Following the bail out of the banks in 2008, it now turns out that Barclays were involved in manipulating the London Inter Bank Overnight Rate (LIBOR) for its own purposes. These activities resulted in a fine of £290 million being imposed by the Financial Services Authority on the bank.
The news came hard on the heels of the Natwest debacle that saw computer problems result in customer accounts being frozen.
Royal Bank of Scotland (parent body of Barclays) boss Stephen Hester announced he would not be taking his bonus, whilst Barclays chairman Marcus Agius and chief executive Bob Diamond resigned.
Things though need to go a lot further if the banking industry is to really be cleaned up. The way in which the bankers have got away with repeatedly robbing the taxpayers is an ongoing scandal.
First, the banks virtually go bust and have to be bailed out by the taxpayer. Nothing happens, they continue with business as usual paying themselves huge bonuses.
Any threat of action being taken against them is met with declarations of "we’re leaving the country." Regulation is resisted on the basis that the banking industry is needed to create the growth needed to get the country out of recession. Restrictions will effect competitiveness. A recession ofcourse largely created by the banks.
The result of the bank created economic crisis that has engulfed the world has been in this and many other countries to dump it on ordinary working people. This has come in the form of cutting public services and the conditions of work for those operating in the public sector. Apart from a minor levy on the banks there has been little effort to make those who created the crisis pay for it via higher taxes.
The thorny question though remains as to how to deal with the banking industry. Let’s say first of all that it is wrong to paint everyone in the same way. Those responsible for the crisis are relatively few in number. The majority of people working in banks are doing ordinary tasks, trying to survive like everyone else. Indeed, it is many of these people who increasingly come to suffer the public anger regarding the perceived crooked nature of the industry. It is not fair to blame someone on the till or answering the phone in a call centre for the libor manipulation or the 2008 crisis.
There is though the other end of the scale, often described as casino banking, where the rewards are huge and the risks bigger. This is the world of the trading floor, where a relatively small number of testosterone driven individuals operate.
The phrase "he would sell his own grandmother" comes from this environment. All that matters is winning, there is no moral bar on the actions of these individuals. The banks themselves struggle to control these people. They usually put “a hard man” in charge to control those operating in an area of such moral laxity. Even then the institution can suffer as these individuals have only one concern and that is themselves.
What is needed is the break up of many of the banks and proper regulation of the industry. The banks must also be made to pay their taxes, which should include paying for the past damage done. There have been the reports like that from Sir John Vickers which make sensible suggestions regarding reform of the industry. These should be actioned immediately.
Most of all though what is needed is the political will to carry through these substantial reforms. Little has really happened since the crisis of 2008, the bankers in the mind of many have got away scot free. They must not this time be allowed, once the dust has settled, to get away with threats of moving out of the country or to complain of the effects of red tape on competitiveness.
The politicians need to be ready if necessary to buy the bankers the one way tickets out of the country if they will not comply with a new just regulatory framework. A Leveson style inquiry could also be useful as it would expose the true nature of the banking industry from the till and call centre to the dealing rooms.
What is for sure is that something needs to happen, the taxpayer cannot simply go on being robbed time and time again by the bankers.
I have often been perplexed at the arguments put forward by the bankers for their high salaries: to recruit top people you need top salaries. Really? How does that work? What lies behind this argument is the assumption that the greediest people are the best. But hey, this is banking, so perhaps that argument is self-fulfilling. But why should greedy=good? Or greedy=ability? Are big-paid people the only ones with brains? Certainly they don't seem to be the ones with any kind of morality that considers equanimity a good thing. But why would you expect someone whose principle is to get as much money for themselves as possible (otherwise threats of 'going overseas' and 'we won't be able to keep them' are hollow) to be genuinely concerned, sacrificially concerned, even, with the welfare of ordinary people? Maybe Jesus knew a thing or two about money and its incipient power over people. If we had kept the usury laws we certainly wouldn't be in this mess, economically or environmentally.
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The Universe
Dear Editor
I seldom agree with anything Paul Donovan writes, but his excoriation of the banks is spot-on. (15 July 2012). It may or may not be a "God-incidence" that the banks collapsed in 2008 within a week of end of the Jewish Sabbath-year, which traditionally triggered a release from all debts.
As we know, the banks have enjoyed release from captivity, while the rest of us soldier on in debt-slavery. Now that the banks have been exposed as beneficiaries of the proceeds of the criminal manipulation of LIBOR and have been lending money out of funds in which those proceeds have been co-mingled, I should like to propose that these loans may not lawfully be recoverable.
Canon 1543 of the Code of Canon Law in force until 1983 reflected the Church's traditional teaching concerning the sin and crime of usury. Suppose I give you a quantity of money or some other fungible - a thing sold by measure, number or weight - so that it becomes your property to spend or consume as you will. In return, you promise to return it later on in kind only.
Exchange justice requires that things be traded at equal value. Any two quantities of the same fungible thing are of equal value if, and only if, they are of equal quantity.
It follows that, if the lending of a principal sum is done in return for a contractual promise to pay for it in kind, the promise binds for the return of the principal, but not for anything more. A good title to interest can exist only if something of value additional to, and different from, the principal is given in exchange for a promise to pay it. The payment of interest cannot validly be contracted for as a percentage of the principal, or by reference to the term of the loan.
Yours faithfully
Michael Petek