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Saturday, 30 June 2012

Banking Shock?

It is astonishing that anyone could be surprised by the latest major scandal to be published about the bankers. Of course they manipulated the London Market Offered Rate of interest: LIBOR.  Of course they sold completely inappropriate derivatives to small businesses. They have run the financial system on the basis of blatant veniality for the last few decades.

The Rating Agencies are paid by the firms whose stock they rate: and by 2010 they had completely blown away their wholly spurious reputation of earlier years, when the uselessness of their ratings of billions of dollarsworth of badly-cobbled 'securities' and other instruments was made clear. It is incredible that five years on from the crunch of 2007 they remain recognised [by regulators, actuaries and accountants] as holders of the magic means by which stocks, shares and gambling slips issued by other firms are regarded as possessing 'value' in financial markets.

This suspension of disbelief in respect of the Agencies' ratings of company stocks helps to explain how the banks have continued to get away with a similar - and even more obviously corruptible - standard and measure of 'value' in the banking sector. Nobody has had any excuse for believing that any valid standard of competence or integrity has been attached to the daily announcement of libor [and of other median rates of interest] in the London Market. These figures, which are used as numeraires in millions of transactions worldwide every day, are based on data that are submitted by employees of the regulated UK banks. Since the nineteen eighties these same institutions have been deeply embroiled in the business of the London Market on their own account, as well as in the role of agents for other investors.

After two years of investigation by the regulatory authorities, during which the libor has been produced on the accepted basis, it has been admitted publicly that Barclays:
First, both in the good times pre-2007 and during the consequential crunch, massaged the data that they submitted for inclusion in the libor computation to support "the sneaking arts of underling tradesmen". The supposed data that the bank submitted were adjusted to support the day-to-day convenience of their trading counterparties and their chums. They supported their own market positions by influencing the rates that were authoritative in the Market.
Subsequently, after the extent of the crunch had begun to become clear, Barclays continued wantonly to mis-state the data better to facilitate their traders taking up and winding-down borrowings.

There is no reason to believe that the other banks that contributed data were significantly immune to the temptation to use the libor methodology to their advantage. More confessions will be made; and  trivial fines [without criminal charges against offenders] are expected to be imposed on the other banks. Thus the whole of the UK's regulated home-based banking business have massively more undermined than had already been done by the crunch itself.

In the same week, just past, the remained unable to rectify a disastrous, inept and incompetent 'upgrade' to its retail software that kept millions of customers from effecting transactions. This was reputationally at least as bad among less sophisticated customers as was the damage to 'wholesale' banking in the credit crunch that they could not understand. Then it was announced that thousands of firms had been invited to buy betting slips that had cost them heavily when interest rates had fallen: some of the 'invitations' had been presented as conditions that must be accepted by the client firm as a term for being granted some other facility by the bank. Many firms were ruined and many more suffered serious difficulty in finding the cash that was necessary to keep going through the slump.

The pathetic politicians have mouthed what their puerile advisers have recommended they should say in response to the multilayered revelations. They have demanded - or promised to establish - 'inquiries' informed by 'independent' 'experts' selected from the usual gang of lawyers and quangocrats who have drawn fees from the system that has promoted the decline of the once-robust economy..

Ordinary white British folk already know all too well what happened.  Since 1980 successive governments of both parties have grovelled to accommodate the demands of the most pushy segments of the finance sector of the economy, because they were declaring expanding turnover and creating jobs and paying taxes that partially made up for the politicians' systematic destruction of the 'real economy'. They never were and never will be capable of self-regulation in any particular. They never were and never will be capable of making objective statements about the 'value' of anything that they conjure into existence. The delusion that the empowerment of market participants will endow them with responsibility towards society or to the body politic was most powerfully asserted by Margaret Thatcher and her sycophants; and was maintained by Major, Blair and Brown. David Cameron has neither the intellectual capacity nor the will to understand the consequences of this ruinous litany; and sneering Osborne has every interest in letting Cameron founder, in the   hope that he will become the leader of a dying Tory Party.

It is certain that within the current political structure the government will not respond adequately or in good time to the next phases of the crisis that the political class has fostered; that the bankers will continue on their exploitative progress; and that the economy will continue to decline. Nobody can seriously claim to be surprised by any of it!

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