I’m currently reading Gordon Brown’s book “Beyond the Crash: Overcoming the First Crisis of Globilisation” (yes, it’s something you could ONLY choose to do if you’ve retired!). As you might imagine, it’s not a particularly popular book, in the commercial sense – which might explain why I was able to buy it for £2 (a tenth of its original price) at “The Last Bookshop” in Park Street, Bristol!He wrote it in the months immediately after his general election defeat. He talks about us needing “to learn quickly of what went wrong” and that “most banks hadn’t been honest… the process of declaring the extent of the losses and the full scale of the toxic assets – of executives telling their seniors, management telling the board, the board telling the market and their shareholders – was proving so painful that too many people in the banks were deluding themselves that the problems would disappear”… “Short-term incentive structures, which relied excessively on self-regulation, aggravated rather than contained the recklessness of risk-taking… there is an incentive to drive up short-term shareholder returns by moving risks to off-balance sheets and increasing short-term turnover through increased fees, profits, and bonuses”.
It’s a wide-ranging book and, no doubt, one that I will struggle even to BEGIN to understand (an understatement!).
So Brown’s book makes interesting reading when set against the incredible accounts coming from the US Senate this week as executives from Europe’s biggest bank, HSBC, were subjected to a humiliating onslaught over revelations that staff at its global subsidiaries laundered BILLIONS (yes, billions) of dollars for drug cartels, terrorists and pariah states (note: I ended up reading about this in the Guardian – at the time of writing, on the BBC’s website, the HSBC story doesn’t get ANY headlines (and it’s only the sixth story on its Business Page”).
It all makes frightening reading:
· “’Pervasively polluted’ culture that persisted for years”.
· “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” (note: there are allegations that some 47,000 people have lost their lives since 2006 as a result of Mexican drug traffickers!).
· “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”.But, on the positive side, the bank HAS apologised for its "lapses" and said reforms had been put in place… so that’s a BIG relief for all of us, I’m sure.
The US Senate committee had been conducting its investigations over the past decade(!) and the permanent subcommittee of investigations had apparently examined 1.4m documents as part of its review. I can’t see the UK parliamentary structure providing the necessary finance to make similar checks in this country.
HSBC is likely to be fined a “massive” amount of money – which seems reasonable in the circumstances(!) – but one can only hope that action (imprisonment and massive fines) will be taken against the greedy, callous perpetrators to send out appropriate signals to others.
Where will it all end?
PS: Well, Dominic Rushe's Guardian piece ends with the following:
“But the report comes at a highly sensitive moment for British banks in the US. Following Barclays fine in the Libor-interest rate scandal and the massive losses at JP Morgan Chase's London offices US politicians have become increasingly critical of the UK's financial services sector…
At a recent hearing into the JP Morgan losses, Carolyn Maloney, a Democratic representative from New York, said: ‘It seems to be that every big trading disaster happens in London’.”
Oh good grief!