Yves here. This tidbit from HSBC reveals a new low in the standards of banking, which given how low those already are, amounts to an accomplishment of sorts. Perhaps we should create a Stuart Gulliver Award for other instances of creative extreme seaminess. Nominees?
By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Originally published at New Economic Perspectives
Greetings from Quito, where I will be spending four months teaching at IAEN about effective regulation and building ties with UMKC.
The latest twists on the latest HSBC tax evasion and tax avoidance scandal is that it has come out that Stuart Gulliver, HSBC’s head, put his money where his mouth wasn’t. He personally used double tax havens – Panama plus Switzerland – to hide his income and wealth from view because his pay was so outrageous that even other HSBC executives would have been outraged by it. The New York Times’ account of this tale demonstrates that Gulliver needs to fire Gulliver as his spokesperson.
He said he set up a Swiss account to hide his bonus from his Hong Kong colleagues, and then another one in Panama to hide the amounts from the bank’s employees in Switzerland.
“Being in Switzerland protects me from Hong Kong, being in Panama helps protect me from the Swiss bank,” he said.
Yes, the HSBC CEO just said openly that he felt a desperate, personal need to be “protect[ed] “from the Swiss bank” – by which he means HSBC. He felt a similar need to be “protect[ed]” “from his Hong Kong colleagues” at HSBC. Any HSBC customer victimized by HSBC’s PPI and “swap” rip offs of customers and any UK taxpayer ripped off by the tax evasion emporium run for the powerful and wealthy out of that same HSBC “Swiss bank” can empathize with Gulliver. HSBC customers and non-elite UK taxpayers all feel a desperate need to be “protect[ed]” from HSBC – and Gulliver.
What Gulliver was so desperate to have “protect[ed]” from his “HSBC colleagues” was knowledge of his pay. He knew his pay was so excessive that it would outrage even HSBC’s senior managers. Remember this event when the next bank CEO rails against the “politics of envy.” The insanely jealous people that Gulliver feared were his peers, because even in the corrupt culture of HSBC he stood out for his greed.
Only a few things would need to be true to make this nearly perfect story the perfect story of the inevitable result of the City of London “winning” the regulatory “race to the bottom” and becoming the financial cesspool of the world – while being praised by the business press (even the Guardian).
First, the defense of Gulliver’s outrageous pay could actually blame criticisms of his pay on “the politics of envy” by little people rather than Gulliver’s wealthy peers. An article entitled “HSBC’s banking excess or banking excellence?” might read:
Some might say those who fret over Mr Gulliver’s pay are practising the politics of envy.
Second, after HSBC was fined for laundering over $1 billion for the Sinaloa drug cartel, a “think tank” might praise Gulliver’s outrageous pay as the just reward for exceptional performance in an article entitled “Our banks are a national treasure – Britain is good at financial services.” The think tank admitted to only one problem by banks – they have not yet found an effective way of triumphing over our stupidity. Indeed, we are not worthy of Gulliver and HSBC.
Admittedly, banks need to do a better job of explaining to the public what exactly they do. Economic literacy is exceptionally poor….
Third, HSBC’s defense to the Guardian of Gulliver’s use of opaque tax havens was that hiding his income and wealth and his outrageous pay (and minimizing taxes) was the epitome of “transparency.”
“There is absolutely no story here,” said [HSBC Chairman Douglas] Flint of the chief executive’s bank account. “There is nothing that Stuart has done that is not absolutely transparent, legal and appropriate.”
Thank you, Mr. Flint, for demonstrating why relying on a board of directors chosen by the CEO to supposedly keep bad CEOs on the right track results in recurrent, unintentional self-parody. Combining Panama and Swiss tax havens to ensure secrecy is the new “transparent” in banking.
For other nominees, regarding Yves Introduction, I still like St. Blankfein’s “God’s work” reference. It is not a specific behavior per se, but cloaking his industry’s overall behavior in the trappings of religious piety is extremely smarmy. It evokes the quai-religious nature of the neo-liberal economic mythology which has created this entire mess.
Why of course Flint would say such a thing, and why not? These days, isn’t this just how it is? I am serious, not snark. Why shouldn’t Flint believe this? I mean, after all, right now we have the US Pres wanting to appoint Loretta Lynch to the position of US AG, and Lynch knew all about this and approved of it. Ergo…
I don’t even know anymore if this qualifies for Orwellian speech or if this is just the new normal. And at any rate, other than a teeny tiny subset of the 99s, who really is paying any attention to this thievery on a grand scale? Where are the consequences? Shorter A: there aren’t any at all. Not even a light tap on the wrist. I just expect the outrageous thievery to get worse. Who’s gonna stop it? Loretta Lynch???
Let the rapine and plunder continue…
“The feeling is definitely there. It’s a new morning in America… fresh, vital. The old cynicism is gone. We have faith in our leaders. We’re optimistic as to what becomes of it all. It really boils down to our ability to accept. We don’t need pessimism. There are no limits.”
Inigo Montoya: You keep using that word. I do not think it means what you think it means.
Very interesting. I assume that it was HSBC’s board of directors that specified Mr. Gulliver’s pay. Were I the investigator type, I might just suspect that Mr. Gulliver was preaching tax avoidance to the board and they were rewarding him for a job well done – backscratching and all that. So, if Gulliver was preaching tax cheating and the board was rewarding him for so doing, isn’t that a criminal conspiracy?
Gosh, I thought that outrageously high pay is considered a badge of honor for CEOs. Don’t they want the other CEOs of the world to know how well they’re doing? How can an ambitious social climber get himself onto the Forbes 400 list if his pay is secret?
I love stories like this, a perfect example of the lack of honor among thieves. He’s making so much – who can he trust? hahahaah.
My Nominee: an oldie but a goodie from the go-go days of the GFC, then-CEO of what was a bailed out TBTF Lloyds TSB Eric Daniels got the bank to pay for his “tax” “planning” “advice”:
Chief executive of Lloyds Banking Group, Eric Daniels is under pressure to make clear his tax arrangements after it was found he earns an additional £25,000 for tax planning advice, according to City A.M. Daniels has also been criticised for revealing that he is awarded substantial tax breaks after retaining his non- domiciled tax status as an American citizen. The chief executive earns a salary of £1m a year with tax breaks that entitle him to avoid tax on foreign and overseas investments. (original at https://www.accountancymag.co.uk/lloyds-chief-faces-tax-status-scrutiny — you get an invalid security certificate which is pretty harmless if you want to see the original page but I have copied the story above).
Obviously he couldn’t cough up the £25k from the £1M basic salary, he was maybe down to his last few million, hence needing to claim this “allowance”. Oh, and paying UK taxes was clearly only for the little people even though his salary was earned here. I guess if he’d fallen down and broke an ankle, the medics and drivers of the National Health Service ambulance which would have take him to the ER would have waived their salaries for that shift’s work…
Papantonio: The Big Bank Mafia Runs America
“First, the defense of Gulliver’s outrageous pay could actually blame criticisms of his pay on “the politics of envy” by little people rather than Gulliver’s wealthy peers”
I see what you did there.
It seems to me that Mr Gulliver has decided that having the piss taken out of him by his peers and the likes of Mr Black is the lesser of two evils. The real explanation, that he was involved in a complex international tax fraud of a kind that ought to get him to number one public candidate for a prosecution enquiry for tax fraud, is not one he would want to admit in the UK’s current febrile pre election atmosphere.
I am so looking forward to the first tax haven bank that embezzles all of the funds of its clients. Sooner or later, it will make Madoff look like a minnow.
BBQ a banker.
Q: What do you say when you see a banker’s head fall into the guillotine basket?