Yet Another Major Bank in the Dock

[Guest fountainhall]

The latest bank to come under the scrutiny of the UK parliament has been Barclays. Both the Chairman and the Chief Executive, Bob Diamond, resigned last week amid a raft of allegations about the fixing of the Libor rate. The London Inter-Bank Lending Rate is one of the most cruclal interest rates in the world of finance and underpins trillions of pounds in loans and financial contracts.

 

According to the BBC –

 

As early as 2005 there was evidence Barclays had tried to manipulate dollar Libor and Euribor (the euro equivalent of Libor) rates at the request of its derivatives traders and other banks.

 

Misconduct was widespread, involving staff in New York, London and Tokyo as well as external traders.

 

One Barclays trader told a trader from another bank in relation to three-month dollar Libor: "duuuude... what's up with ur guys 34.5 3m fix... tell him to get it up!"

 

Between January 2005 and June 2009, Barclays derivatives traders made a total of 257 requests to fix Libor and Euribor rates, according to a report by the Financial Services Authority (FSA).

 

http://www.bbc.co.uk...siness-18671255

 

And it went a lot further when Barclay’s made false submissions to the FSA, all to bolster the bank’s credit quality and ability to raise funds. Last month, the bank was fined £59.5 million in the UK and a further US$230 million in the US.

 

During the parliamentary hearing on the scandal last week, one email was read out showing that the writer had promised bonus-hungry traders boxes of Bollinger champagne to fix the figures that affect millions of home owners and small firms. Throughout, Diamond professed not to know what had been going on. This drew the retort from one MP –

 

“You must be grossly incompetent if you were not complicit.” Earlier, the same MP, John Mann, claimed Diamond presided over a “rotten, thieving bank.”

 

Today comes the news that Diamond has forfeited departure bonuses worth up to £20 million. The news item states he gave up the bonus voluntarily! Believe that if you will, for only last week Diamond was steadfastly refusing to give up even one pence of his bonus!

 

This is far from the end of the scandal. Other banks were almost certainly involved.

[Rogie]

“rotten, thieving bank.”

 

Nice and succint but I fear many people might not be so restrained!

 

I feel sorry for the average bank employee, tellers and such. All the banks in Britain, whenever I've done business over the past few years, the staff have been unfailingly polite and helpful. They've been badly let down by unscrupulous 'colleagues', many already on far higher salaries than the humble 'faces of the bank' who actually deal with the majority of customers on a day ot day basis.

 

These behind-the-scenes, largely invisible people are like a malignant cancer. The body as a whole looks healthy, all rosy cheeks and glossy hair but deep within, well out of sight the cancer is slowly eating its way into the body's vital organs. It's now erupted onto the surface like a melanoma that's suddenly mutated from an innocent-looking mole into a hideously ugly mishapen excrescence.

 

Would emergency surgery save the body? Who knows, quite possibly, but it'd need a very long period of convalescence to recover its former vitality.

[Guest fountainhall]

And yet another UK bank seemingly caught with its pants down! The world's second largest banking and financial services group, HSBC may have been born and grown up in Asia and still makes most of its profits from Asia, but it has been based in London since 1991. Apart from possibly being tangled up in the LIBOR setting scandal, a New York Times article today confirms it has revealed weaknesses in its money-laundering controls in te USA.

 

HSBC, the largest financial institution in Europe, has become the latest British bank to reveal major internal-control problems, saying that senior officials would apologize to United States lawmakers next week for not cracking down soon enough on money-laundering activities in America.

 

The money laundering, which a United States Senate subcommittee indicates was linked to terrorism and drug deals, could result in HSBC paying fines of up to $1 billion, according to analysts.

 

“Our anti-money-laundering controls should have been stronger and more effective, and we failed to spot and deal with unacceptable behavior,” Stuart T. Gulliver, the chief executive of HSBC, wrote in a memo that became widely circulated after it was released to employees late Wednesday.

http://dealbook.nyti...ref=global-home

 

So bank shares continue to slide - and these banking crooks continue to remain out of jail!

[Bob]

As is the usual case, those involved in the LIBOR setting scandal (i.e., the upper echelon) will likely escape with no issue and likely with whatever golden parachutes they took with them out the door; however, the long-term implications on the civil side (states, counties, cities, etc., within the US alone who borrowed funds based on the LIBOR rate) will add up to many billions. If you own stock in one of the banks caught up in this, now might be a good time to sell.

[Guest fountainhall]

And so the banking scandals continue. Having watched the recently disgraced head of Barclays give testimony to the UK Parliamentary commission, I found much of what I heard, frankly, evasive and unbelievable. Would I trust that man to sell me anything? A resounding ‘No’!

 

Now we have HSBC, also up to its neck in the LIBOR scandal (although that involvement is still leaking out) admitting to US senators that it was involved in massive money laundering for many years. The bank, as had long been suspected, had also been involved with “drug cartels, terrorists and pariah states.”

 

A report compiled for the committee detailed how HSBC's subsidiaries transported billions of dollars of cash in armoured vehicles, cleared suspicious travellers' cheques worth billions, and allowed Mexican drug lords buy to planes with money laundered through Cayman Islands accounts.

 

Other subsidiaries moved money from Iran, Syria and other countries on US sanctions lists, and helped a Saudi bank linked to al-Qaida to shift money to the US . . .

 

The bank has been under investigation for nearly a decade, and faces a massive fine from the US justice department for lapses in its safeguards.

 

http://www.guardian....-resigns-senate

 

Testimony included a former official of the bank estimating that “60% to 70% of laundered proceeds in Mexico” were channeled through an HSBC affiliate. Despite there being no offices or staff in the Cayman Islands, HSBC had 50,000 customer accounts and US$2.1 billion in deposits there, much of which was allegedly used to purchase planes for Mexican drug traffickers.

 

My understanding is that any individuals found guilty of money-laundering in the USA get jail time. So, will the senior management be similarly punished, right up to the Chief Executives and the Chairmen of the bank in position during all this time? After all, they are just as crooked. But if they get more than a slap on the wrist and a reduction in bonus, I’ll eat my hat!

[Bob]

While I've welcomed the US position (somewhat more severe punishment for at least well-publicized or large-scale economic or white-collar crimes), generally it's still not true. The fat cats still tend to get away with it completely or, as you say, get the effective slap on the wrist (fining a guy worth a couple of hundred million dollars only a million or two is no effectively punishment at all). As you've noted before, how many people have been truly taken to task for the investment banking fiasco that effectively led many countries into the economic dumper? None as far as I know....and the Lehman guys and others of their ilk were not even required to give up their golden parachutes.

 

What's ultimately laughable is that any fines levied against these institutions come out of the money owned by the investors (who had no idea what the morons were doing) instead of out of the pockets of the crooked money managers' pockets themselves. Hardly much of a deterrent let alone punishment for personal (and sometimes criminal) behavior.

[KhorTose]

I used to feel bad when I made stupid mistakes with my money, but these guys, who are supposed to be some of the worlds brightest, make me feel like a genius. Oh for the good old days of the 60s' when we knew a good bank was a burnt down bank.

[Guest fountainhall]

Oh, for the good ol' days of the early 1980s when we could stick cash into CDs with returns of well over 12%!

[Rogie]

Until the early 1990's in Britain anyone with money to save or wanting to buy a house with a mortgage had a great choice of institutions. First off you had to decide if you wanted to use a bank or a building society. I don't know the history of building societies but I assume they were so-called because they were originally set up to lend money to people who wanted to buy a house or invest in 'buildings'.

 

There weren't that many banks, as they'd gone through the merger-mania some years before, but if you'd decided to use a building society the choice was immense. Then they too became acquainted with the merger bug, so the smaller BS's disappeared and those remaining a lot bigger, obviously. Then, starting in 1989, the BS's looked enviously at the banks and became infatuated with the idea of becoming banks themselves.

 

As the old building societies were owned by their members (they were mutuals) those that did convert paid big windfalls to existing members. Many people, the so-called carpetbaggers, jumped on the bandwagon and joined building societies in the express hope they would de-mutualise. All the BS's that became banks have in turn been taken over by other banks and many illustrious names have disappeared from Britain's High Streets.

 

Why am I going on about this? Well, following the bad publicity and plummeting repution of banks those BS's remaining are in a good position to benefit. If I could go back in a time machine and ask executives of BS's who ceased to be BS's in a frenzy of de-mutualisation if they regretted it, if they were honest they'd have to say yes.

 

On the whole, Britain's financial institutions have been managed by donkeys (borrowing from the expression "lions led by donkeys" from WW1) for at least the past 20+ years.