Sunday, 10 November 2013

Is It Really So Hard To Be A Saint In The City...Or Wall Street...


Saint E Of Wall Street And The City : Makeshift Studios 2013

In the hazy, dark, rapidly evolving, end days of 2013, do we really find it surprising that almost six years from global financial catastrophe no high ranking Wall Street or City executive has faced criminal prosecution?

Well, no, I don't think so.

This thought came to me when reading about a man jailed for stealing a bottle of wine from a Glasgow retailer. Now, I would never condone theft, of course, but it certainly makes you think...

That, quite simply, is the situation our world lends itself to.
However, as much as no legal proceedings have been taken against individuals, the same cannot be said for the banking institutions themselves.
It feels like everytime you check the financial section of a newspaper or magazine at the moment, there is a high-end bank in the dock for some misdemeanour or other, facing gigantic financial penalties for serious industry indiscretions.

In the three years since the start of 2010 America's finest, JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley have, between them, agreed to fork out $70 billion (£43.6 billion, €52.3 billion) in penalties tied to various misdemeanours related to the financial crisis.

To put this into perspective for the ordinary working person, $70 billion (£43.6 bn, €52.3 billion ) would keep 1000 retired workers in a pension of $20,000 (£12,500, €15,000 ) for 35 years, or feed the population of Mozambique ( 19.5 million) for a year. This kind of money would employ 280 Chief Executives with Bob Diamondesque IQ's of 99,600 for ten years.

But the US banking situation is not unique, across the pond a whole string of top European banks are also in the dock.

Red-faced Dutch lender Rabobank has agreed to pay more than $1.6 billion (£1bn, €1.2bn) for its squalid part in the Libor scandal, while Swiss giant UBS has set $652 million (£406.8m, €487.4m) aside - it could easily become more - to pay for 'regulatory' issues having already shelled out $1.5 billion (£900m, €1.1 bn) in December for another misdemeanour. Meanwhile, Deutsche Bank has found itself with a litigation bill of $1.2 billion(£750m, €900m). In total, legal proceedings thus far have cost the German Bank a massive $4.1 billion (£2.6bn,€3bn).

In the UK, Barclays Bank has been ordered to pay a US hedge fund $700 million (£436m, €523m) after losing in court over issues once again linked into the 2008 financial crisis, while the cost to Lloyds Banking Group for mis-selling loan insurance has climbed to $12.8billion (£8 bn, €9.6bn).

Recently some banks have been suspending forex ( foreign exchange) traders. Six traders at Barclays and two at RBS have already been suspended under suspicion of manipulating the $5.3 trillion ( £3.3tr, €4tr) per day market.

There is, I imagine, some wonderful intergalactic comic line or tantalising cyberpunk plot for a novel in all of the above, and I have to pinch myself that this is the real world.

As you will have recognised, the sums of money involved in the banking industry, for most of us, is hardly imaginable, especially with regard to forex. As reported, trillions of dollars, euros or pounds sterling slushes around in this market every day - we would all be impressed if it were thousands of dollars, euros, pounds sterling - such is the light year of distance between the street and the financial universe.

What was it Oscar Wilde once said : We are all in the gutter, but some of us are looking at the stars.

It is so difficult for us to imagine what $5.3 trillion would actually represent in real terms? I am not going to even attempt to work it out.

But, no doubt this would be enough to feed the world several times over on McDonald's happy meals with extra fries and a bottle of Coke thrown in! It would probably be enough to house the world's homeless at a Marriot for the next 100 years ( that's assuming the hotel was big enough to take ALL the world's homeless).

But November didn't spawn the monster of banking indiscretions, capitalism has been evolving for a long time and with it the global banking structures. 

The misdemeanours listed above are serious and will, at some point, impact on all our lives. However, it wasn't the global financial system that created the world we live in, but the other way around.

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