This week, Move Your Money have launched a new local authority banking toolkit which guides local government through the process of moving public money to support local alternative forms of finance, dispelling key myths about local government finances along the way. This comes after the news that 2.4m customers transferred their money out of the big banks in 2012. Some account holders might still be applying a better the devil you know approach to their banking – but given the recent behaviour of the Big Banks, your money would be safer under your mattress than within these corrupted organisations.
Despite current propaganda that the national debt and the ensuing austerity policies are required to roll back excesses in public spending, the reality is the Financial Crisis was caused by the unregulated financial services sector.
There was collusion between government and the financial services industry, to avoid proper regulation of financial services in general, and the derivatives market in particular. There was intense lobbying in the US and the UK to maintain this position, with senior government figures on both sides of the Atlantic stepping in directly to prevent the Commodity Futures Trading Commission (in the US) and the Financial Services Authority in the UK, from ever coming close to putting the appropriate safeguards in place around these products.
This left banks, brokers and insurance companies free to mount the biggest assault on fiscal logic known to man. They started to rapidly expand their theoretical balance sheets by leveraging debt to almost infinite ratios.
High Street Banks and Mortgage Providers, credit card companies and other debt merchants chased the custom of individuals with little or no regard for their ability to pay back the loans. They did this to sell on the debts to Investment Banks as Collateral Debt Obligations.
This product was then, with the support of the Cartel’s gatekeeper, the Credit Ratings Agencies, declared Triple A for its credit worthiness; the same as a government bond.
The banks then took these investment products and sold them to unknowing pension companies who bought them on the basis that they were now deemed perfectly safe.
The same Investment Banks then insured themselves against the very product they just sold the pension firm going toxic. These insurances are called Credit Default Swaps (CDS). There was no limit on who could set up these CDS’s either. So, banks could place greater risk into the market by betting not only on their own toxic sell offs, but those of other banks.
At every point of these exchanges, significant fees were being handed over, generating paper profits, making balance sheets look amazingly positive, with no actual product or service underpinning them.
Finally, in 2007 all those little over leveraged consumers around the world started to find it impossible to repay their loans. As CDS claims went in the insurers couldn’t cope with the financial hit and started to fold, the brokers balance sheets couldn’t handle the hit and started to fold, and the high street banks, unable to claim from broker, bank or insurer started to fold.
However, instead of these corporations collapsing, this extraordinary mountain of toxic private debt was transferred into public debt by the Bank Bailout.
According to the National Audit Office, The UK National Debt rose by £850bn as a result of the Bank Bailout. This is almost twice the nation’s total annual budget. For this amount, the UK could have funded the entire NHS (£106.7bn a year) for eight years , our whole education system for twenty years (£42bn a year) or provided two hundred years of Job Seekers Allowance (£4.9bn a year).
They Rigged the Rates
While the banks were approaching the taxpayer with a begging bowl, they were simultaneously rigging LIBOR (the basic rate of interest), in order that they could make profit from the bailout deal, whilst taxpayers, pensions and savers suffered losses.
To give you some sense of scale, it is estimated that the rigging of LIBOR saw lost income from its victims of over $850 trillion. This is the total UK state budget for 760 years.
This is not a victimless crime. Some say consumers benefitted from their loans and mortgages being slightly lower due to the LIBOR rate rigging. However, these small short term gains were outweighed, as simultaneously their pensions were being devalued. Those with investments and savings (largely linked to the LIBOR rate) also saw massive losses.
Serious questions about the rigging of the LIBOR rate have been around since 2005. In June 2012, Barclays was found guilty by the FSA of rigging the rate and given a fine of just £290m by UK and US regulators. None of the traders who profited for perhaps a decade from breaking the law were taken to court, or put in jail, or had their personal fortunes diminished.
By August 2012 it was announced that seven banks were to face legal questioning in the US. This week RBS, a bank now 81% owned by the British tax payer, has agreed to pay a £500m fine to settle the issue with US and UK regulators. However, this effectively makes the British tax payer (the victims of the RBS fraud) the bill payer for the criminal activity of RBS.
Chancellor George Osborne has made strident comments that the bankers would need to pay the fine from their bonuses, but after a string of U Turns on policies designed to tighten banking regulations and break up banks, one would have to an optimist of the highest order to place any faith in such sops to the masses.
Do you want to reward them for this by allowing them to make a profit from your debts and savings?
They Sponsor Terror and Drugs
The rap sheet for banks funding criminal activity across the globe reads like War and Peace. Most recent in the dock was HSBC, the world’s bank.
HSBC launder money for Mexican drug cartels, break sanctions with ‘pariah states’, and funding the very same ‘terrorists’ the UK government is sending troops and weapons across the globe to defeat.
This is not a conspiracy theory. HSBC were found guilty in a court of law of funnelling the proceeds of crime through their books knowingly and deliberately. This was not the act of some rogue trader.
HSBC set up a subsidiary firm with the specific intention of using it to launder the money of Mexican drug barons. It spirited over $7bn of the stuff between 2001 and 2007.
HSBC deliberately concealed transactions between 2001 and 2007 worth $19.7bn which mostly involved Iran. These trades were illegal under US trade restrictions. HSBC Europe and HSBC Middle East repeatedly removed information from transactions to conceal that they were dealings with Iran.
HSBC also pressured its US subsidiary to rekindle its relationship with Saudi Arabia’s Al Rahji banks which was found after 9/11 to have relationships with terrorist organisations.
Finally, HSBC’s US subsidiary happily cashed over £290m in dodgy travellers cheques used to launder Russian money without taking due diligence procedures.
The penalty HSBC will face for such rampant criminal behaviour? A fine equivalent to just 14% of the profits posted by the bank for one year. No one is held personal responsible; no one goes to jail; no one’s personal fortune is diminished. Is this a bank you want dealings with?
They Gamble on Whether People Eat or Starve
Last year Goldman Sachs made £250m speculating on staple foods. While the UN was warning of a global food crisis in 2013 due to poor harvests in the US and Ukraine, Goldman’s traders were gambling on the crisis raising the cost of items such as wheat and rice, and placing bets.
One might argue dispassionately that it doesn’t make it morally wrong for someone to profit from a catastrophe so long as they played no part in causing it. However, this assumes that the mass speculation does not impact the price, which it patently does. The droughts and poor harvests combined with mass speculations hiked up food prices by 40% over 7 years . By betting on starvation, Goldman drives up the price of food not just on a market ticker screen, but in the real world. In the real world those high prices have resulted in real people starving to death.
None of the traders involved have been taken to court, none of them have had their profits from starvation rescinded, and no one has gone to jail. And if you Bank with HSBC, Lloyds Banking Group, RBS or any of the other Big Banks, it is likely that your credit cards, loans and mortgages are sold on to the likes of Goldman to use to place bets like this. Do you want to be a part of such a criminally cruel system?
Move Your Money
The cost of the bailouts is being met by ideological austerity on the poor. A decade of planned austerity measures across Europe is delivering a lost generation of young people born into a world of zero opportunity.
An additional 200,000 children have been forced into poverty in the UK alone by the Coalition government’s austerity programme.
The working poor and those others in our society reliant on the support of public money are paying the price for a financial crisis they did not cause. Meanwhile, the men (and they are mostly men) who made themselves stinking rich by destroying their own banks and the global economy, continue to live lives of rampant indulgence.
While our institutions of politics, economics and justice fail to hold the banking sector to account, we can. By removing our money from the system, we protect ourselves and we stop them profiting from our cash. By taking a step further, and pushing for local government to do the same, we do the same with our public money as we have with our private money. If our supposed advocates refuse to make these corporate criminals pay, then it is high time that we stepped up and did it ourselves.
Move Your Money – Do it right now. Get your money out of these banks.
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