Even though the executive branch of the English government has as much of a soft spot for its banks as America’s does, its regulators are less craven than ours* (admittedly, ours set such a low standard that it is not all that hard, and the UK’s relative advantage may be about to go into reverse with the appointment of a new head of the Prudential Regulation Authority, since the designee presumptive believes big banks can’t be prosecuted). Despite some major lapses, such as failing to deal with Libor abuses, the Bank of England has been been openly critical of bank behavior and has pushed for reform, specifically, a Glass-Steagall like breakup of the banks. It was joined in this effort by the FSA, but the Treasury and the industry succeeded in getting that proposal watered down to ring-fencing of the retail banking operations, which is still more serious than any structural reforms implemented in the US. And remember banking contributes an even bigger percentage of GDP in England than in America, so the usual palaver about the need to leave banks alone, given the size of their economic footprint, would seem to have more weight there than here.
Consider another way that England departs from the US: it’s already devised a program to compensate victims of misrepresented swaps (usually interest rate). In the US, municipalities have been shellacked by being on the wrong side of these trades, with the bankruptcy of Jefferson County serving as the poster child for both how much corruption was involved and how damaging the consequences can be. In the UK, the preferred chump customer was small businesses, but the bad outcomes were very much the same. The FSA has established a scheme through which the eleven biggest banks involved have agreed to join an FSA sponsored program to compensate victims of mis-sold swaps.
The problem is that the scheme is moving forward too slowly, which has led some MPs to demand that swap payments for transactions already flagged as probable mis-sellings be suspended until the investigation is completed. From the Telegraph:
Banks must be forced to offer a moratorium on payments that thousands of small businesses are still being forced to make on interest rate swaps, according to a group of MPs investigating the scandal.
The Financial Services Authority and Treasury have been told they must push banks to offer an immediate freeze on all swap payments, according to a letter signed by 24 MPs.
“There are many businesses who are continuing to enter administration as a direct result of their obligations under their swap contracts,” wrote Guto Bebb, a Conservative MP and chairman of the All-Party Parliamentary Group on swap mis-selling.
Mr Bebb and the other MPs said the existing offer of suspending payments on a case-by-case basis was not sufficient and that more needed to be done to help struggling victims.
More than 40,000 interest rate derivatives are estimated to have been sold to smaller businesses since 2001, but with interest rates at historic lows the cost of servicing these contracts has left many firms facing hundreds of thousands and even millions of pounds in costs they say they were never warned about.
“Administration” is UK-speak for “bankruptcy”.
By contrast, we’ve had a mortgage settlement in which banks violate key terms of the agreement, yet as far as I can tell, not a Congresscritter, much the less a meaningful group, has said a peep. Nor have we heard much official noise about criminal practices in the municipal swaps market, including bribes and bid-rigging. And the lack of criticism from the political classes means the media uptake on these issues has been sporadic and half-hearted, which reinforces the official narrative that things really aren’t that bad and the public does not care all that much. And they might not be wrong. As long as citizens can be kept largely ignorant of the many and varied ways that banks have been looting the public purse and breaking laws, they at most have a sense the banks get the cream and they get the crumbs. They can’t articulate anything more than general suspicions and thus can be dismissed as uninformed. Even though the English have a long way to go in cutting their banks down to size (and the support of the government is a major obstacle), the frequent and negative coverage of bank behavior in major news outlets means that it is less risky for politicians to go on the offensive against banks. That is a bridge we need to cross if we are to reverse what Simon Johnson has called a quiet coup.
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* The Bank of England dropped the ball on the Libor scandal, but so did the US Treasury, and US banks were deeply involved too. And at least in the UK, they had hearings and grilled bank CEOs and senior officials at the Bank of England pointedly. And those were covered in considerable detail in the UK media. We haven’t had anything remotely like this sort of roughing up of officials here, and their performance on the whole has been much worse.
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” . . . [W]hat excuse does the US have?” “We don’t prosecute rich white people here; instead we pay them public money to stay that way.”
Since you asked . . . .
OMG!!!!! The roughing up of officials!
I feel a bit snarky about this given that none have been sent to jail….so the looting continues with some promised swap rate paybacks where misrepresented.
I think the global inherited rich see this as a current cost of doing business to be passed off until their Shock Doctrine events in the US and EU are completed.
The UK is a financial center because it is convenient for the global inherited rich to have multiple levers of control. Once the US and EU have been cowed, stiff upper lip or not, the UK public will be forced to join the social devolution along with the rest of us.
Welcome to the new world order or is it Neo-Fedulism where we never even know the puppet masters behind the global curtain that are removing the iron fist from the velvet glove.
Using UK & England interchangeably has rendered this article unreadable for me.
A US equivalent would be to confuse “USA” and “The Union” when discussing the SEC.
The Queen is very displeased.
I don’t get it. Which is the insult?
I try and follow the bouncing ball of authority and spheres of influence and chains of command, and I never can.
Nicholas Shaxson was just interviewed by Harry Shearer on Le Show:
So, okay, in all that, what power does a letter written by some MPs to the FSA have? As much as another sternly worded letter by Henry Waxman to anyone in the Bush administration ever meant here? (Or a DOJ trial-preempting fine to HSBC that shovels money out the front door while pushing it in the back?) Sound and fury signifying nothing?
From Yves’ link in the post:
In the interview, Shaxson describes the bigger picture which is that multinationals write the laws they want in secret, get them passed quietly by a few insiders, with no one the wiser and no democracy involved. Say, here:
or here:
(Shaxson says the U.S. has quietly been competing with Switzerland and Britain* to become an onshore tax haven.)
(long-form interview, almost an hour — I get lost — just where is the Queen’s displeasure focused? It’s all Oakland to me, no there there.)
* “the Anglo-Saxon system, which fundamentally Britain was the most important part of this”
Here Nicholas Shaxson would disagree with you, and he is a former Financial Times writer and I believe a holder of an English passport. Note the heading from a post dated yesterday:
UK memo to US media: our financial bad guys are badder than yours
http://treasureislands.org/uk-memo-to-us-media-our-financial-bad-guys-are-badder-than-yours/
So I think you need to get over your sanctimoniousness. The pound is the official currency of the United Kingdom, including Scotland, Wales, the Crown dependencies and the British Overseas Territories of South Georgia and the South Sandwich British Antarctic Territory and Tristan da Cunha. The Bank of England is the central bank for all these countries and jurisdictions, not just England. Similarly, the FSA also had jurisdiction over Scotland, so I would assume the new prudential regulator also oversees Scotland and Wales. The UK more or less still exists for financial regulatory purposes.
And he disagrees with my thesis, since he thinks the UK (yes, UK, per Shaxson) offshore is much bigger and dirtier than the US offshore, so pretending neither exists makes the UK (yes, the UK, per him) worse
In support of John Hay’s analysis (though not his sentiment towards the article) and HMS Limey’s sympathy for HM the Queen…. and your apparent contretemps (?)
I’m an Englishman, and still I carry a British Passport, as do my fellow Brits from Scotland, Northern Ireland and Wales. So, I suggest Nicholas Shaxson check his ‘English passport’ for the ‘Meade in China’ label before he next attempts passes through immigration control.
As far as I am aware the UK Parliament has no plans to establish an ‘English government’ (as written in the first sentence of the article above) or assembly – although, several pressure groups exist that are calling for one (the several being: my mum, dad and granny, and Scottish cousin Tosh).
The ‘UK Parliament’ remains ‘The’ sovereign (with no emphasis on the silent sovereign) parliament for the whole of the UK, but Scotland has “a” parliament (though, apart from New Year’s Eve renditions of Auld Langs Syne, no one really listens in; not even the Scots) and Wales and Northern Ireland have assemblies (We think). The UK is therefore a unitary state with a devolved system of government; which contrasts nicely with a federal system – one that you may be more familiar with since you got rid of HM’s great, great, great grandfather George.
As per the article, again, I’m not sure England has a GDP per se (though some clever policy wonk like Mark Carney will probably think of something once he’s got his feet under the table, supping on a nice cup of Earl Grey tea and dunking a ginger nut biscuit).
The Government of the United Kingdom is responsible for several dependencies, which fall into two categories: the Crown dependencies, in the immediate vicinity of the UK, and British Overseas Territories, which originated as colonies of the British Empire (however the Channel Islands and the Isle of Man are not part of the United Kingdom, but are dependent territories of the English Crown). Oh! And there are 15 Commonwealth Realms….which are just ….Realms (whatever that is). But, you’re right about the Quid! I can go anywhere from England to the Falkland Islands (via Buenos Aires)and still use the loose change in my pocket to buy fish and chips. Hurrah!
“Merrie olde UK” “Meade in China”
I’m confeused!
And your “Commonwealth of Nations” which includes that huge chunk of eastern Africa including Madagascar, and presumably all that oil?
Yves wrote: Here Nicholas Shaxson would disagree with you, and he is a former Financial Times writer and I believe a holder of an English passport.
From the Shaxson Le Show interview that I linked above:
(Does that help? He certainly has a British/English accent: http://harryshearer.com/le-shows/december-2-2012/)
“By contrast, we’ve had a mortgage settlement in which banks violate key terms of the agreement, yet as far as I can tell, not a Congresscritter, much the less a meaningful group, has said a peep”
Well we do have one such Congresscritter, namely, Honorable Alan Grayson. (One is not enough, obviously, but he is proof of principle)
I.e., recall “Alan Grayson (High Quality Version): Is Anyone Minding the Store at the Federal Reserve?”
http://youtu.be/cJqM2tFOxLQ
I’m a Scot living in exile in England. I hope to go back if we form a Scandinavian republic. Scottish complicity with he worst of UK banksterism was complete – with as many as one in nine jobs in financial services. Call us England all you want Yves – it helps with the shame!
The swaps were sold much as ppi and maybe like insurance was once sold by people never intending to pay out. We have not worked out in the UK quite how our banks have money to invest abroad or where the ‘seed corn’ of this came from, or the links of this overseas investment with war and crime. Given good arguments were made about this from 1900 to 1920 and our competition with the USA led to War Plan Red one would guess neither of our countries has any moral high ground in this. We both lack informed publics. Keep up the information – my guess is you are wrong on this as UK legislation and enforcement activity is designed not to work!
Just curious about your sovereignty, you Brits, or Uks. Has your banking system totally undermined your ownership of private property with fraudulent “securitizations” which destroyed any semblance of land entitlement? Do your land titles have a broken, never-to-be-repaired chain of ownership. And what does British/UK law do about this mess?
No, strangelly enough we managed to avoid that particular clusterf*ck.
Not quite sure how that happenned.
The FSA were often a part of the problem rather than a well functioning regulatory authority, if not still, or have they had an epiphany ?
i refer specifically to the time when Sir James Crosby was both Deputy Director at the FSA.and the CEO of HBOS bank and who, during his tenure of both positions simultaneously, sacked the HBOS former group head of regulatory risk,Paul Moore, after Moore warned the Bank of their excessive risk. An independent auditor which was hired to investigate Moore’s claims, concluded that there was no problem and FSA accepted that. The rest, of HBOS, is history; the bank collapsed.
In Moore’s own recent words, in relationship to the HBOS case : “Unless the FSA are taken out of the picture in relation to the question of accountability for the banking crisis , there will be no accountability.”
Quoted from :
http://www.ianfraser.org/hbos-whistleblower-hits-back-at-crosby-claims/