Readers will recall a recent article here in FinnishNews where it was proposed that governments and other public bodies should not continue to deal with banks, no matter how big, that committed serious misdemeanours.
The article described how Goldman Sachs, an American bank, was involved in a major case of fraud with the Malaysian government. They were the lead manager for a huge bond issue the proceeds of which ended up in the pockets of certain Malaysian politicians and Goldman Sachs officers a number of whom have been found guilty of criminal activities.
Legal action was brought against the bank in the courts, and after the process was started Goldman Sachs decided to settle the case by paying €3 billion to the government without admitting any liability or criminal action. This huge payment was not a charitable act by the bank, and is clear evidence that even that the bank’s board had failed to stop its staff from engaging in serious criminal activities. Let’s be clear, these huge dominant banks are so big and complex that it is almost impossible to control what is going on in the trading rooms and in far flung countries thousands of miles from Head Office.
Almost every big bank has been embroiled in similar bad deals. The last financial crisis in 2008 saw plenty of “misdemeanours”, a fancy word used by bank lawyers for what is “really crooked dealing”, and yet hardly any traders or their bosses were imprisoned or fined. Remember that petty bank robbers get 5 to 10 years in prison, and they inflict much less harm than the last mortgage scams in the US! In fact certain banks were saved from almost certain bankruptcy by taxpayers being “too big to fail”!
As a result of these misdemeanours few, if any, banks are excluded from dealing governments or with big companies, who are their main clients. For instance, Goldman Sachs is still one of the biggest dealers for government bonds for Nordic and other European governments, the US Treasury, and many others…
The question is that why are taxpayers’ representatives still dealing with such banks? How can they be trusted? Would you allow a criminal run organisation to handle your affairs – don’t we call these people “The Mafia” and mock the Italians and Russians for failing to protect their economy against these ruffians? Then why are we allowing Goldman Sachs and other such banks to make money from our affairs when they are clearly not the type of people we would like in our house?
Now, it is apparent that the French government has been reading these articles, and have just announced that they will stop trading with Morgan Stanley for a 3 month period because it has been caught trading in bond futures five years ago with “the effect of seriously undermining the liquidity of the French sovereign bond market”. The bank was also fined €20 million by the French government.
At last one government in Europe is doing something to clean up the market, and although the step is small it is a step in the right direction.
Finally, do not be fooled by professionals working in the State Treasury and central banks who will probably say that these big banks are the best dealers for their needs with enormous placing power and big balance sheets. There are now many good bankers out there who could easily step into the shoes of these banks if they were firmly pushed out of their heavily protected ivory towers. Another reason for not listening to these people is that many of them expect to secure nice jobs at these banks as “senior advisors” when they retire! It is called the revolving door…
Photo: Wikipedia Commons