Financial Swindlers

So it turns out the top brass at Lehman Brothers were deliberately lying about their indebtedness to the tune of $billions. Shades of Enron! So what’s new? Speculative markets are based on lies. In the old days financial institutions such as pension funds and insurance companies, served some social purposes. Today, hedge funds, sovereign funds and the like, serve no social purpose. They exist only to make money for their investors and themselves, both being in a position to take risks with ‘loadsamoney’. They have no moral compass beyond ‘making as much money as possible’ to quote the famous economic mountebank, Milton Friedman. So, of course, they are liars. The accounting profession are culpable, deliberately falsifying balance sheets so they appear less risky than they are. And firms of auditors are liars, declaring the accounts to be “true and fair” when they know perfectly well they are nothing of the kind. But very few of these parasitic liars end up behind bars.

7 thoughts on “Financial Swindlers”

  1. Nice to see such bluntness here. Most of the time, we seem to pretend that various forms of cunning are somehow laudable behaviour, to be rewarded with giant pots of cash. But this is bluffing, dissembling, concealing, misdirecting, being economical with the truth – the sort of things that get people (and even politicians) a bad name. Odd then that when financiers do it, we call it good business.

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  2. All this invective against the bankers and overpaid bosses is all very well, but the big question is why are the UK political parties not putting reform of corporate governance at the top of their manifesto agendas? There might be a few reasons. One is that they know that in order to sort out the deficit they need the state owned shares in the banks to be worth a lot more than they are now. Fixing this quickly means returning to status quo ante so that there can be some quick wins and they can return to business as usual. Hence fat bonuses and salaries so that those bright minds that got us into the mess can get us out by the same route. And because of interlocking shareholdings, all the fat cats are in it together. Where is the manifesto commitment to cap salaries or tax income over £1million a year at 90 or even 100%? There is a great Greek word – hysteresis- which has been used in Economics (especially with respect to unemployment) to denote a persistence of a phenomenon despite the need to eliminate it. What we have now is a political class so used to being subservient to the demands of the financial sector and big business that they cannot get out of that mindset even though they know it’s mistaken. I find it extraordinary that there is not a bigger public outcry against what is going on. I guess it’s because so far the Government has successfully insulated most people against the effects of the crisis. But they or their successors may not be able to continue to do this and then there may be a bigger crisis than the one we have had to change that mindset and a movement from below to underpin the change.

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  3. I find it extraordinary too! My last post on Fat Cat Corruption says something about it. As well as the need to get our money back, another reason governments have done nothing is their fear of upsetting the City. But it will have to be faced at some stage, and the sooner the better. The UK financial sector has for decades exploited traditional firms in manufacture, distribution and services. Since the 70s there has been a parasitic asset stripping industry, making vast sums through the destruction of traditional industry – Cadbury just the latest. Since big-bang deregulation that sector has grown massively and there’s not much British owned traditional industry left for them to destroy, so London based firms are now preying on overseas firms. This way they are bringing vast amounts back to UK which otherwise we would not see, and though their tax rates are low and avoidance high, it is still a big boost to the UK economy. If they upped and left, the government would be in an even worse position short term. So, it may be thought, now is not the time. But, if nothing is done, the City will presumably become even more dominant and more difficult to constrain. Now IS the time, though 1986 would have been better

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  4. Exactly so! Really, we cannot do anything unless there is some sort of international agreement which denies these companies the possibility of doing better elsewhere (at least as far as tax and regulation is concerned). That may be where Obama and Brown have been heading and I am sure they would get support from Germany and France. Question is whether we have anything to offer countries which might lose out. Once upon a time I thought that international trades unionism would become a powerful force. THat’s not happening so we need a wider international popular movement to push for action. Fancy starting one?

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  5. I think most people share your view. Unless there could be some G20, or G7 or, as you say, at the very least an Anglo-Saxon, agreement to act in concert, nothing could be done. But what would be the cost of going alone? And how long would it be before others followed? It would be good to have some idea of the answers. It might be risky, but doing nothing would mean being tied in to this stuff for ever. The sort of unilateral action that could be considered would be to exercise the law, get a few locked up for presenting dishonest balance sheets, and a few more for insider dealing, and get some auditors locked up for dishonest certifications. I’d re-separate commercial from investment banking, charge a transaction tax on all investment banking deals and disallow limited liability partnerships, which allow the business to be tax free and partners to be non-dom tax avoiders. That would be a start.

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