Tag Archives: Goldman Sachs

June 20, 2013 · 12:42

RBS of the Clan Goldman Sachs?

Well today the light shines a little brighter. As I was watching Sky News, I now see a stronger and more enthusiastic run to get these bankers under some kind of rational control. Will it work? Time will tell, however there is a start, and it might not take long until a strong voice could stem the tide of greed to a small extent.

We are however nowhere near a good solution. Mr Osborne (the Chancellor of the Exchequer) is about to take a page from a legally valid solution to divide the bank into 2 parts, a good and a bad bank. Yes, Mr Osborne, that will really help to take these billions of bad debt and add them to the tax payer’s burden! Not really a solution, is it?

To add other news moments that the UK economy is out of intensive care is not just wrong; it is a bad insight close to that of the Titanic playing chicken with an iceberg. No, I stand corrected. This decision is worse. You see, the Titanic had a few survivors; this approach might leave people alive, but destitute for a very long time.

So yes, there is a chance that the Royal Bank of Scotland will join Clan Goldman Sachs.

The idea of shares, making public and so on are ideas. I am not in favour of them, but perhaps Mr Osborne does not have a choice. You know, it is unfair for me to just complain, lay blame and not have a solution. What could be done is to keep the RBS nationalised, and remain an operating bank. Do a proper bank job by giving out small loans, do banking functions for those with jobs and create jobs. Also, the money that the RBS bank makes is used to pay off the debts, the bad loans and even create tax fortunes this way. Why not?

It is not like the banks at present are doing anywhere near a decent job.

The so called stated fact that the economy is in a better shape by stating: “Nothing better signals Britain’s move from rescue to recovery than the fact that we can start to plan for our exit from Government share ownership to private ownership.” is in my view horribly wrong. The fact that the UK is not in the red at present is just fortunate (and at less than 0.5%). The fact that most of Europe is down and there is no realistic view that this will improve within 18-24 months is not realistic. I read the claims that some made over the last two years. Good news was always bad news in the end and results had to be corrected downwards every single time. To rely on that a belief that the UK is now in a stage of recovery is in my humble opinion a case of really bad judgement.

How about playing it safe? Instead of quickly selling the good bank so that irresponsible banks can continue to endanger the lives of too many, hold on to it, make it stronger and get it into a shape where it is worth a lot more than it is now.

The current ‘noise’ that bankers are being chased for criminal charges are nice claims to make, yet the true culprits did what they did, and they never broke the law. Until the law changes, they are out of reach. The small fry we do get to prosecute will get nowhere near the punishment that is due. It is best reflected by Paul Moore, former head of Risk, HBOS. “The banking crises drove 100.000.000 people into poverty“. He is correct, what was done should be criminal and those involved require insane levels of punishment. Yet, as I reflected earlier, that will not happen. Lawyer Sidney Myers seems to be in agreement (or more precisely, I am in agreement with him). Mr Myers is not just a somebody in this field. As the head of Berwin, Leighton and Paisner this man wield a formidable legal cricket bat. It would make Colin Cowdrey instantly humble. Mr Sidney Myers is listed as one of the top 500 lawyers, this in a field that has over 120.000 practising lawyers, so we are in well informed top tier company.

To get a person convicted is near impossible. Getting the group convicted must proof all guilty, neither seems to be a realistic possibility at present. So we need to see a legal overhaul that changes the game, and selling of Lloyds and the RBS before that moment is in my humble opinion not a good idea. Sir George Mathewson, former CEO of the RBS has that same view (in regards to the legal prosecuting). He did however state an interesting line. “Where the information is made clear to the board and the shareholders” this comes to collected responsibility. The interesting part is what information? To get a clue on that, we should look at a book called ‘how to lie with statistics‘ written by Darrell Huff in 1954. It is a gem, an eye opener and it actually shows today’s problems. If we react to numbers and if numbers are ‘not incorrectly’ tweaked, then how is managed risk not anything less than misrepresented risk?

The bulk of data miners will look at profitability, but profitability of whom and how?

Uniting the views of Paul Moore and Darell Huff gives us part of this problem. Separate the data miner from the board of directors and we create a Star Chamber situation that lacks accountability for the simple reason that no laws can be proven to be broken. That danger, until countered gives reason for the now nationalised banks to remain as they are. SNS Reaal in the Netherlands is in that same scope. Until legal secure measures are firmly in place, protecting the taxpayer from irresponsible risks, other banks should not be allowed to continue, especially AFTER they move part of their failures into a bad bank.

The idea that the PM David Cameron has mentioned about selling the RBS at a loss is just not an option in my view. They should continue in the setting they are now, offering financial solutions to the UK citizens at lowest base +1% could over time turn the RBS and Lloyds into banks that are no longer in the red. Other banks have no reason and right to complain. They have been making customer services nearly impossible. To get a grip on that, take a look at The Netherlands where getting a mortgage reads like a tale no less imaginary then ‘the Hobbit’. As banks have been banking on higher levels of return on investments, smaller businesses and individuals suffered. They have no issue with credit cards as they charge 11-12%, however getting a mortgage seems to be a lot harder. So as customers come to the rescue of the RBS as they switch credit cards for 6-7% which will aid the government to get RBS back on their feet and even add some coinage into the treasury’s coffers (with a 1 trillion deficit), this could be a possible good solution. Are there any banks complaining? Well, that is the way the cookie crumbles. It is time for them to face the consequences of unadulterated greed.

The issue of holding bonuses for 10 years does sound nice in theory, however, how about appellant case HQ09X04007 and HQ09X05230. A case settled in the Court of Appeal by Lord Justice Elias and Lord Justice Beatson? A case where 104 members, were due their 50 million Euro in bonuses.

In that case I found this: “Bonus awards for all front and middle office employees who received a letter in December stating their provisional award, which was subject to Dresdner Kleinwort’s financial performance targets, will be cut by 90% pro rata to the stated provisional amount.”

However their contract had this little hidden gem “It is common ground that all the claimants, including the three whose employment agreements did not contain any provision with regard to payment of a discretionary bonus, Messrs Sacre, Honeywood and Daley, had a contractual entitlement to be considered for the award of a discretionary bonus.” (Source: Case note)

How soon will that case get quoted in another court case to get a bonus freed up? Some miscommunication through contracts where no one is accountable, yet the bonus is immediately payable? Another option could be that these senior members will start playing musical chairs with friendly banks, switching each year all protecting one another stopgapping large bonuses on an annual basis (in their favour of course).

So how long until we get some level of miscommunication going on? If we accept the journal of Ronald Green from 1993 ‘Shareholders as Stakeholders: Changing Metaphors of Corporate Governance‘ and if we accept that banks and financial institutions fall in that category, then their responsibility is to profit, not to accountability, which means that their acts will focus on non-accountability to endure ruling of profitability. The latter part would be my take on the works of Milton Friedman.

There is the crux. Until serious changes are made to separate the banks, the profit in regards to  stakeholders and shareholders, whilst increasing a banks social responsibility, the cut-throat business they now do and the taxpayer currently pays for will continue.

 

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March 22, 2013 · 21:33

Asleep at the wheel of the banking industry?

Cyprus is fast spinning out of control. The banks are still closed; the people are near civil revolt. All this was not just implied by me; it seemed to me that these acts were clear as day. So are people asleep at the wheel of the Eurozone finance?

The problem is that I am not that overly intelligent. In addition, I never had a degree in economy. So what on earth are the parties involved up to?

Last night on the 21st another Cyprus meeting was set in motion. And here, now the new game comes into play. Yes, they might have an alternative! They have offered a solution opting with two banks, a good and a bad bank. (Source: NOS News) Is this it? Is this the wave that we will see? It seems that Goldman Sachs has been very active. It was Goldman Sachs who initially mentioned such a solution in a few cases. This included the SNS bank, however the solution was rejected there and it caused the nationalisation of the Dutch SNS bank. I spoke about this in an earlier blog, and likely you might have read it in a league of other sources discussing this.

As mentioned, I did not study economics, yet I am overwhelmingly against this solution. There is no denying that the Goldman Sachs boys (and girls) are loads more qualified than me in this field and this has to be solved by clever people. All this I agree with. Yet, sweeping loads of debt under a carpet so that those who created the debt to forget about it is not the solution. Getting rid of it by creating bad bank swaps is not a solution and to accumulate all these bad banks in an effort to offset the overvalued total global sum as set in LIBOR is not a solution either (even though that would have been VERY clever indeed).

The banks never ending ability to play quick and loose with bank funds at the expense of all their customers so that they can enjoy a quick raise in commission is clear evidence that after 4 years, doing nothing is just no longer an option. It is extremely frustrating to listen to politicians and journalists games for alleged infringement of their freedom to speech and the need for better budgets. The one party that needs some intense new levels of legislation is left alone to play the games they play.

Yesterday’s news on NOS, where we saw the head of the Eurozone finance ministers Jeroen Dijsselbloem getting flame baked by the German Peter Simon who is a member of the German Committee on Economic and Monetary Affairs. He went the route of dust, stating that he was taking responsibility for certain joint decisions. So is this all incompetence? If we consider that he met with Christine Lagarde earlier this week, it gives clear image that more is going on, because pardon my French, but she is one clever cookie. Should we therefore consider that they are considering another path?

I reckon that the entire SNS issue as it exploded earlier this year did not go the way certain groups wanted. Even then there were clear calls for the bad bank solution. It was stopped and the Dutch government stepped in by nationalising it all. It is not impossible that the bad bank solution was the only option from the beginning, however they not in a public position to offer it as a first option. The people would have to be a little more against the wall there (not the Cypriots, but the general population in the Eurozone). This is more than just a call. I think there are several reasons playing the field in regards to the bad bank issues.

Should you consider my thoughts to be wrong (which might be very valid), then consider the US eternal resistance against Russian activity in Western Europe. Now, there is utter silence when Russia is willing to come up with the billions saving the Cypriots and getting access to the Mediterranean Gas fields? There is no way that they would allow this, which means that either another tactic is played here, or the US is almost officially utterly bankrupt. (Not entirely unrealistic either).

It seems that this is turning into a Machiavellian play. A play where the banks hold the dagger that they are ready to stab straight into the backs of the people they should be protecting. Their own citizens! This is where the shoes are getting too tight to dance. The banks have not been a caring factor for their local population for a long time. It is all for greed, commissions and it all tastes sweeter on the international market. This is also a massive reason why it is harder and harder to get a mortgage. In the end the return on those investments does not yield the returns the banks are hungry for. This was clearly mentioned by several sources. They have been bending over backwards to not qualify customers for a mortgage. (Source: Trouw, a Dutch newspaper). Banks want to make money, lots of it. Mortgages just don’t slice the bread for a banker any more, leaving most of us all out in the cold.

So why am I against the bad bank? In itself, the bad bank could be a solution if people in charge would wake up and ACTUALLY get some true banking reforms in play. Stopping this group for needless risks should be punished severely. Like the press they claim to self-regulate, yet, like the press it is nothing less than a joke.

This was reported by CBS on May 14, 2012: “JPMorgan Chase’s admission last week that it lost more than $2 billion in one set of trades should be used as a wakeup call to end the practice of banks regulating themselves, Massachusetts Senate candidate Elizabeth Warren said on Monday.”

This is only one of MANY of these reports in a period between 2008 and now. 2009 with the reports by Lord Turner, and even now, or even in six months’ time when more fines hit the LIBOR banks. Self-regulation does not work. Show me a person with greed and I show you a person who does not care about the rules and often does not worry about the consequences either. Banks are filled to the brink and drowned in resources motivated by greed. It is the same reason why the press cannot regulate their ranks. Their need for greed (size of publication) and their ego trip to get the news first is why phone hacking started in the first place.

Yet, a royal charter will not work for banks. They will walk away too often without any severe consequences (because most dealings are international). A clear need to legislate beyond draconian is the only solution for banks, which must happen on a vast international scale. Also, my thought is that any banks on the international trading floor should have at least have 20% vested in local mortgages. The reason is that it will give most banks a better level of stability, it will serve people actually having a chance to work on a future and in the last it will give many a peace of mind.

All this is needed BEFORE we start playing with the bad bank solution. If we can tie these banks down with draconian measures making these transgressors homeless, income-less and future-less is the only way to ensure that not only will the current banks behave, it will give a realistic chance of the debt for bad banks to be resolved and paid.

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February 10, 2013 · 01:14

The Italian menace?

The Italian menace?

Just when you thought it was safe to think of any kind of future again, the abyss opens up right in front of you and your savings are again in danger.

The first topic of discussion as presented by the Dutch NOS was of course the European budgets. To a budget of 960 billion, the Dutch contribute 6 billion and they got a one billion dollar discount. Yes, this seems to be the Marks and Spencers approach to budgeting. Now, they seem to be happy, and I am not sure how to feel. It does however give a clear picture that the Dutch, always visible as a high player, are anything but that big. When you are profiles as a larger player and their contribution is less than a tenth of 1 per cent, that it means that they are not that big a player at all (or so it seems).
So, the Dutch politicians are going home with a satisfied feeling until the end of the decade. So how is this impacting? It is what followed that could become the real worry. It is a newscast of the return of Mr Berlusconi. Yes! He is returning to Italian politics with elections less than 3 weeks away. Does he have a chance? Not sure and not really my worry to be honest.

What is interesting is how he pulls people in with his dreams of giving back the real estate taxation of 2012. So, if that is done then Italy would be withdrawing from their promise to get their budget and deficit under control. If that happens, then what is next for Europe?
The bigger issue is that this might be a clear indication that Goldman Sachs is back and actively trying to meet their share in the Game of Greed.
They seem to be a clear controlling and influential party with most European governments. Forbes already reported this as a ‘danger’. They did mention the Monte dei Paschi banking scandal as part of their news cast as well. They also remained soft in their ideas of nations no longer being governable. I am less subtle. From my viewpoint I am willing to contemplate the opinion that the European governments are about to become the bank’s bitches with Goldman Sachs leading them the way to population enslavement. I agree, the thought is a little strong!

You see, there is method to my madness, or my madness is methodical (either way works). So, let us take a look at how I got to that conclusion.

In the Dutch newscast on this, as well as in Forbes and as well as mentioned in other sources “Berlusconi, who said he won’t seek the executive position but rather prefers to become Finance Minister, has seduced the masses saying he will repeal a property tax imposed by Monti, returning about €4 billion ($5.4 billion) to the people by refunding taxpayers’ 2012 payments” so with all the shortages, they add to the non-debt resolving side. We can debate whether it is the right or the wrong thing to do. In my view it is an Italian choice and it is their right to choose. Whether right or wrong, it is however interesting that Berlusconi seeks the Finance Ministers position. With him being a connection to Goldman Sachs as a (former) international advisor? It also means that the Italian deficit will be upped by another 5.4 billion dollars. This implies that Italy is less interested in getting their deficit down.

My issue is that according to the numbers Goldman Sachs is one of the banks retaining their gains these last years. I have nothing against that as I do have a capitalistic side. There is however a realistic side to profit, and many greed driven organisations seem to remain very unrealistic. With the ties he had/has, and the rules of the game so unaltered. I worry about what will happen to the Italian debt during the next government term.

Here is the link between this all. This was discussed by the Independent. “What price the new democracy? Goldman Sachs conquers Europe”. In there they made the following statement: “Instead what you have in Europe is a shared world-view among the policy elite and the bankers, a shared set of goals and mutual reinforcement of illusions.” (Nov 18th 2011). I could not have said it any better.

Now we get to the juicy part. Should Berlusconi get elected, and then we will suddenly read on how certain realignments of bad banks will be needed? There will be a change, and of course Goldman Sachs will get their share. It is all nice and legal. No matter how they react, whether Europe breaks apart, whether the costs will once again be set into other places. We are looking at an additional total debt increase of half a trillion dollars (across the EEC) and Goldman Sachs will get their share. So why are the European legislations not dealing with this clearly visible weak flaw?

Now, here is where I get to go on thin ice. The conspiracy theorist in me might think that this is what the power players from the US had in mind from the beginning. From their point of view governments are obsolete! Especially when these governments are getting in the way of highly desired profits, commissions and personal wealth goals.

Politicians seem to get pushed into an ego trip (in some cases they are simply with their backs against a wall). They do not cover their budgets and get the back of these strong players to get visibility and media to do the things that should be investigated and questioned on many levels. The Dutch SNS was a clear example. However other banks and acting parties should not be forgotten. The ABN/Amro Bank was one of these banks that required nationalisation. They are linked in all this with connections to the Royal Bank of Scotland (who was having a nice go at acquiring ABN/AMRO). And again here comes Goldman Sachs around the corner, having a nice juicy finger in all of these matters. They were in an investigation regarding Collateralized Debt Obligation (CDO) traders. They were not guilty, as some people forgot to disclose certain matters. However, the LA Times reported this on October 12th 2010: “Hedge fund operator John Paulson a key player in SEC case against Goldman Sachs. His firm made $15 billion in 2007 by betting that Americans would default on their home loans in droves.” From my point of view, that is not all they betted against.

Why am I so against Goldman Sachs? The issue is not Goldman Sachs; they are not breaking any law. It is the politicians that walk away with golden futures, creating bad banks and leaving the population to work of the debt through taxation, a population left with forever less and less. Soon this can no longer remain affordable and Italy seems likely the next one moving into this direction. This is where banks and large corporations become in charge and we get to work past retirement ages to fill the need of their greed. This is a need that is eternal and will never be satisfied. If you doubt me, then look at the list of nations that was able to keep their budget. It seems that only Belgium made their budget, and that might only have been because they were without a parliament racking up cost for the most of 2011. They even celebrated their new parliament after a record 541 days without a parliament on December 11th 2011. So that would definitely helped in keeping the cost down.

So back to the headline I started with “The Italian menace?”
Is it Silvio Berlusconi the menace? Possibly! If he continues on a path that does not stop the rising debts.
Is Italy the menace? Possibly! If they do not get a handle on their debts. In this case I mean a solution where they pay for their massive overspending from more than the last decade, mostly under Silvio Berlusconi.
Will the Italian menace end the EEC? Likely! If debts keep on rising, and as insurmountable debts are taken as write off’s against retirement funds and national treasuries. It is not impossible that Italy becomes the straw that breaks the camel’s back. Should you consider that this could never happen, then think again. The same was said about the SNS bank and that puppy is now a nationalised one (but it seems that for now it is not house broken).

This has happened again and again. This is not just about the banks. Politicians are also to blame. For that I would like to mention papers like “Investing in Greece: an Olympic opportunity”. It came from Costas Bakouris in 2001. The thoughts were all fair enough. However, how much came to happen? How much money did come in?

Most facts point towards the information that the Olympics cost double from what was budgeted and out of the amount approaching 10 billion a lot less then budgeted came in.
There was the article called “Business and investment prospects strong after Olympic Games triumph” Which was released after the games of 2004. In December 2004, through the newspaper USA Today. It was published in December 2004. The interesting part of the second story is that there was no name attached to it. So what was THAT source?

Even though the Olympics are a unique event, the financial consequences are real and high. Yet, there were no visible budget cuts and massive cuts were required. But wait, here is super hero/villain Goldman Sachs to help with the presentation of it all.

The Olympics were the most visible, but not the only one. This is what Felix Salmon wrote for Reuters on February 9th 2010 (exactly 2 years ago). “It’s a bit depressing that EU member states are behaving in this silly way, refusing to come clean on their real finances. But so long as they’re providing the demand for clever capital-markets operations like these, you can be sure that the investment bankers at Goldman and many other investment banks will be lining up to show them ways of hiding reality from Eurostat in Luxembourg.”

In that time, banks wrote cheques for investment events no one could cover. This is clearly shown in the case of the Dutch SNS. And the fun does not stop here. The article “ABN Amro hiring spree targets Asian private wealth” 29 January, 2013 Written by Elliott Holley shows that they are hiring again, with at least 1 person from Goldman Sachs. It is interesting how this small circle gets to go everywhere.

Goldman Sachs does not seem to have broken any laws. Politicians all over Europe seem to have changed very little, and they seem to all extremely willing to get into bed with Goldman Sachs, their ‘golden’ solution. National politics does not seem to regulate banks to the degree that is needed and some governments do not seem to properly regulate themselves either.

When we look at the 2011 EEC numbers we see the following: the largest government deficits in percentage of GDP were recorded in Ireland (-13.1%), Greece (-9.1%), Spain (-8.5%), the United Kingdom (-8.3%). Whilst the Government debt kept on going up and was set at 10 421 987 million Euro, which boils down to 82.5 (% of GDP). (Source: Eurostat News release 62/2012 – 23 April 2012)
They also show that Even though the GDP was set to become negatively in 2012, it had been forecast slightly positive in 2013. There is no proof of that, and whatever taxation was acquired in 2012, Berlusconi wants to hand that back to the people. Consider these numbers. Now add three facts to this equation.

1. The LIBOR scandal (see previous blog) shows how within the UK the percentages had been tweaked. This means that the percentages were incorrect. Now consider that the LIBOR is based on 4 times the planets GDP (adding up to 300 trillion $ as mentioned in several articles).

2. The GDP is the market value of all the final goods and services produced within in a country in a given time period. We have seen how people are without work. Economies are shrinking and services are lost to families all over the EEC. So how does that number keep on going up?

3. The European Economic Forecast, Economic and Financial Affairs (Spring 2012) document shows a picture again way too optimistic. In several nations it seemed to predict that 2013 was a year when things would be turning up. There is NO sign that this is happening. The belts are tightening in nearly all European nations. In addition, when we consider the SNS Property moving into Bad banks, we see that the current need for business property is diminishing due to lack of revenues. From my point of view it implies that the mentioned government debt at 82.5% of GDP (2011) could be as high as 90% of GDP. If that is true, then the overall percentages will hit all harder as the interest rates for government debts should be higher, and their credit ratings might be lower as a consequence.

Now consider that should the debt grow and their rating goes one level down, then that nation might have to pay a percentage on their debt. With governments owning hundreds of billions, an example means that a debt of $300B, if the interest is only 1% that would come down to an annual payment of 3,000 million, just to keep it stable. That means every person pays between 50 and 300 dollars to pay the interest. EVERY PERSON! Now consider that this is not a real problem for most people, however Consider that in Spain 24% has no job, that means that this amount will be paid by 75% of the population with income, so they pay more now. Then consider that the debt needs to go away.

We cannot trust banks as LIBOR shows. The EEC papers show them to think of them in a better state then they are, and the presented numbers are debatable. And as shown from several sources Goldman Sachs is connected to nearly every stage, somehow in some non-criminal way.

So two years later (after the claim by Felix Salmon), where are we now and what bad news is yet to come?

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February 7, 2013 · 15:11

Banks, eunuchs of a new congregation

The times are still all over the place. As I finished the 5th part of my previous story, the stories from SkyTV UK and the news by the Dutch NOS started to hit my TV. The thoughts I had on issues that are currently playing out are nowhere near done. I get the distinct feeling that this is far from over. It is almost that there is a voice whispering in the ear of Dutch Finance minister Jeroen Dijsselbloem. The whispers seem to be about the Bad Bank and the whispers could involve Goldman Sachs. There is no doubt that this man knows his stuff. He got his finance papers in Wageningen, a renowned and highly respected Dutch University. There is however more at play. I know it is a personal feeling and I am not an economy graduate, so there are plenty who can run circles around me in this regard.
The first part is that this idea comes from Goldman Sachs. Is it wrong to call a spade a spade as the expression goes? This firm together with the Lehman Brothers were the massive cause of something that had us reeling in 2008, and this is not over, not by a long shot. THAT damage will take decades to overcome. No amount of fancy bookkeeping can brush this under any size of carpet. This is however not about emotions. That path will never ever give any solution. My issues remain clinical (or at least I am trying to keep them that way).
Consider the banks are all allowed to get all their failings into a small rejectable corporation. These costs should be paid by the failed implementers. Not the government, not the taxpayer. The bank must pay for their blunders!
If this continues as it currently seems to be going, then we get a legal situation where high risk bad ideas can just be written off the books and straight onto the taxpayers list of to pay, whilst those responsible will ever show improvement. Those people will just keep on playing high risk games. That had been shown already. This thought was also mentioned by Rolfe Winkler at the New York Daily News. How is it even possible that a company that seems to have been one of the major reasons for the financial meltdown be regarded, or even ALLOWED to make any continued presence?
Wherever I looked Spain, Netherlands, Ireland, and perhaps even more places. Goldman Sachs keeps on being named as a primary advisor. How many bad banks are there in America?
Let’s take a clinical jump into health care. Would the Dutch Minister of healthcare Mrs Edith Schippers consider someone for a position? You see, I know a person (well, kind of). Brilliant physician (so they say), over a decade of medical research experience and deep knowledge of improving the physical best in all of us. His name is Dr. Mengele. Would she please consider him as the new Surgeon General?
Are people feeling ‘slightly’ sick at this particular moment? So if a transgressor of THAT magnitude is so offensive, can ministers not understand that we have a massive amount of resistance against parties like Goldman Sachs and Lehman Brothers? Some things should just not be considered. This is not emotion, this is common sense. If groups like that can debunk a generation, why trust them again?
Again I say, this is not emotion, this is common sense. My reasoning is simple. When a board member moves into such a power position, that person will surround himself/herself with the golden boys and girl that made for this to happen. It is an evolutionary step. The board member rewarded is also the golden boy/girl reward. The top of the pyramid moved to the direct vicinity of that power circle. And they would have moved a few people into their vicinity too. So whatever was done to that board of directors did not stop when they left. We are looking at a minimum of two additional circles of power, some moved up, some moved away and some stayed. But the way of thinking of those who left remained in place. That is the real danger. This could happen again!

My fears are voiced in much better way by Professor Julia Black from the London School of economics in a paper from January 2011 “The financial crisis revealed weaknesses in regulation which went far deeper than organisational structure. The new legislation alone cannot provide the solutions – but it will be an important tool for guiding the future conduct of regulators, as well as determining the name of the institution for which they will work” (Black, J, ‘Breaking up is hard to do’, 2011).
So these weaknesses go deeper than just the casual parts. This is partially visible in an article in the Guardian written by Alan Travis on October 2nd 2012 (“Labour will introduce new laws against dishonest bankers, Cooper to say”). It is interesting that this happens more than a year after the paper by Professor Black and more than 3 years after the Banking Act 2009 (I reckon they could not delay it any longer). In the article Cooper says: “Cooper says that the public looked at what had happened and had seen no real sign of people being held to account.” This was Yvette Cooper MP, the current UK Shadow Home Secretary.

Really?

Many had that feeling since 2008 when retirement funds when to the local latrine and haven’t been heard of since. For me there are a few additional issues.

1. Can this happen in Australia? (Some might say No, we are not like that, but how clearly is this set in legislation?) We should find and test this BEFORE the Australian public is presented with a multi-billion dollar write off.
2. The UK has the Fraud Act 2006 (originally part of the Theft Act). The problem here is that the word ‘Dishonest’ is a factor in each of the variations of Fraud. That has the issue that the events that lead the 2008 meltdown were not illegal. When we look at the Banking Act 2009, the criminal links are not really there. More important, since its release there have been no additions, alterations or amendments to stop the bad credit ‘solutions’ the US banks employed. So it seems to me that proper protection is still not in place. This means that the impression remains with me that the financial top can continue to get their monthly shares of luxury items, real estate and yachts. It seems that this area is not filled with loopholes; it remains nothing less than an open gate. Beyond that is the statement of Martin Wheatley in regards to LIBOR and that this had been happening since 1991 is an indication of the remaining dangers. So how safe am I in Australia from our banks playing this game?
3. Which solutions and papers can we trust? Many of them are all about concepts, approaches and possible ideas. And nearly all of them are pleading against regulators, regulations and stricter control. It seems to me that those papers are all from financial experts who want a solution without hindering their need for freedom of movement. This is in the heart of my fears.

There are leagues of papers that proclaim ideas. An example is “CRISIS MANAGEMENT AND BANK RESOLUTION QUO VADIS, EUROPE?” written by Dr Barbara Jeanne Attinger. In the conclusions section of page 47 she writes: “National special resolution regimes are capable of addressing the characteristics of credit institutions at national level. The UK regime is exemplary in this respect, as it provides an effective toolbox for bank resolution”.
We might ask her about the LIBOR issues; that in itself does not invalidate her thoughts and approach to the Banking dilemma at heart. Stronger than that, her presentation on 29th January 2013 in Copenhagen reads direct, to the point, clear and pretty brilliant. I do not need to need a finance degree to read between the lines that this is a possible approach to a solution. The part I am missing starts to be visible when get to the resolution in the context of a banking union. She mentions this and focusses on the third pillar.

• Single supervisory mechanism
• Integrated resolution framework
• Common system for deposit protection

The first pillar is about the supervisory mechanism. From my point of view I see the specific need for a fourth pillar, which would require alignment over several nations (not all have the same acts, rules and legislations when it comes to banks).
My thoughts would go towards:

• Single supervisory mechanism
• Integrated resolution framework
• Common system for deposit protection
• Acts of Accountability for Banks and Financial Institutions

I have seen several papers that rely on a solution without regulations. There is no way to tell who’s right here (my lack of Financial degrees gives them the advantage), yet the fact has been shown that Banks cannot be trusted, and the LIMOS scandal just adds a bucket load to that belief.
The acts need to go further than the Fraud Act and the Banking act combined. It must clearly outlaw certain acts. It must also limit rewards. The utter need for a ruling that bad bank approaches are no longer rewarded. More important, any form of reward within financial institutions should be lessened by the amount moved to a bad bank, or bad investment write-off. Something they will not want, however, consider the fact that people end up with margin profits with swapping papers. That should no longer be rewarded.
The high risk use of Interest-Rate Hedging Products (IRHP) are reported to dent their net earnings prospects in the short- to medium-term. (Quote from the Guardian) Well, if it is impeding net profits, then it should not be rewarded in any way shape or form. You want to run risks, fine, but then the bank does it risking their own capital and own finances. What are the chances the banks agree to such measures?
There is an additional issue. This is the current instalments of Goldman Sachs creativity called Bad Banks. This is nothing to attack them on, as they do not seem to be doing anything wrong or illegal. However, I feel that this escape hatch will cause a lot more damage in the short and medium term than anything else. Even long term these Bad Banks are to be seen as issues. The required change would be that until resolved, no less than 5% of annual banking revenues MUST be transferred to the bad banks from the banks that had to be created because of their actions. In additions, the commission-able revenue must be based on the remaining profits AFTER funds are transferred into the Bad Bank. The need for this is shown as the Netherlands are already reporting the need for more and more financial assistance as Bad Bank properties are placed in financial duress. So SNS can just wave it off and sail to the future? It reads like the good old British days of Wine and Jousting: “Peasant Population Taxation! For a long lasting rule of Fun and Frolic”
The next issue goes beyond this. The Bad Bank might be taken care of in some way. Perhaps McKinsey & Company picks it up. Perhaps Moret & Young takes a creative accounting dip in that pool. The LIBOR scandal is however more than just an issue at hand, it will be a debilitating complication, allowing several parties to start muddy the water, leaving a solution hanging until sometime down the track, and at present no protection seems to be in place, and none to look forward to in the short term.

I reckon the current scandals show that this is not even the end of the beginning!

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