They say that patriotism is the last refuge
To which a scoundrel clings
Steal a little and they throw you in jail
Steal a lot and they make you king
Bob Dylan, "Sweetheart Like You" (1983)
The record-breaking fine of £290m to which Barclays was subjected this week for financial crimes committed from 2005 onwards sounds significant, until you realise that Barclays chief executive Bob Diamond was paid £17m for last year alone (and that the bank also paid £5.7m to cover his tax bill), that he has been paid almost £100m since 2006, and that the amount of the fine (£60m in the UK and £230m in the US) is basically peanuts — just 10 days’ worth of profit for Barclays, as Paul Lewis of Radio 4′s Money Box programme explained to the BBC.
The first thing that occurred to me was that, however much bankers are caught committing financial crimes, they always seem to get away with it, as Bob Dylan explained back in 1983. Moreover, Bob’s recognition of the disparity between the rich and the poor when it comes to crimes involving money also rings horribly true still, as is clear from the punishment for Barclays — a slipped wrist — and the punishment for those involved, however peripherally, in last August’s "riots" in the UK, when judges decided to "make an example" of the mostly unfortunate young people who came up before them. The most shocking example I came across was described in the Guardian as follows:
At Camberwell Green magistrates, Nicholas Robinson, 23, an electrical engineering student with no previous convictions, was jailed for the maximum permitted six months after pleading guilty to stealing bottles of water worth £3.50 from Lidl in Brixton. He had been walking back from his girlfriend’s house in the early hours of Monday morning when he saw the store being looted, his lawyer said, and had taken the opportunity to go in and help himself to a case of water because he was thirsty. He was caught up in the moment, and was ashamed of his actions, his defence said.
But the prosecution told judge Alan Baldwin: "This defendant has contributed through his action to criminal activities to the atmosphere of chaos and sheer lawlessness." There were gasps from the public gallery as his sentence was delivered.
To listen to Barclays boss Bob Diamond, you would think that the crimes uncovered by the Financial Services Authority in the UK and the Commodity Futures Trading Commission and the Department of Justice in the US were insignificant — and presumably, less significant than £3.50 worth of bottled water, for the theft of which Nicholas Robinson received a six-month sentence — but as Jonathan Freedland explained in the Guardian:
Confronted with a clear ruling that Barclays traders had lied and cheated in seeking to rig a key interest rate used to determine everything from mortgages to credit card bills, Diamond put his hands up and conceded that the traders’ action had been "wholly inappropriate".
Inappropriate? Inappropriate is wearing a tie to a barbecue. Wholly inappropriate is burping during the wedding vows. Distorting for personal gain a rate that underpins contracts worth $350 trillion worldwide is rather more than "inappropriate".
On the Guardian's letters page, a reader, Mike Davies from Leeds, also provided a simple but powerful explanation of the bankers’ crimes. He wrote that the rigging of the Libor and Euribor rates — the rates at which banks lend money to each other — by Barclays bankers and the employees of other major banks in the UK, US and Europe, including Lloyds and RBS, which are also under investigation (and which were both bailed out by taxpayers) "sounds just technical. It isn’t." He added:
The Libor rate is the average rate at which UK banks lend to each other. It is also the rate used as a benchmark for everything from the interest due for late payment on many contracts to the interest rate on many mortgages — real payments by millions of real people. These rates also serve as benchmarks for much of the trade in financial "derivatives": obscure instruments created by financiers whose total value is hundreds of trillions of pounds, an unbelievable amount. The money to be made by fraudulently manipulating this market simply beggars belief.
Adding that, because "finance capital continues to act purely to make huge profits, legally or illegally," the entire banking system "is not a support to the real economy but a criminal conspiracy against it," Davies recommended that, "Instead of propping up the unaccountable private banking system at the expense of ordinary people, we must replace it with a publicly owned, publicly run, publicly accountable national bank."
I hope that many people agree, and that consumer indignation accompanies the forthcoming revelations that other banks were intimately involved in the rate-rigging scandal. As the Observer explained today:
The interest rate rigging scandal that has engulfed Barclays was the result of a coordinated attempt at collusion by traders working for a coterie of leading banks over at least five years, according to a series of lawsuits and legal rulings filed in courts in Asia and North America. The lawsuits allege the fraud was extensive, spanning at least three continents and involving trades worth tens of billions of pounds.
In a 28-page statement of facts relating to last week’s revelation that Barclays had been fined a total of £290m, the US Department of Justice discloses how a network of traders working on both sides of the Atlantic conspired to influence both the Libor and Euribor interest rates — the rates at which banks lend to each other. It was, in effect, a worldwide conspiracy against the free functioning of the market.
The Observer further explained that it was the knock-on effect of the rigging of the interest rates on other parts of the world of finance that was particularly prompting further investigations. For example, one significant US broker, Charles Schwab, alleged in a lawsuit in April that he did not receive "rightful payments" as a result of the rate-rigging, and this, the Observer noted, suggests that "a plethora of similar lawsuits seeking compensation could soon be issued" — affecting as many as 16 banks in the UK, the US, Japan, Canada, the European Union and Singapore, including HSBC, Lloyds and RBS, as well as Barclays, and involving nine different government agencies.
Officials at a bank in Canada, who have agreed to become whistleblowers, have stated that a number of different banks "communicated with each other … to form agreements," and that this "was done for the purpose of benefiting trading positions." A trader at this particular bank is also "alleged to have communicated with traders at HSBC, Deutsche Bank, RBS, JP Morgan and Citibank."
The Observer also noted that a "crucial question" is whether senior managers knew of, or approved of the traders’ activities. A former RBS trader in Singapore, who was fired, stated in a lawsuit that "it was 'common practice’ among RBS’s senior employees to make requests for the Libor submissions to be set at certain rates."
RBS denied these claims, but it is difficult to see why the banks’ protestations should be believed.
As the rate-rigging scandal erupted last week, politicians and those in positions of economic influence queued up to express their disgust. Mervyn King, the governor of the Bank of England, "said something had gone 'very wrong’ with Britain’s banks that needed to be put right," as the Guardian put it, and Lord Turner, the chairman of the FSA, said that there was a "culture of cynicism and greed that is quite shocking." Vince Cable, the business secretary, described the problems in the UK banking system as "a moral quagmire of almost biblical proportions", and Ed Miliband called for a public inquiry into the industry’s "institutional corruption."
Predictably, the Tories, calling the shots in the coalition, decided instead to order a review of the inter-bank lending rate, which is obviously intended to be nothing more than a whitewash.
I suspect that rage — public rage on a colossal scale — is probably what is needed, but I have no idea when or if the crimes committed by the rich and powerful will provoke a significant response. However, we surely cannot tolerate forever the unfettered greed that crashed the global economy in 2008, but has been allowed to continue its ruinous work unpunished. In deliberately manipulating the inter-bank lending rates, bankers were clearly engaged in criminal activity, but even if there is a loophole — as there was, for example, in so many of the complex schemes developed by bankers, which were purportedly legal, but which brought the world crashing down just four years ago — it is time for all this cynical, unproductive profiteering to be brought to an end, permanently.
Andy Worthington is the author of The Guantánamo Files: The Stories of the 774 Detainees in America’s Illegal Prison (published by Pluto Press, distributed by Macmillan in the US, and available from Amazon — click on the following for the US and the UK) and of two other books: Stonehenge: Celebration and Subversion and The Battle of the Beanfield. To receive new articles in your inbox, please subscribe to my RSS feed (and I can also be found on Facebook, Twitter, Digg and YouTube). Also see my definitive Guantánamo prisoner list, updated in April 2012, "The Complete Guantánamo Files," a 70-part, million-word series drawing on files released by WikiLeaks in April 2011, and details about the documentary film, "Outside the Law: Stories from Guantánamo" (co-directed by Polly Nash and Andy Worthington, and available on DVD here — or here for the US). Also see my definitive Guantánamo habeas list and the chronological list of all my articles, and please also consider joining the new "Close Guantánamo campaign," and, if you appreciate my work, feel free to make a donation.