Over the course of the previous decade, the press regarding various instances of financial mismanagement, fraudulent activity and underhanded collusion by too-big-to-fail-or-prosecute banks and investment firms has become increasingly frequent. For the financial services sector entrusted most simply with keeping funds safely where they’re deposited and not starting financial depressions, this has apparently proven to be the most challenging task in both the US and EU with Australia fairing marginally better but not without incident. Compounding these systemic failures to the severe detriment of the majority of people is the inability of the courts or governments to prosecute those personally responsible for the Global Financial Crisis (GFC) – which hence relegates the importance of the laws intended to protect the very same people they’re being used against and almost condones such behaviour by financial institutions such as Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland.
Entire US states have been forced to declare bankruptcy, European nations have enacted increasingly harsh austerity measures, the Australian Securities and Investments Commission allowed months to pass before investigating allegations regarding the Commonwealth Bank of Australia (CBA) – with the most dire of consequences affecting those most powerless to stop them. Before we got lost in latent anger and fury however, here’s a look at the facts and figures as simply as they can be stated in their simplest form.
- Dec 1997 – AUS – ‘CBA employee Don Nguyen writes $39m of new business in 10 months, 3.5 times his target’ 1
- Nov 1998 – US – “Glass-Steagall legislation (‘a law passed after the Great Depression, which prevented banks with consumer deposits from engaging in risky investment banking activities’2) repealed. This allowed Federal Deposit Insurance Corporation (FDIC) insured banks, whose deposits were guaranteed by the government, to engage in highly risky business. It also allowed the banks to bulk up, becoming bigger, more complex and unwieldy.” 3
- Dec 2003 – US – Freddie Mac fined $125 million, Fannie Mae fined $400 million to settle federal regulator’s allegations of mismanagement at the mortgage finance giant that is blamed for a $5 billion understatement of earnings. 4
- Apr 2004 – US – “The Securities and Exchange Commission changed the leverage rules for just five Wall Street banks… The “Bear Stearns exemption” replaced the 1977 net capitalisation rule’s 12-to-1 leverage limit. In its place, it allowed unlimited leverage for Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns. These banks ramped leverage to 20-, 30-, even 40-to-1.” 5
- Apr 2006 – US – ‘Mortgage giant Freddie Mac has agreed to pay a $3.8 million Federal Election Commission fine — the agency’s largest ever — to settle charges that it illegally raised campaign money for members of Congress.’ 6
- 2007 – US – Collateralised debt obligations (CDO) market stands at $4 trillion and this compares with a 1998 figure of $350 million. 7
- Sept 2007 – US – ‘Freddie Mac, the nation’s second-largest financier of home mortgages, is paying a $50 million fine to settle civil securities fraud charges brought by federal regulators in a four-year accounting lapse.’ 8
We take these charges seriously, and that’s why the Freddie Mac of today is a very different company than the Freddie Mac of the past.
– Richard Syron, Freddie Mac’s chairman and chief executive officer – 28/9/2007
- Sep 2008 – US – the bankruptcy of the U.S. investment bank Lehman Brothers, and the collapse of the world’s largest insurance company, AIG, triggered a global financial crisis. 9
- Oct 2008 – AUS – Whistleblowers tip off ASIC (Australian Securities and Investments Commission) to Don Nguyen’s fraudulent activity. 10
- Jan 2009 – UK – British bank Lloyds-TSB paid a fine of $350m to US authorities after prosecutors accused it of faking records so clients in Iran, Libya and Sudan could do business with US institutions. 11
- June 2009 – AUS – Whistleblowers tip off CBA to Don Nguyen’s fraudulent activity. 12
- Feb 2010 – AUS – Whistleblowers visit ASIC head office in Sydney to demand action. 13
- Dec 2009 – US – Swiss banking group Credit Suisse says it will pay $536m for violating US sanctions against Iran. 14
- March 2012 – US – ‘Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. It paid federal authorities $110m in forfeiture, for allowing transactions later proved to be connected to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons of cocaine… Yet the total fine was less than 2% of the bank’s $12.3bn profit for 2009.’ 15
- March 2011 – AUS – Nguyen banned for seven years. 16
- Nov 2011 – US – RBS fined $52 million, Goldman Sachs fined $60 million, Morgan Stanley fined $102 million in order to settle charges filed by the state of Massachusetts that unfair residential mortgages were put into investment pools. 17
- June 2012 – UK – Barclays fined £290m for its “serious, widespread” role in trying to manipulate the price of crucial interest rates that affect the cost of borrowing for millions of customers around the world. 18
- Oct 2012 – US – ‘Royal Bank of Scotland has been fined £26million in the US for selling thousands of home loans which helped trigger the global financial crisis.’ 19
- Nov 2012 – AUS – ‘Another CBA planner Ricky Gillespie permanently banned after forging client signatures. Seven planners now banned’. 20
- Dec 2012 – US – British-based bank HSBC fined $1.9 billion (or about five weeks’ profit) for the largest drug-and-terrorism money-laundering case ever. Not one dollar or one day in jail from any individual, despite a decade of stupefying abuses. 21
- June 2013 – US – ‘Former Freddie Mac CEO Richard Syron and other executives serving during his tenure failed to escape a pending case filed by the Securities and Exchange Commission over subprime mortgages….The SEC claims the former executives misled investors about the company’s subprime mortgage exposures between the dates of March 23, 2007 and Aug. 6, 2008.’ 22
- June 2013 – US – ‘Former Goldman Sachs Vice President Fabrice Tourre lost a bid to limit a U.S. Securities and Exchange Commission civil fraud case against him over a transaction that led to a $550 million settlement by the Wall Street bank’. 23
Perhaps the most galling aspect of this unprecedented set of events – as if it weren’t infuriating enough – is that along with the meagre amounts paid by these various institutions in fines, no admission of guilt was necessary. Given that Court hearings on events from the early 2000’s are still currently taking place and media coverage has at times been documenting events years after the fact, it may come as no surprise that a fundamental change in the global economic system could be years, decades or generations away…if ever.
Josh Rayson (KS)