Monday, 18 March 2013

How corrupt can banks actually be?

Ellie (fiancĂ©e/house executive) and I are going back to our roots and have recently moved house from Leicester to Norwich. Now normally on long journeys I insist on listening to an audiobook of some sort to capitalise on this dead time (to Ellie’s usual protest), but on our last trek back to Norwich we listened to a music radio station for the first time in a while. I soon remembered why I don’t listen to the radio much due to the tripe that’s on it, and Ellie’s not fond of Radio 4 but what I found amusing on the news piece is that another bank has been found guilty of fraud and cooking the books and all they got was a slap on the wrist.  The radio then just flowed nonchalantly onto the next story. It’s amazing how that we’re all so used to hearing of banking sector scandals these days that we just shrug and mention nothing of it. Surely I can’t be the only one who’s outraged and slightly shocked that nothing’s being done to fix these continuous scandals? I think part of the problem is that we as a whole think that we can’t fix it all as it’s way over our heads. People tend to think that unless you have a whole alphabet of letters after your name, you shouldn’t go near finance and the banks. Also I don’t think that many people actually fully understand the real significance and extent of this ‘banking cancer’ because if we did, I’m sure there’d be a revolt!
So like with any issue, a full comprehension of the topic is a good start, so I’ve done the leg work for you and compiled a small list of some of the things the banks have been caught doing recently:
  • LIBOR scandal
  • UBS carries out unauthorised trading, loses $2.3 Billion and tried to cover it up by cooking the books in order to not become nationalised during the 2008 crisis.
  • Societe Generale hid over $4.5 billion in losses from unauthorised trading.
  • Wells Fargo were fined $175 million for discriminating against certain races.
  • JP Morgan lost $5.8 billion from a trade that went wrong. This was made using customer funds.
  • Standard Chartered (a UK bank) were fined $327 million for illegal dealings with rogue nations. Then fined again for $340 million for being caught doing over $250 billion of transactions with Iran and making hundreds of millions in profit from fees.
  • A former Goldman Sachs Director, Rajat Gupta was fined $5 million and jailed for 2 years for sharing inside information.
  • Kabul Bank siphoned $861 million out of war-torn Afghanistan by issuing fake loans.
  • The wife of Philipp Hildebrand (former Chairman of the Swiss National Bank) made £322 000 by buying US Dollars just before the SNB manipulated their currency by grossly devaluing the Swiss Franc. The ‘Swissy’ was becoming too strong against the Dollar and it was hurting Swiss exports. Hildebrand has recently quit his position due to this ‘insider-trading’.
  • HSBC has recently been fined £1.2 billion for money laundering for drug cartels, terrorists and rogue nations. They also facilitated 25 000 undisclosed transactions with Iran (despite UN sanctions) over a 7 year period.
  • Barclays Bank has just been caught committing fraud by hiding £11.5 billion from their balance sheet by giving it to a Qatari company. Then using that company to re-invest it back into Barclays to help the share price. Barclays have only been fined £290 million.

I could continue, but I think you get the point. Bear in mind that these are only a few examples of the times the Banks have actually been caught red handed. Who knows what else they’re doing which is going unchecked? It’s also comical how they’re treated once they are caught. They are simply slapped with a small fine, effectively told to not do it again and at worst, given a bit of bad press in the papers. That’s all. It’s extremely rare that anyone actually ends up in jail so there’s no real deterrent. Most of these fines are below $500 million and it may seem large, but I can assure you that it is simply loose change for the banking world. It’s like you making hundreds of thousands of Pounds in profit from running an illegal Ponzi scheme, laundering money for drug dealers, going to the casino with your grandmother’s pension money, then get caught red handed by the Police and simply given an ASBO with a £4.50 fine. Now if you actually did get caught doing all of that in real life you’d be on the front page of the Sun newspaper, fined and imprisoned for years. You’d be more hated by the public than Tesco Value lasagne. Now for fear of sounding a bit crazy, it’s almost as though the Banking Industry has got such an influence and grip on politicians and the Government that they’re simply helpless to do anything about it. And these fines are just lip-service to appease the law in some manner. I may be completely wrong about this, so please enlighten me if I am, but I just can’t see any other reason. I’m pretty confident that the Government relies heavily on private funding/donations from the financial sector in some way, but as I said, I’m just speculating here. My only aim for this article is to just make you slightly more aware of the Banks so that you understand their propensity for huge profits and how far they’ll go to procure it. Stay tuned, as I’ll be explaining in 6 year old language just exactly how they make their money day to day. You’ll be scarily surprised to the core…

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