How it works in the UK

You're a major UK bank. Like your friends in the media, for the past decade you've been using corrupt private investigators to illegally snoop on people, hacking their voicemail, stealing their financial information and phone records, even acquiring police witness statements. All of this is against the law and carries serious criminal penalties. But that's fine, because the agency which is supposed to be investigating you - the Serious Organised Crime Agency - will instead cover it all up to protect your reputation:

Banks and pharmaceutical companies are on a secret list of blue-chip firms that hired private investigators who break the law, The Independent has learned.

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Illegal practices identified by Soca investigators went well beyond the relatively simple crime of voicemail hacking and also included police corruption, computer hacking and perverting the course of justice.

Meanwhile, in an extraordinary joint admission on the Soca website, Mr Pearce and Commander Neil Basu of the Metropolitan Police admit the agency sat for years on evidence of criminality, until it was finally forced to act in May 2011 by former British Army intelligence officer Ian Hurst whose computer was allegedly hacked by corrupt private investigators.

Mr Hurst told The Independent: “For reasons that remain unclear, the Leveson Inquiry did not touch the sides with regard to the police. In the final analysis, law enforcement agencies are going to have to justify why they conspired for years to protect the offenders and their clients, which extend way beyond the media.”

The joint statement also failed to address why Soca has still not passed all its historical evidence to Scotland Yard, which is currently investigating the crimes that the agency ignored.

The information has now apparently been passed to a parliamentary select committee, but in a final insult, SOCA has classified it in order to protect "financial viability of major organisations by tainting them with public association with criminality". Which tells us what is really going on here: SOCA apparently sees its job not as catching criminals, but as protecting the banks. Like the rest of the UK establishment, they work for the wealthy, and fuck the law.

The good news is that that select committee is so outraged by the evidence they've seen and by SOCA's tawdry coverup that they are planning to release it anyway under parliamentary privilege. Here's hoping. And then, maybe, there can be the sort of cleanout the UK desperately needs.

Bloodsuckers

While we're not technically in recession, things are not going well in New Zealand. Unemployment is at near-record levels, wages are stagnant, ordinary families are struggling. And meanwhile, our foreign banks announce enormous profits again:

New Zealand banks boosted their combined profit to almost $1 billion in the March quarter, but an ultra-competitive lending environment appears to be favouring big players, like ANZ, over smaller operators such as TSB and Kiwibank, according to new research.

KPMG's quarterly Financial Institutions Performance Survey said the collective profit of the nine banks surveyed lifted 12.9 per cent on the December quarter to $971 million.

And of course most of this money went straight overseas to Australia, rather than being reinvested in New Zealand to create jobs for New Zealanders.

This what happens when you have a non-competitive banking sector dominated by a foreign oligopoly: a permanent siphon in our economy which profits from our misery. As for what to do about it, breaking up those banks and returning them to local ownership would be a good start...

About time

National is finally putting the government banking contract out to tender. About time. The contract was awarded to Westpac over 20 years ago without a competitive tender, and there's no evidence that we're getting value for money. Meanwhile, the company spends thousands on bribing Ministers with extraordinary corporate hospitality, lending an appearance of corruption (which of course John Key is quite comfortable with).

One thing which is unclear yet is whether the government's new banker will be required to be a good corporate citizen and pay its taxes. Westpac stole almost a billion dollars from us over the years, and the other Aussie banks are the same. We should not be giving large government contracts to tax cheats. If they want our business, the least they can do is obey the law and pay their fair share.

Capping the bankers

Banker's bonuses have been in the spotlight ever since the start of the Great Financial Crisis and the odious sight of the very people who had ruined the world awarding themselves enormous payouts for doing so. Now, the EU has moved to rein in this problem, by capping those bonuses:

European Union officials have struck a provisional deal on new financial rules, including capping bank bonuses.

Under the agreement, bonuses will be capped at a year's salary, but can rise to two year's pay if there is explicit approval from shareholders.

The deal was reached late on Wednesday. EU ministers must approve it, although this is considered a formality.

Its a good move, but at the same time you have to ask why it is only limited to banks. Corporations in general pay excessive bonuses, and these are both a source of economic instability and a driver of inequality. So why not cap their payouts (and limit their ability to rob their shareholders) too?

Profiting from our misery

The last four years have been tough. The global financial crisis and National's anaemic response to it has seen soaring unemployment, stagnant wages, and companies going bust right, left, and centre. Meanwhile, our rapacious Aussie banks are making out like bandits:

New Zealand's four major trading banks, which are all Australian-owned, made more money in the four years following the global financial crisis than the four years preceding it, new figures show.

The Greens have today released a comparison of four banks - ANZ, BNZ, Westpac and ASB - prepared by the Parliamentary Library which shows they reaped $14.42 billion profit from 2008-2011, up from $14.08b between 2004-2008. That is an increase in before-tax profits of about $340 million.

Greens co-leader Russel Norman said a similar analysis for all New Zealand industries found profits had fallen by 15 per cent since the global financial crisis.

And it gets worse: three of the four Aussie banks reported record profits in the last year. They're profiting from our misery.

How does this happen? Because our banking sector is not competitive. The Aussie banks have a tight little oligopoly, where they set the prices and we just have to pay whatever they are asking. While there are other players, they're not big enough to provide any real competition in the market, and hence not big enough to force fees and interest rates lower (or higher, for deposits). The result is effectively a giant siphon in the New Zealand economy, funnelling off our economic output to Australia.

As for how to stop this, supporting Kiwibank is one option. Tighter regulation is another. But ultimately, if the Aussie banks are too big and behave oligopolisticly, then they need to be broken up, to reintroduce competition into the market.

America's crooked banks

Back in February, America's banks settled a case over dubious mortgages and improper foreclosures, promising to pay $5 billion in cash and forgive $17 billion in loans. What does it mean in practice? Banks "forgiving" debts that no longer exist - and in the process creating enormous tax headaches for their former customers - all in the name of meeting arbitrary settlement targets. Because obviously, they wouldn't want to forgive debt they were still screwing payments out of people for - that might hurt profitability or something.

Just another example of the everyday fraud committed by America's banks.

More criminal bankers

Today's criminal banker story: Standard Chartered Bank is alleged to have schemed with Iran to launder money and evade financial sanctions for nearly a decade:

The New York State Department of Financial Services said that the bank hid 60,000 secret transactions for "Iranian financial institutions" that were subject to US economic sanctions. It labelled UK-based Standard Chartered a "rogue institution".

This goes well beyond merely looking the other way on dubious transactions, to actively falsifying information to hide them. And its not just a few bad apples: this was written up as official policy by senior management. They're estimated to have laundered around US$250 billion over the last decade, collecting hundreds of millions of dollars in fees for doing so. And why wouldn't they? After all, its not like they'll ever be held to account. While the bank may be fined, or even shut down, that price will be paid by its shareholders, not its management. The people responsible will simply trigger their golden parachutes and depart to continue their criminal career in another financial institution.

When corporations engage in illegal behaviour on this scale, it tells us that the incentives around corporate malfeasance are all wrong. If we want to stop this sort of criminal behaviour, we need to focus penalties where they belong: on criminals, not innocent bystanders.

More criminal bankers

Another day, another tale of outright criminality by banks, this time in the US, where three brokers have just been convicted of bid-rigging:

The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement. And they did it so cleverly that the victims never even knew they were being ­cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.

Three convictions doesn't sound like a lot, but that's because a bunch of the guilty had already settled and agreed to pay $673 million in fines and restitution. And that's just the tip of the iceberg:

Since that settlement involves only four of the firms implicated in the scam (a list that includes Goldman, Transamerica and AIG, as well as banks in Scotland, France, Germany and the Netherlands), and since settlements in Wall Street cases tend to represent only a tiny fraction of the actual damages (Chase paid just $75 million for its role in the bribe-and-payola scandal that saddled Jefferson County, Alabama, with more than $3 billion in sewer debt), it's safe to assume that Wall Street skimmed untold billions in the bid-rigging scam. The UBS settlement alone, for instance, involved 100 different bond deals, worth a total of $16 billion, over four years.

This is how the banks make their mega-profits: by systematic fraud and corruption. Again, time for a cleanout. Time to put the bankers in jail.

Criminal banks

The latest scandal to engulf the banks centres on something called LIBOR - basically, an average interest rate UK banks pay other banks, which is used as a reference rate on all sorts of derivatives. Barclay's Bank in the UK has been fined £290 million for attempting to rig this rate. As a result, the bank's chairman has resigned in disgrace (though of course he's collecting a £2 million payout on the way to the exit).

But as London Banker points out, the scandal probably goes much wider than this. LIBOR is just one of hundreds or thousands of such reference rates, all of which are open to this sort of manipulation:

What I suspect is that this is not a flaw but a feature of modern financial markets. And if it was happening in LIBOR for between 5 and 15 years, then the business model has been profitably replicated to many other quotation-based reference prices.

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How has it been possible for banks to grow from less than 4 per cent of the global economy to more than 12 per cent of the global economy without impoverishing others? How has it been possible for profits in the financial sector to be consistently higher than profits from other human endeavors with more tangible products or impacts on our daily lives - such as agriculture, transport, health care or utilities? How has it been possible that banks derive their profits not from the protected and regulated activities of deposit-taking and lending, but from the unsupervised and often unknowable escalation of off-balance sheet assets and liabilities? How has it been possible that pension savings have increased while pension returns have declined to the point where only bankers can expect a comfortable old age? Global banks have built the casinos and tilted the odds in the house's favour by rigging the data that determines the outcomes of most of the bets on the table. Every one of us that sits at the table long enough - whether saver, investor, borrower, taxpayer or pensioner - will be a loser. It is not a flaw; it is a feature.

Casino capitalism is simply rotten, based on fraud at the highest levels. Its time for a cleanout. And the first stage of that has to be putting the bankers who have stolen from us where they belong: in jail with the other thieves.

Laughing all the way to the bank while dancing on corpses

Today's must-read: a truly horrifying article by Johann Hari in the Independent about how US investment bank Goldman Sachs set up a speculative bubble in food futures and caused mass starvation as a result:

In 2006, financial speculators like Goldmans pulled out of the collapsing US real estate market. They reckoned food prices would stay steady or rise while the rest of the economy tanked, so they switched their funds there. Suddenly, the world's frightened investors stampeded on to this ground.

So while the supply and demand of food stayed pretty much the same, the supply and demand for derivatives based on food massively rose – which meant the all-rolled-into-one price shot up, and the starvation began. The bubble only burst in March 2008 when the situation got so bad in the US that the speculators had to slash their spending to cover their losses back home.

Two hundred million people went hungry as a result, not because there wasn't any food - supply had in fact risen - but because futures market speculation had pushed prices beyond what they could afford to pay. There were food riots in 30 countries, and at least one starvation-induced revolution. The UN Special Rapporteur on the Right to Food has called it "a silent mass murder" entirely caused by "man-made actions". Another word for it would be genocide.

But hey, the bankers made money, so it must be OK, right?

This is the sort of shit which caused the French Revolution. And if they'd done it in the places where people were actually starving, they would have been strung up. But the joy of globalisation is that you can profit from a famine on the other side of the world, while being totally insulated from the angry, starving mobs you have caused.

Our bankers are genocidieres. Time for some trials.