You know, there would have been a time when a financial contributor for the Daily Mail was restricted to the little stuff. Share tips, muttering about monetary policy, that sort of thing.

Not any more. Over the last few years, there’s been no breaking news like finance news. No war, no election, no natural disaster has long been able to displace finance from the front pages. This new emphasis makes perfect sense. When your job is threatened, your pension demolished, your child’s prospects seriously impaired, you need to know why these things are happening. The answers all revolve around matters financial.

So: another week, another row. Hot on the heels of last week’s news – another banking scandal, another repentance-free resignation – we have this week’s headline. Ed Miliband wants to force the big banks to sell up to 1000 branches each. He wants a specialist financial unit inside the Serious Fraud Office. Vince Cable has lambasted the banking sector’s ‘anti-business’ culture and accuses it of ‘throttling’ an incipient British recovery.

And they’re right. Bang-on-the-money, hole-in-one, jackpot-hittingly right.

Take each of those points in turn. Should the big banks be forced to sell branches? Of course they should! How is there even any argument? The mergers, acquisitions and bank failures which took place during the 2007-09 period have left British high streets with a dangerously oligopolistic industry. That means less competition. It means aworse deal for borrowers, a worse deal for savers – and a much-reduced capacity for corporate lending. It’s a market gone badly rotten. Competition from sizeable, properly funded institutions is essential for us all.

As for a specialist finance unit inside the SFO – I’m frankly astonished there isn’t one already. What’s more, such a unit needs to be lavishly funded. It needs to be able to employ professionals who understand the nuances of the financial markets. If that means paying top dollar, so be it. The money would easily be recaptured from the fines that would result.

And after all, how much more evidence do we really need that these banks have utterly lost touch with their ethics? They are happy to mis-sell a wide array of products to consumers. They are happy to fiddle interest rates. They are happy to sell totally inappropriate derivatives to corporate users. They will help an entire country, Greece, fiddle its books so it can enter the Euro.

I was about to write that there is nothing these people won’t do, and then I wondered. Mass murder? Genocide? Are there perhaps some limits still prevailing? Some matters a board of bankers would still not countenance? I don’t know. Maybe. But until those bankers find their ethics again, we need a fraud unit with as much finding and as much investigative authority as it plausibly needs. The hard truth is that until we see a fair few bankers serving long jail terms, these people will continue to feel immune. And no wonder. They have been immune. Bob Diamond may have resigned last week, but he hasn’t apologised, he hasn’t handed back any of his £100 million pay, he hasn’t indicated that he intends to waive his £20 million odd serverance package – and he isn’t facing jail. (Incidentally, Barclays stock price has declined 52% since February 2011 and 75% in the past five years. So how exactly does he think he earned that money?)

Blame: Vince Cable has slammed the banking sector’s ‘anti-business’ culture and accused it of stifling the chances of a speedy British economic recovery

As for Vince Cable’s comments about the anti-business culture of these firms – well, duh! Of course they have an anti-business culture. Banks have made money over recent years by (i) acquiring lousy assets (Greek bonds, American subprime debt, over-leveraged domestic mortgages), (ii) mispricing them on their books (so they don’t recognise the true impairment in value), (iii) waiting for the Bank of England to print more money as a way to support creaking asset markets and, when in dire straits, (iv) waiting for a handout from the taxpayer. None of these items have anything at all to do with real, ordinary banking business. None of them supports the broader economy. You’ll also note that the last two items involve massive support from the state, yet that support is somehow not inconsistent with the payment of massive bonuses. Explain that one if you can.

The trouble is that many banks are a zillion miles from becoming responsible citizens again. Their balance sheets are rotten. They may not admit that rottenness in public – there would be a bank run if they did – but they know perfectly well that their balance sheets are in a desperately weakened state. Because of that, they flinch from offering corporate loans – which involve real business risks in a difficult climate – and prefer to trade government paper. That way, their capital ratios look alittle better, no matter than no real banking work is being done.

You don’t have to take my word for these things. A strong bank will have a stock market ‘price to book’ ratio of more than one. That is: the stock market regards a given bank as being worth more than the collection of financial assets (less debt) on the bank’s balance sheet. A ratio of one exactly would mean that the bank was worth its financial assets but that its actual franchise – its ability to generate additional profits from those assets – was worth zero.

Action: Labour leader Ed Miliband wants to force the big banks to sell up to 1000 branches each

Most of our banks are today rated at far less than one. Barclays Bank, for example, has a price to book ratio ofjust 0.36. That is: the market regards the bank’s valuation of its own assets as laughably optimistic. While that continues to be the case, the bank willhave neither the strength nor the outlook needed to finance recovery.

So Miliband is right. Cable is right. The Tories are, on the whole, lamentably silent on this issue. (The worst offender is the bankers’ own apologist, Boris Johnson.) That’s not to say the Labour record has been glorious – very far from it. Ed Balls’s recent Oscar winning performance in front of the LIEBORgate enquiry was a frightening reminder of how useless and responsibility-evading his party was when in power. Until we have politicians ready to accept accountability and transparency while in power, we will continue to have a government that is wholly ineffective in the face of the banking lobby.

Nevertheless, and that said, Miliband and Cable are currently seeing these things more accurately than George Osborne and his colleagues. So here’s what has to be done. Break up the banks. Stop printing money. Deflate the housing bubble created by QE. Punish fraud. Force banks to publish honest balance sheets. The solutions are obvious. But will they happen? Of course they will: a Brit just needs to win at Wimbledon first…

Mitch Feierstein is CEO of Glacier Fund and author of Planet Ponzi: How politicians and bankers stole your future

I published this in the Daily Mail.

How low can a political system sink? Pretty low it would seem. A recent Rasmussen poll suggests that around two-thirds of us would happily fire every single member of Congress, a spectacular lack of confidence in our lawmakers. These are unprecedented levels of disdain and the sad thing is that they’re largely justified.

Frozen solid!

The conventional analysis of this malaise has to do with partisanship in Washington. Too much money, too many special interests, too many lobbyists, too many non-competitive electoral districts leading to a new breed of politicians who pander only to the increasingly extreme demands of their base. The Constitution was never intended to foster such gridlock. Remember that the authors of that Constitution lived in a nation without political parties — in a world where parties of the modern sort were unknown. It was 1796 before the party system had really taken hold and even then, that politics was more fissile, more fluid, than anything we have now. Indeed, you could argue with conviction that the country has never had a more gridlocked, mutually hostile and partisan Congress. At a time of great economic peril, that’s a terrible position to be in.

There are wider consequences too, best expressed in the Russian proverb that the fish rots from the head. If our national leadership is incapable of showing transparent, accountable leadership, what hope is there for the other institutions and organizations that together create the nation?

One recent example would be shocking if repeated injury hadn’t more or less robbed us of the ability to be shocked. The Fast and Furious scandal matters. For a number of years, the Bureau of Alcohol, Tobacco and Firearms allowed guns to ‘walk.’ The idea was to allow suspect purchasers to acquire guns in the belief that these weapons could be tracked back to high-level figures in the Mexican drug cartels.

I don’t know if that was a completely dumb idea or not. I’m not qualified to comment. What I do know is that many dozens of Mexican citizens are alleged to have been killed by these weapons and at least one U.S. Federal agent, Border Patrol Agent Brian Terry, was shot dead. One ATF official told a congressional oversight committee, “The ATF armed the [Sinaloa] cartel. It’s disgusting.”

But these things happen. In a big country, with a complex government, sometimes people do stupid things. That’s not, in itself, the issue.

How's about a little love and a lot of Executive Privilege?

The issue is what happens next. Is there a transparent investigative process, whereby the facts are investigated and the appropriate people dismissed or (if found to be in breach of the law) punished? Of course not. The House voted to cite Eric Holder for contempt of Congress in a battle over which documents should be released to the inquiry. Holder claims he’s just a proxy for Obama and the entire attack is partisan. Nancy Pelosi argues that it’s all part of a giant conspiracy to undermine democracy. Just in case things hadn’t sunk low enough, Rep. Trey Gowdy tells Pelosi that she’s “mind-numbingly stupid” and suggests she “schedule an appointment with a doctor.”

And an American officer has been shot dead by guns that walked out of the country under the direction of our ATF officials. And Mexican drug cartels have bolstered their armories. And our southern neighbor has descended that little bit further into violence and anarchy. Yet all our politicians can do is call each other names and bicker at each other.

So much for the head of the fish. The rest of that fishy body isn’t smelling too good either. Barclays, a British bank that scooped up Lehman’s U.S. operations and has a huge presence on these shores, has admitted manipulating the LIBOR “Fixings.” Those markets are multi-multi-trillion dollar markets and if the banks are rigging them for their benefit, you can bet your house that you’re one of those to have lost money as a consequence.

So what happens? Answer: not much. It’s been fined a little fraction over 1% of its market cap. The Chief Executive — who’s already pocketed over £100 million in pay over the past few years — resigns (but will probably get a huge payoff). No one goes to jail. No one ever does, more deflection and more diversion.

Or ING, a foreign bank trading out of New York, is fined for fraud, breaking sanctions aimed at Cuba and Iran. The fine was big, but who goes to jail? Nobody. Instead the bank says in a statement that it, “it took a provision of €370 million ($462 million) in the first quarter of the year to cover the penalties, set up a team to prevent and detect money laundering, closed its representative office in Cuba in 2007, and ended relationships with sanctioned entities.” Gee, shucks.

Where did I put that 1.6 Billion..? Look under my keyboard.

Or MF Global, run by Jon Corzine, formerly of Goldman Sachs and close to the Obama White House. The firm went bust and around $1.6 billion in client money has gone walkabout. If someone takes money that isn’t theirs, that is theft. I’m not talking about the law, necessarily, I’m not a lawyer — but I am talking about ethics. If someone or some group of people conspires to deprive clients of $1.6 billion, that person or group of people should be wearing orange and looking out of windows with bars on them. But what actually happens? Nothing.

The solutions are so simple. We need transparency and accountability at the top. We need accountability and transparency all the way down. Forget about creating new laws when we never enforce existing ones. If you mess up, you bear the consequences of your actions. If a federal operation goes wrong, it is investigated swiftly and rigorously, with appropriate outcomes for those involved. If your firm goes bust, nobody bails it out. If you breach the law, you go to jail. If you steal a thousand bucks, you receive a light sentence. If you steal a thousand million bucks, you should get the cell next to Bernie Madoff and the same release date: 14 November 2139.

Is that going to happen any time soon?

Nope. It won’t. But meantime, two-thirds of us are right. We need to fire this Congress and start again. The pledge of allegiance talks about justice for all. We need to honor that pledge at the moment we are doing the opposite.

 

This was published  in the Huffington Post 

Barclays will not be alone in its wrong-doing, and other banks may even have exceeded Barclays’ brazen contempt for truth and right-dealing.

So what happens? So far, we’ve seen all the standard responses.

Exit: Bob Diamond has quit Barclays after days of pressure but what will happen next?

Barclays’ Chairman, Marcus Agius, tried to fall on his sword, but the political commotion was such that the bank’s CEO, Bob Diamond, was forced to fall on his instead. It is said that there will be significant pressure on the board to avoid paying a monster ‘golden farewell’ to its departing boss, but don’t place too much faith in that pressure.

For one thing, if a deal has not already been penned (a big IF), Diamond will have lawyers pushing for maximum compensation and the Barclays board will want to avoid a protracted legal fight and even more negative publicity. But in anycase, Diamond has already earned £100 million in pay and and perks from hisstint at the firm. The guy’s hardly going to be destitute.

Neither destitute nor (what a surprise!) repentant. Diamond’s arrogant and self-serving spin said, ‘I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth. I know that each and every one of the people at Barclays works hard every day to serve our customers and clients.’

What? ‘The impression created’? Every one of the people at Barlclays ‘works hard’ to serve customers? Bob, you haven’t got it at all. Your bank was involved in fraud on a massive, multi-trilliondollar scale.

I don’t necessarily mean fraud in the way that the law defines it – I’m not a lawyer – but I do mean fraud in its ethical, moral and human sense: the manipulation of interest rates to fit the bank’s position. Emails prove Barclays bank employees are guilty of conspiring to manuplate interest rates on a massive scale. Bob, your bank was rotten as hell and your bankers were part of that rot.

Probe: The Conservative party have ordered an inquiry into the scandal

Meantime, the Tories have ordered an enquiry into the scandal. Andrew Tyrie, the putative head of that enquiry, describes his remit as dealing with these questions: ‘What does the Libor scandal, what does this scandal in the market, where people have made money by rigging the market, say about the standards and the corporate culture of banks?’

Those are dumb questions. The LIBOR “Fixing” scandal provides one small illustration of what my book, Planet Ponzi, details in 394 pages: banks no longer have any functional ethical standards and that the corporate culture of the City of London has been degraded beyond all recognition. We know that already. (And remember I’ve been talking about this LIBOR “Fixing” scandal long before it hit the main stream news.)

But it’s not just LIBOR. It’s the PPI scandal. It’s the bonuses paid out by taxpayers to the employees of failed, nationalised banks based on lax if not fraudulent accounting practices. It’s the gross misselling of mortgages which led to those bank failures. It’s any number of derivatives scandals. I’ve accused regulators oftentimes in the past of being useless and toothless. And so they mostly are. But a near £300 million fine is a good start. We need to encourage those regulators to stay in action mode, to find their teeth.

Meantime, Labour is reluctant to endorse Tyrie’s enquiry because it wants any probe to be run by a judge under quasi-courtroom conditions.

Reluctant: Labour is reluctant to endorse Tyrie’s enquiry because it wants any probe to be run by a judge under quasi-courtroom condition

And Labour is half-right. If you’re going to do this job, do it properly. Get a judge. Give that judge a budget, as much time as he needs, and the power to sub-poena documents and compel witnesses. The Tory enquiry will only have eleven weeks to complete its mission. That’s pathetically insufficient. You might as well try to fix the England football team in that time, or restore Nick Clegg’s image.

But Labour’s no more than half-right. We don’t need an enquiry, we need prosecutions.

The Feierstein rule of criminal justice says that for every million pounds of financial misselling or manipulation, one banker should spend one year in jail. That’s a reasonable, modest, and proportionate rule. If you started to nick stuff from your local Tesco’s, you’d find a much fiercer rule applied to you.

And where are the prosecutions? Where are the bankers in handcuffs, in custody, applying for bail, their passports confiscated and (ideally) a block on any movement or transfers ofassets? A fine of a few hundred million quid means something to a bank – though not much – but it means little or nothing to the guilty individuals.

Please note that I’m not calling for the writing of new laws to bolt the stable doors behind this most recently escaped horse. I’m calling for the vigorous application of existing laws that have never been enforced.

It cannot be the case that kids who pilfer from ashop in Hackney are sent to jail, while the bankers who manipulate hundreds of millions on an industrial scale and over a period of years, are allowed to walk free.

Oh, and because the bankers will have the best lawyers that money can buy, the state should respond in kind. There should be no financial limits placed on prosecutors. If they need more money to secure convictions, they should get it. If they need to hire in top-dollar financial consultants, they should get them. Without limit. (Oh, and again, this isn’t a new theme of mine. It’s right there in my book Planet Ponzi: enforce the laws, send corrupt bankers to jail. It’s so simple, but what has happened? What ever happens?)

Enlarge 

Uncapped: There should be no financial limits placed on prosecutors

So, enforcement of existing laws would be my very first recommendation, but it doesn’t stop there.

The Tory Party needs to stop taking money from the finance industry. That industry is too vastly compromised and has done far too much harm to this country – yet some half of all Tory funding comes from that source.

Just as the Leveson enquiry will force a much greater distance between politicians and the media, so too should this Barclays scandal force a proper separation of finance and politics. There should be a crocodile filled moat between the two. And searchlights, machine guns and electric fencing.

These things matter for two reasons.

One, it’s a simple question of justice. We don’t have a fair or equitable society if the rich aren’t held to account the same way as the poor.

But two, it’s a question of saving our society from civil unrest. Last summer saw the London riots. There were multifarious causes of those riots of course, but the essential heart of them was the sense – the perfectly correct sense – among the rioters that ours has become an unjust society. Where the rich too often don’t deserve their riches, where their crimes go unpunished.

If we want to save this country from more civil unrest, more riots, we need justice. We need bankers in jail. Lots of them and for long, long sentences.

This was published in the UK Daily Mail