Every day, more details are being revealed about how major High Street Banks, like Barclays, mis sold financial products to small businesses. They have manipulated LIBOR, mis sold Payment Protection Insurance (PPI) and mis sold Interest Rate Swaps (IRS). Where do the High Street Banking crimes end?
Financial Fraud Caused Credit Crunch
Evidence is accumulating that shows that banking fraud was partially responsible for the 2008 Credit Crunch. The Financial Services Authority (FSA) is responsible for regulating High Street Banks. Yet, for many years it has been merely creating the procedures for reviewing compensation. Individuals and small businesses are still waiting for their money.
Financial analyst Reggie Middleton has advanced the theory that there was a Financial Insurance Real Estate (FIRE) “Pump ‘n Dump” scam run by the High Street Banks. This entailed artificially-inflating mortgages. The manipulation of the LIBOR was necessary to create a conducive environment for property prices to rise. Then, “worthless” PPI, Mortgage-Backed Securities (MBS) and IRS were sold to the public.
During the “Pump” phase, the banks made record profits, during the “Dump” phase, the homeowners and businesses are experiencing record losses. The banks failed to follow FSA guidelines in selling financial products that “fit customer needs.”
Political Rhetoric Condemning the Banks
British politicians know the public is angry. They are engaging in political rhetoric to condemn the banking crimes using the word “shocking” to hide their own culpability. Prime Minister David Cameron called the latest scandal a “shocking indictment” of the banking culture.
British MP Shadow Banking Secretary Chuka Umunna lamented the lack of details forthcoming. He noted that since 2001, an estimated 28,000 of these interest rate swaps were sold. He asked the banks to give a clear number of how many of these were mis sold.
Government Owns Banks
The UK government is walking a very narrow tight rope because when it bailed out the banks, it gained a level of ownership. The FSA is working closely with the High Street Banks to resolve the problems. Unfortunately, the process is too slow for many consumers and there are many conflicts of interest. Four years of bureaucracy does not sit well with homeowners losing their houses and businesses going bankrupt.
“The inmates are running the asylum!”
The FSA seems to be causing even more confusion by changing into the Financial Conduct Authority (FCA) to be headed by Martin Wheatley. An impartial regulator does not thank financial criminals, like Mr. Wheatley did when he said the banks were doing the “right thing by their customers.” The customers who have not received compensation would disagree with that assessment.
Changing horses in mid-stream causes more confusion, which is what the FSA may want. To add insult to injury, the FSA is entrusting the same criminal executives of the banks that committed the crimes to “take personal responsibility for resolving the situation.” The criminal bankers will review all the mis sold financial products and determine who receives compensation. “The inmates are running the asylum!”
At the same time, the FCA said it would appoint an independent scrutineer to review the complex financial instruments. The confusion worsens.
According to “http://www.ftadviser.com/2012/10/03/regulation/regulators/ppi-continues-to-dominate-complaints-data-cqe8KMRL9qUJhyvZvl4vkJ/article.html”, there is a heavy backlog of mis sold PPI cases. Barclays received 442,266 complaints according to the “www.FTadviser.com”. The total number of mis-sold payment protection insurance claims are about 2.2 million.
Many homeowners are running out of money “http://www.thesun.co.uk/sol/homepage/news/money/city/4568541/Huge-delays-as-debtors-forced-to-claim-over-PPI.html”. By the time that compensation is received – it might be too late for many.
Some British homeowners are resorting to the Individual Voluntary Agreement (IVA), which allocates all disposable income to debt payments for five to six years. Individuals who have seen their credit ratings destroyed want to rebuild their lives. Still, they wait for the banks and government to complete the compensation process.
Regulators Dragging Their Feet
Evidence is accumulating that regulators are dragging their feet. According to the following article – “http://beforeitsnews.com/economy/2012/07/have-banks-been-manipulating-libor-since-1997-2356774.html” – a financial trader said the following:
“Fifteen years ago the word was that LIBOR was being rigged. It was one of those well kept secrets, but the regulator was asleep, the Bank of England didn’t care and … [the banks participating were] happy with the reference prices.”
After a decade, the LIBOR rigging has finally been made public. How could the Bank of England have not known that the most important interest rate in the world was being rigged?
In Bed Together
The crimes of the High Street Banks have caused more pain, suffering and financial loss
than any gang of criminals; yet, no prominent banker sits in jail. There seems to be collusion involved. Many regulators were former employees of the same banks that they now regulate.
Same Crime, Different Name
Barclays, HSBC, Lloyds and the Royal Bank of Scotland have admitted mis-selling interest rate swaps. The Financial Services Authority found “serious failings” in the marketing of these financial instruments.
According to “http://www.guardian.co.uk/business/2012/jun/29/barclays-missold-products-small-businesses”, Barclays was selling interest rate swaps to protect businesses. At the same time, Barclays was rigging the LIBOR on which the interest rate swaps depended. It committed fraud against its own customers.
While large banks have plenty of money to absorb losses, many small businesses are already suffering during the Credit Crunch. They wonder when they will see their money.
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+John Yates
