Six global banks, two them British, have just been fined £5.6bn in what the FBI has called ‘massive scale’ criminality, yet no individual executive has been prosecuted and no bank has been deprived of its licence to practise which would have happened in any other sector given such monumental wrongdoing. Indeed State regulators have gone out of their way to protect them from any such consequences. None of the charges in respect of any of the banks has been brought to trial so that the full scale and nature of these criminal activities will never be publicly disclosed. Two of the banks did not admit to any crimes related to this abuse, though they still paid up, but the other 4 who did were then given waivers shielding them from the consequences that would normally follow – the loss of the all-important banking licence. The banks have an armlock around the neck of the State.
How did this arise? Under the current financialised capitalism, the most extreme form of market fundamentalism, the UK State is effectively run by a political-financial nexus between No.10/Treasury and the Big 4 banks which implicitly guarantees protection for these banks against all eventualities. This pattern was first apparent in the banks being ‘too big to fail (or jail)’ after the enormous financial 2008-9 crash which they largely caused, then in the leniency and no prosecutions after the Libor rigging scandal, and now again after the equally colossal Forex market rigging scandal. It is also astonishing how listless has been the political response to all this monumental criminality.
Negotiated settlements are no substitute for criminal proceedings. Worse, it is clear that this velvet glove system of penalties has not led to any change of behaviour among the offending banks. Global banks have now been made to pay more than $10bn in relation to the Forex scandal despite previously being charged $9bn over the Libor rigging revelations. Many have responded, not by altering their culture, but by hiring former prosecutors and regulators.
Two banks, Barclays and UBS, have explicitly been penalised for breaching existing deals with US prosecutors not to break any more criminal laws after settling Libor-rigging charges in 2012. And, so far from being chastened, Wall Street and the City of London are now looking to revive the niche single-name credit default swaps (derivative contracts that track the risk of default by a company that sells bonds) which were widely blamed for helping to inflate the credit bubble prior to the 2008-9 crisis.
Nevertheless, in the face of all evidence to the contrary, the UK Financial Conduct Authority has been claiming that the fines are working. That has probably more to do with Martin Wheatley, head of the FCA, seeking to salvage his reputation after his serious mishandling of the investigation into the insurance industry a year ago. Pace Wheatley, it is patently clear that only individual prosecutions and deterrent custodial sentences, disqualification from employment in the finance industry, and withdrawal of bank licences to operate will change the City of London whose morality is rotten to the core.
The problem with taking bankers through the courts of course is they may state the facts, and name politicians. So it’s better to fine the banks, money is just money, and let them get away with what they have done.
Nothing much worse then a banker on the make, except of course a Politician…