In the immediate aftermath of last summer’s riots in English cities, Deputy Assistant Metropolitan Police Commissioner Stephen Kavanagh, told the BBC on August 11 2011 that he was unhappy with the light sentences the courts were handing down for looters. The message must have got through to the magistrates pretty quickly. On August 12 a 21 year old student with no previous convictions received the maximum permitted six months sentence for the theft of bottles of water valued at £3.50. On August 31 an eleven year old boy was sentenced to an eighteen month youth rehabilitation order for stealing a waste bin. These are just two of numerous similar sentences, some much harsher, that have been handed down since then.
The Banksters, of course, are most definitely not in the dock - except in the metaphorical sense that they stand arraigned in the court of public opinion – a plight that doesn’t seem to trouble them overmuch. But, in the actual system of justice, they await prosecution. Since the onset of the great financial crisis in 2008, which brought the global economy to the brink of collapse and visited increasing hardship and misery on the millions who have been made to pay the price for their criminality, not a single bankster has gone to jail in Britain. The most recent example of the egregious greed and impunity that characterizes these permanently impenitent masters of the universe, has been evident in the Libor scandal, and, in particular in the behaviour of Barclays Bank’s former chief executive, Bob Diamond. But before saying more about this latest revelation in the sleazy saga of malfeasance, malpractice, corruption and criminality that passes as Business as Usual for Britain’s Big Banks, it is worth recalling an earlier episode involving Barclays. Representatives of the corporate and political power elite who have been exposed to public scrutiny for wrongdoing of one kind or another, like to think, and hope, that most people have short memories; what may capture the headlines for a day or two will be forgotten in as many weeks. As Tony Blair was fond of saying about the Iraq fiasco, ‘It’s time to move on.’ Or, as Diamond himself said in 2011, ‘There was a period of remorse and apology for banks and I think that period needs to be over.’ Time to move on. Because the earlier episode, now more than three years old, has been largely forgotten, it is worth reprising it in some detail.
On April 5 2009, Letter from the UK dealt with an attempt by the Structured Capital Market’s department of Barclays Bank to cover up complex tax avoidance schemes which made the bank between £900 million and £1 billion (The Great Financial Crisis: What the people need to know but must not be allowed to find out.) A whistleblower at SCM had passed documents detailing these operations to Vince Cable, who was then economics spokesman for the Liberal Democrats. (Cable has since become secretary of state for business in the coalition government and is markedly more cautious than he was then). Cable passed them to The Guardian. On March 17 the paper ran a front page article and a double page centre-spread plus an editorial on the story. The secret documents were posted on The Guardian’s website. Barclays’ lawyers woke a judge at 2.10 am that morning and persuaded him to impose an injunction on the paper forcing the removal of the documents from the website. The case went to the High Court the next day and the court ruled in favour of Barclays. The documents had to be removed from the website. Ridiculously, the judge also ruled that The Guardian be banned from providing information about the documents and from ‘inciting’ or ‘encouraging’ others to view evidence that was publicly available, about the bank’s massive tax avoidance schemes. A few days later The Guardian published copies of seven documents with the text blacked out. Beneath was a summary of the contents, followed by comments from the paper’s tax expert. On March 26, the Lib Dem’s Treasury spokesman, Lord Oakshott, taking advantage of parliamentary privilege of freedom of speech, told the House of Lords that the documents were widely available on internet sites such as Twitter, Wikileaks.org etc.
The whistleblower provided evidence of a scheme codenamed Project Knight. In summary it showed that the SCM sought to put about $16bn into US loans via a complex scheme involving companies in the Cayman Islands, US partnerships and Luxembourg subsidiaries. Tax benefits would be generated through a £4bn deal with North Carolina Branch Banking and Trust Co. Two larger schemes were identified by The Guardian involving loans of $6bn and $7bn. The whistleblower claimed that the sole purpose of SCM was to make profits from ‘tax trades’. Apparently in one year ‘the SCM made between £900 million and £1bn profit from tax avoidance.’ All this was legal. So why was Barclays so desperate to hide these activities from the public?
The April 2009 article went on to note that, unlike other banks, Barclays had avoided seeking assistance from the government. But it had applied to participate in a government insurance scheme which would provide taxpayer protection against loses of about £80bn of toxic assets. This was the reason the bank needed to conceal the scale of its tax avoidance. It employed highly paid lawyers to devise the schemes that would remain undetected by the government’s revenue office – HMRC. Lord Oakshott famously described HMRC’s attempts to detect the bank’s tax avoidance as resembling ‘a fat policeman chasing a speeding Ferrari’.
How does this relate to the Libor scandal? Unlike RBS and LloydsTSB/HBOS, Barclays turned down a cash injection from the government in 2008. Referring to the ‘strength of its well-diversified business and existing capital base’, the bank announced that it planned to raise £6.5bn from the market. But this was hot air. It is now clear that between 2005 and 2009, Barclays (and no doubt many other banks world-wide now under investigation) rigged the inter-bank lending rate for Libor (London inter-bank offered rate). Its traders manipulated the bank’s submissions when dealing with other banks’ traders to their own and the other traders’ personal pecuniary advantage. In 2008, during the banking crisis, the Libor submissions were rigged in order to make the rate look lower than it actually was, thereby reducing concerns about the bank’s stability. In one way or another, these scams, involving a £350 trillion market, operated for nearly five years and adversely affected the cost of borrowing for millions throughout the world.
During these years Bob Diamond, was CEO of Barclays Capital, the investment division of the bnk, where the scam was operating. At his appearance before the less than rigorous interrogators of the Treasury Select Committee in early July, shortly after being fired as Barclays CEO, he said how sorry he was that the illegal rate-fixing had occurred but denied that he had known anything about it. It had, he claimed, all been perpetrated by 14 rogue traders. This was all too reminiscent of the claims by News International’s executives that phone-hacking had been confined to a few rogue reporters. The rogue traders in question, who were not named, had all been either dismissed or they had moved on. No-one has been arrested. Barclays has been fined nearly £290 million (£59 million in the UK and £230 million in the US) – peanuts when set against the astronomical sums involved in the illicit trading over many years. Diamond himself has announced that he will forego this year’s £2 million bonus. For all except those as corrupted as Diamond is by the unfathomable culture of corporate greed, it is difficult to keep a straight face. Since 2006 he has been paid £98 million and it is estimated that he could walk away with as much as another £22 million in free shares and contractual bonuses. Lesser, but still eye-watering sums are likely to be awarded to his deputy, Jerry del Missier, who has also resigned. It’s as well to remember that we are no longer in the realm of untenable claims about the need to pay ‘top salaries for top quality executives’ to staff a ‘financial services industry second to none’. This is a world where, in Will Hutton’s words ‘men and women with little skill and no moral compass can become very rich very fast’.
The 2009 Letter from the UK concluded with these observations about the Structured Capital Markets division of Barclays:
‘The whistleblowers describe a hierarchical, macho culture of bullying and callous insensitivity. Those at the top of the pile display all the worst characteristics associated with power and extreme wealth – arrogance, contempt bordering on sadism for subordinates, and megalomania. The avoidance of tax by means of exploiting loopholes is seen as the raison d’etre of the unit.’
That was three years ago. The revelations that have emerged so far in the Libor scandal show that nothing has changed. Those who perpetrated the SCM tax-avoidance schemes, and those who still defend such practices, argue that as they are not illegal there is no case to answer. Moral questions are for moralists, not for financiers. We now know that the banks have been covering up organized illegal practices on a colossal scale. Claims that their operations are essential in the interests of economic growth are now threadbare. ‘Investment banking’, says Will Hutton, ’is an organized scam masquerading as a business.’
Have the revelations that have emerged so far, and the further revelations surely still to come, brought us to a moment of truth about the intrinsic nature of finance monopoly capitalism, and the deepening crisis of that system? It is tempting to think it has. But one should never underestimate the determination of the 1% - the corporate, financial and political power elites - to hold on to their power and to shift the burden of their crisis onto the rest of us – the 99% who are now expected to pay the bill. It has been estimated that every ‘man, woman and child in Britain has already handed over £19,271’ to the banks. (Aditya Chakraborrty 03.07.120 ) It is becoming clearer by the day that this is the worst crisis the global capitalist system has faced for a century. A few weeks ago, thousands of people, young and old, gathered in London for the annual ‘Festival of Marxism’. It was an uplifting event, extending over five days. Many crucial issues were addressed by an impressive array of speakers. There was animated discussion and great enthusiasm. It showed that there is a deep desire to understand what has led to this crisis and a determination to do something about it.
But the burning question is- to coin a phrase - What is to be Done? If the crisis is to be confronted and overcome in such a way as to ensure that the system is changed root and branch, a clear-sighted mass movement will have to be built. It will need to formulate demands which challenge the unsustainable status quo and the power elite whose interests it serves. If such movements can be built here and throughout Europe and beyond, in the coming months and years, there is reason to hope that the 99% will prevail.