 14 of all those where proof of wrong doing has been established without the knowledge of the immediate superiors and the bank hierarchy in general, attempted to fix the rate at which banks lent money to each other and in turn to others both higher than it should have been and lower so they would  make individually greater profit for the bank and therefore greater bonuses for themselves as well as demonstrating that the bank was more successful in terms of competitors and therefore enhancing the image of the bank. There was no financial law making this illegal and therefore the perpetrators were immune from prosecution by the Financial Services Authority in much the same way that the Information Commissioner has no legal authority to initiate prosecutions against journalists where the penalty could be imprisonment.
The consequence of this situation is that the Financial Service Authority negotiated a fine with the Bank because of this practice. The fine is paid to the FSA who as a consequence is able to reduce the levy on banks for its future service rather than the sum going to the Treasury and the taxpayer. The fine of Barclays involved a reduction in profits based on recent years of about one and half months. It is not clear if a deal was struck with the traders involved that they would leave with severance which would have involved a confidentiality agreement or if this deal  also covered all forms of criminal prosecution.

Faced with the public outcry the FSA had talks with the Fraud office of the national Police service something which the Coalition government and Opposition have also called for although without the single minded clarity one would expect as say in relation to those involved with phone tapping, computer intrusions and the corruption of the police and other public officials. What the Government and Opposition did expect that there would have been public admissions by the Chairman and Chief Executive on behalf of the Board and the company and they would have also indicated their willing intention to step down. So far none have done so. It is revealed that the Chief Executive phoned the Labour Leader Ed Miliband to suggest that the situation was not as bad or as serious as it was being painted. He appears confident that he can defend his own position and that of the management of the bank when he appears before the House of Commons Financial Committee this week.

What he may not yet have appreciated is that given the statements of Mr Cameron and Mr Miliband, and the likely position of the Lib Dem representatives(s) on the Committee together with the reaction of Parliamentary colleagues and the general public he is unlikely to find any defenders of his personal position even though the two main political parties are locked in dispute about their responsibility for what happened.

On the question of prosecutions there are two areas where criminal prosecutions can occur if it is in the public interest to do so. Under present legislation governing prosecutions for fraud if an individual acted for pecuniary personal advantage they can be prosecuted. No doubt  individuals will argue that they acted for the benefit of the bank and its image and that the pecuniary advantage was a bi product of a system and culture which management not only was responsible but had initiation and encouraged. It is he difference between being a camp guard at Belson and those responsible for the policy of building the extermination camps and then managing them.

There is also the question of the more serious charge of conspiracy to commit a fraud and as more banks were involved with some twenty being investigated internationally, particularly in the United states and in fact the investigation has been a joint one with the USA authorities and negotiations on the financial penalty in relation to the Royal Bank of Scotland  are said to be well advanced and likely to have only been held up with pressure from the government and opposition because of the public reaction to date.

It is however questionable that criminal prosecution is in the public interest. From the point of view of justice as fairness criminal prosecutions are essential. The public felt the bankers got away with it the first time round. My understanding is that there has been a handful prosecutions compared to the position in the USA where there have been several scores There is the important difference in cultures between the two societies. In the USA there is pandering to the mob sense of justice by individuals being manacled and hauled from their offices and homes. In the UK individuals are invited to attend police stations with their lawyers at agreed times. In the UK we did see what I regarded as mischievous and dangerous gesture by the police who provided film of dozens of equipped police breaking into the domestic homes of individuals who had taken or received goods during the theft riots of last summer. While I do not believe or want this kind of behaviour to become the norm in the UK as with the newsprint scandal it is important that individuals are investigated in relation to criminal prosecutions, that an appropriate number are prosecuted and that some also go to prison for periods which appear to the general public appropriate for the crime.

The more senior in the organisation someone is prosecuted and goes to prison the greater the sense of justice for all the hardships  being suffered and likely to be suffered over the next decade and the more likely public confidence will be restored in the UK and by others. The Chairman and Chief Executive of Barclays must therefore be aware that if they do not do the honourable thing the politicians will not be able to resist getting them one way or other,

In this respect there is the get out of this country and stop meddling in our affairs solution. As I will refer in the piece on Leveson and Party politics, The Murdoch’s now appear set on leaving the UK and have taken the first steps to get rid of its newspaper here and to move its main Sky Operation out of the UK. Murdoch was quite clear that he wants revenge on the English as he openly admitted on Fox TV knowing it would only serve to increase the wrath here and make it easier for him to move out of the UK  in his own time and with the least financial damage knowing that a host of nations particularly the USA will welcome  moving the HQ of Sky out of the UK and that there will be bidder for the Sun and the Sunday edition and presumably to hell with the Daily and Sunday Times unless someone is able to step in as they did in relation to the Guardian Newspapers.
I think the majority of the British public whatever they understand of what has happened and what ever the actual culpability needs some important scalps and in this respect this means losing jobs and not immediately getting another and some people going to prison.

The Coalition will announce new measures to bring in criminal prosecutions and tighten regulation and its supervision this week as part of the current Financial Service Bill before Parliament but will attempt to do so in such a way to embarrass the Labour Party as it is doing in relation to House of Lords reform, Social Welfare modernization and Europe as it did by including an examination of the relationship between politicians and newsprint as part of Leveson. I can see the advantage to Ed Miliband of having a Leveson type inquiry in relation to the banking system for as it did with Leveson it has done for Brown and Blair and their ambitions to return to political leadership in the UK.

The stage managed Party Politics of all this was also clear for all to see. The Tories were able to deflect some of the anger from them because they are now in power by accurately pointing out that the offences occurred when Labour was in power and Labour had wilfully not included the market in question for the F.S.A to criminally prosecute when the opportunity to do so arose. Why it did not remains to be explained and is clearly one tack the Tories will follow.

Labour on the other hand, as Dimbleby on Question Time and others have been quick to support, have pointed out that the Tories when in Opposition and led by Cameron and Osborne pushed for less regulation and accused  Labour of  attempting to stifle free enterprise and damage Britain‘s position as a world’s premier centre for finance and banking. The Lib Dems are in a difficult position because as Liberals they are also for less Government and less regulation of individual lives and support the private as such as the public sector, and Vince Cable in this instance cannot express his natural instincts and  views on Bankers because of his responsibilities which require him to work close with them although as Teresa May has shown it is necessary to not just take decision  but support the policy in directly as well as generally as she has done in relation to the police and border controls.

I am still to work out if Osborne decided to come to the Commons on the Barclay issue on Thursday because he knew Ed Miliband and Shadow Chancellor Ed Balls were making speeches at the Local Government and Unite Union conferences or because he knew the initiative was being taken from him by the immediate responses from Miliband and the Shadow Chancellor. What was interesting about Question Time on Thursday is that the audience made it plain that are not interested in being told by Conservatives that it was Labour’s fault. They are now in Government and the public wants action and to see blood on the floor and not just promises that things will be put right in time. A new round of increased banker‘s pay and bonuses and the absence of prosecutions and convictions all spell electoral doom for the Coalition especially as there are those now on both sides seeking to bring about a premature coalition divorce and realignment between Labour and the Lib Dems on one had and the purist right and traditional Conservatism on the other. Cameron recognises this and is hurriedly getting rid of as many aspect of the Blair approach he once espoused and which brought him into power.

What is clear is that the perception of Britain as a place for banking and financial integrity and traditional professionalism has been badly damaged and will need all the political parties working closely together to convince that action is being taken to prevent such situations occurring on any scale in the future. individuals and small groups of individuals, as we have seen in the print media and elsewhere will always are able to circumvent systems, managements, and supervised controls and no amount of care in selecting and vetting, in management and supervised controls will prevent this happening now and again.

This is also true in relation to other political event which directly relates to the banking revelations.  This was the decision, now understood in the context of  recent announcements that  following the planted disclosure in the Times that a tax management systems was in operation which enable a thousand individuals such as the comedian  to pay only 1% of that otherwise required.  He singled out as Jimmy Carr as morally reprehensible although he had been doing  what everyone else has been The main focus of the Times investigation was on the involvement of the Comedian Jimmy Carr who has made a small fortune from making jokes at the expense of people and institutions. He had attacked Tax Dodging in a satirical programme on TV and the Prime Minister declared his behaviour was immoral. Mr Carr who is said to have become a millionaire apologised on Twitter saying he had made an error of judgement. It will be interesting to see what effect this development has on his immediate career with one report stating that his rating had increased. We shall see.

I have previously reported that when I met representatives of Federal, State and County social welfare managers from the United States in 1974 who come over see how our Seebohm implemented Social Service Departments were being but into practice they boasted at the social event I attended that they boasted of arranging to pay little mandatory taxation by investing their capital in low cost housing as tax offsets.  Greece is said to have partly got itself in its present mess by the majority of the upper and middle class not paying their taxes. It is a common disease.

This dodge involved resigning from employment and giving the majority of income to an overseas based trust which then give it back in the form of loans. Everyone agreed this was wrong although why the Prime Minister singled out Carr was questionable as well as having boomerang party political significance because it is alleged that recently honoured by the Queen Gary Barlow, and a noted Tory party supporter was also using this scheme on the advice of his tax accountant. Obviously newspapers and the Labour Party, and the Lib Dem Party on the quiet, will be investigating all leading Tories and their main financial supporters to see if they are involve in this or similar schemes. There was a general air of puzzlement why Cameron made the statement when did, given that he was out of the UK attending the G20 get-together in Mexico.  As far as I have been able to check he did not give similar attention to the second Greek General Election, or the ongoing saga of the who won the Presidential Election in Egypt, or the failure of anything substantial to emerge at the G 20 meeting in Mexico ( as it appeared at the time) or about the Climate Change gathering in Brazil attended by Deputy Prime Minister Nick Clegg.

To be fair to the Prime Minister he did stand the British ground in relation to the Argentina where it was said he. and no doubt the other member of the G 20 present, were presented with a glossy case as to why the Falkland Island should revert to their Spanish name and Argentian authority. Mr Cameron is reported to have forcibly made the point that the matter is in the hands of the Islanders who are holding a referendum on the subject. Recently Prince William did a rescue helicopter tour there and the navy has provided one of its latest warships to undertake exercises off the island as a warning that the UK will not tolerate another attempt to take the Islands by force of arms. Argentina has been warned that on this the UK will stay united.

However as with the position of Gibraltar and Spain Cameron as has  previous Prime Ministers will have wished that those concerned would recognised the importance to world stability and security and the development of relations between Britain and as many trading nations as possible by seeing where the future of their children rests. Such tin pot self governed states may be a luxury none of us can afford in the future along with everything else we are now told is beyond our means. The Spanish as we saw last night play great football.

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