Tag Archives: bailouts

Christmas 2014 round up of financial crimes with no one going to jail.

My husband made a very valid point a few days ago and I have been thinking about it every day since. He pointed out that when we (Paul and I) started looking at misconduct in the financial industry and specifically HBOS, we couldn’t get anyone to take our allegations seriously because no one believed us. That was in 2007 and it took until late 2009 to actually get the FSA involved and 2010 before the police got involved – even although we made allegations to the police in November 2007. We’re not a lot further forward now in December 2014 because the criminal trials for that alleged crime won’t start until September 2015 – and even then, I’m not holding my breath.

It was disappointing no one believed us in 2007 but not surprising because the idea banks, or rather bankers, might be crooks, was out of the question back then. Bankers were seen as respectable professionals and your bank manager was so trustworthy, he or she could even sign your passport. The same doesn’t apply now and no one bats an eyelid at the concept of crooked bankers – in fact bad conduct is what we expect from them, to the point even the good guys (yes I do acknowledge there are still many good bankers our there) are tarred with the same brush.

Paul’s point was simple: It was tough back in 2007 because no one believed us, so nothing was done. Now, everyone knows the financial sector is rife with fraud and corruption and still nothing has been done! Not just in the case we reported – right across the board and in thousands of cases. Even more alarming is the fact that, in many instances I know of, where people have tried to report financial crime, the police will not investigate it! In all probability this is because they don’t have the budgets to investigate such a glut of criminality in austerity Britain – but that is of no help to the victims who are frequently told – “it’s a civil matter.” No it’s not – crime is never a ‘civil matter’ and even victims of PPI have a right to report it as a crime, get a crime number and, if applicable, also have it investigated. Of course that might damage crime statistics.

But no. Most financial crime is just swept under the carpet as “mis-selling” or “restructuring” and resolved by bank shareholders’ paying huge fines to the FCA. Think about that for a moment – we all believe bankers have committed criminal acts but nothing has happened. It just beggars belief and is really as scary as hell because, what it actually means is, we can no longer rely on the Law and really do have a two tier criminal justice system. There isn’t another, plausible explanation.

This terrifying thought was brought home again when I read the latest excellent Matt Taibbi article in Rolling Stone magazine: http://www.rollingstone.com/politics/news/the-police-in-america-are-becoming-illegitimate-20141205 where he is talking about the disparities in the US legal system and it reminded me that I still haven’t had a reply to my letter to Mr Cameron of December 2012 when I asked for some clarification about the apparent immunity bankers have from prosecution. In that letter, which I wrote after reading some worrying comments from Andrew Bailey (now head of the PRA), I said:

Mr Cameron, unless I am completely mistaken, Mr Bailey seems to be telling us that banks, and therefore bankers, are now officially considered to be above the law in this country and that, in the interests of confidence in the banking industry (which is already at rock bottom among the British public, and therefore can hardly sink any lower), they cannot be prosecuted.

I am writing to ask you, as Prime Minister, for some clarification.

Does your government endorse the notion that banks and bankers should be given a licence to commit criminal acts without any fear of prosecution? Is this now official government policy? Are the British public now being asked to accept that, despite incontrovertible evidence of multiple criminal acts by banks, including money-laundering, drug-money-laundering, Libor rigging, multiple frauds and assorted Ponzi schemes, bankers are considered to be immune from prosecution? And if so, can I ask on what grounds your government, or indeed the government of any democratic country, can justify such a policy?” Full letter here: http://www.ianfraser.org/dear-mr-cameron-if-bankers-are-above-the-law-we-need-an-urgent-explanation/

I didn’t write the letter to be confrontational – although I must admit I am incredibly disappointed the PM’s strong words in the run up to the last election about what should happen to criminal bankers, turned out to be hot air and no more. This is what he said to Jeff Randall in January 2009:

“I think that we need to look at the behaviour of banks and bankers and, where people have behaved inappropriately, that needs to be identified and if anyone has behaved criminally, in my view, there is a role for the criminal law and I don’t understand why is this country the regulatory authorities seem to be doing so little to investigate it, whereas in America they’re doing quite a lot.”

I wrote the letter because I genuinely wanted some reassurance from the Prime Minister that bankers are not above the law; we don’t have a two tier legal system and; something would be done to redress this inequitable situation.

So what has happened to clarify or allay my concerns since December 2012? Well a few things have happened but not what I was expecting. For example:

  1. I’ve never had a reply.

  2. Several banks have been found guilty of money laundering and even money laundering for drug cartels. And the only penalty has been a huge tax on the bank’s shareholders who have paid massive fines for the conduct of bankers. But no one has gone to jail.

*given that banks (buildings or legal entities) don’t have any physical ability to pick up the phone and negotiate with drug cartels – such deals had to be done by bankers. So why have no bankers been held responsible?

  1. Many banks have been found guilty of making billions of pounds with the PPI scam. They’ve had to pay the money back in many cases but, I assure you, not all cases. So again, the shareholders have lost a fortune. But no one has gone to jail.

* I often wonder who invented PPI? Did senior bankers sit down and plan how best to get thousands of their customers to take out insurance policies which cost them a fortune but could never be used? Or did someone in a bank find a recipe for creating and implementing PPI in a fortune cookie?

  1. As a founder member of SME Alliance, I talk every day to people whose businesses have been totally destroyed with various, ridiculously (and I would suggest deliberately) complicated financial products under the collective name of swaps. I’m not a victim of a swap and I know little about them (I’m learning fast) but even their titles smack of more contempt for businesses e.g. vanilla swaps. Can you have chocolate or strawberry? Probably. The FCA have said many of these products should never have been sold to ‘unsophisticated’ clients and in some cases banks have had to give the money back. However, the years it has taken for this to happen and the devastation these products have caused, apparently do not necessitate banks having to pay out billions in compensation. The redress scheme the FCA has come up with has conveniently been limited to peanuts – and no one has gone to jail.

* A journalist was telling me the other day of a case where someone challenged the FCA decision multiple times and was eventually awarded £500k – but of course the bank interest and charges on his account over the time it took to challenge the bank’s conduct meant the victim got nothing and the bank paid themselves £500k. You couldn’t make it up.

  1. The now infamous business recovery units like RBS/GRG have been merrily acquiring, appropriating, stealing their clients’ assets left right and centre and sadly RBS have not been working in isolation. It has caused outrage – it’s been all over the news, MPs have held debates on the subject, Committees have interviewed senior bankers and regulators and even the ever cautious BBC have suggested some bankers are crooks. http://www.bbc.co.uk/programmes/b04t6jy1 But no one has gone to jail.

* As a victim of HBOS Reading (similar model) I have so much to say on this – but am having to keep quiet for now but not forever.

  1. And while the likes of GRG and HBOS Reading have caused many businesses to fail, a separate scandal has specifically targeted farms across the Country for over 20 years. Repeated allegations have been made against a man called Des Phillips and various of the 59 companies he has been or is a director of including UK Farm Finance, UKCC and UK Acorn Finance. And some of our major banks have been heavily implicated in these allegations as have other ‘professionals’. It’s a sickening story which has resulted in many family farms being repossessed and, sadly, farmers committing suicide. You can hear about it here: http://www.bbc.co.uk/programmes/b040hzz5 or read about here: http://www.publications.parliament.uk/pa/cm201415/cmhansrd/cm141111/halltext/141111h0001.htm No one has been prosecuted so no one has gone to jail.

  2. Bankers or traders have been found guilty of rigging LIBOR. Again, massive fines have been levied – another penalty on shareholders. However, in this instance it looks possible some bankers will go to jail and one banker has even pleaded guilty. But let’s not get too excited that justice might be done. Read this: http://www.theguardian.com/business/2014/oct/07/banker-pleads-guilty-libor-rigging-rate-fixing

As you can see the banker concerned could get up to 10 years in jail but we don’t know who he is or what bank he worked for and reporting on this case is heavily restricted. Presumably, after the other three people charged have had their trials, we might know more. But I wouldn’t bet money on it – especially if the banker in question worked for one of the State subsidised banks. But it’s a start.

I could make the list much longer but, to date and looking at the 6 instances above, money laundering, PPI, Swaps, asset theft including farms and LIBOR rigging, it’s certain 1 person in the UK will go to jail and 4 people might. And when you look at the trail of poverty, misery, desperation and devastation these crimes have caused, it is unbelievably disappointing – not to mention scandalous, that our regulators, justice system and worse still, our Government, have let this happen. In fact it is morally and ethically reprehensible.

Of course individual bankers do go to jail quite regularly – they’re usually quite low down in the pecking order and their offences (with a few noticeable exceptions) just about make it into their local newspapers. But the top dogs – the ones who make policy – the ones who instigate and oversee the kind of conduct which allowed all of the above to happen, seem to remain above the law. Which begs the question – why do we have laws?

Meanwhile, the Government have issued the following figures regarding crimes to businesses:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/284818/crime-against-businesses-headlines-2013-pdf.pdf

I haven’t read it in any great detail but I’m pretty sure it doesn’t mention the wholesale destruction of SMEs by banks. I sometimes think we should move the Houses of Parliament to Canary Wharf and have done with it before La La Land spreads across the whole of London.

Here in the real world we are in the run up to what will be another very austere festive season for many people in Britain – and I’m not just talking about people or SMEs who have been defrauded by banks. I’m talking about those families who’ve lost jobs and/or benefits and most of all, those people relying on food banks or who have lost their homes and now live on the street. A lot of people would say – me included – our major banks and therefore our most senior bankers, were very instrumental in causing our national austerity. And, post the so called Credit Crunch, those same banks (especially the part State owned ones) have done little to help the economy and much to damage it further. Unbelievably, the people at the top of those banks continue to be heavily rewarded.

For example, yesterday (13th December) I was reading an article about the top paid European Bank CEO’s. http://www.cityam.com/1415705309/which-ceos-european-bank-have-biggest-pay-checks-two-uk-banks-take-second-and-third-place

Hmmm – £7.4M. Even when you deduct 50% tax, that still leaves approximately £71k a week. I think you could have one hell of a Christmas with that remuneration package!

Mind you, every silver lining has its own cloud and I suddenly thought – I bet it’s really tough finding the perfect Christmas gift for these top bankers because, what do you buy for the man or woman who has everything? So maybe La La Land has its own problems at Christmas.

Shame you can’t gift wrap integrity – if we could give some of them that, the whole Country might feel more festive. Still, there’s always the good old standby gift – Monopoly. After all, banks have bought, sold, packaged and mortgaged every property on the board many, many times over – but, to date, they have been very adept at steering clear of the “Go to Jail” square. But then I’m guessing Al Capone thought he would never lose ‘games’ either.

Did the Bank Wreck My Business? Yes – so what happens now?

Did the Bank Wreck My Business? Yes – so what happens now?

I’m pretty sure the ratings for the excellent Panorama programme, ‘Did The Bank Wreck My Business’, were very high last Monday. Certainly most people I know watched it – but then many of them have direct experience of banking abuse at the hands of RBS or Lloyds – so they would. In fact most of them were interviewed by Andy Verity and Jon Coffey although their stories weren’t used in the programme. Some would say (and I would agree) there are many more horrific stories out there that the production team could have used – but it’s not a competition. Every business annihilated by bank misconduct (known to many as fraud), is a tragedy. And, given the Beeb’s generally conservative, establishment stance, I think it’s nothing short of a miracle this programme was as frank and exposing as it was.

As always, when programmes like this are on, I took some notes. I do it mostly to collect quotes for my book (nothing quite like “from the horses mouth”quotes to make points) but I also do it because I’m so staggered at what some people in the banking world say, it has to be captured in black and white for posterity. One day future generations will surely look back and ask “how the hell (being polite there) did a democratic country let that happen?”

I know the transcript of the programme will be available soon (or I hope it will) but here’s some of my favourite quotes from last night:

Jon Pain (RBS) “The whole purpose of GRG is to help customers return to financial health…..”

Vince Cable (BIS) “Well of course I’m very alarmed because good companies appear to have been put at risk or in some cases destroyed by banks behaviour…..”

Stephen Pegge (Lloyds) “our goal is to support businesses (you know) small and medium sized businesses are really important to us….”

Jon Pain (RBS) “(But) I would in no shape or form condone any inappropriate behaviour by anybody acting on behalf of RBS – that’s not part of our agenda in supporting customers.”

Christ Sullivan (RBS) to Andrew Tyrie re GRG “It is absolutely not a profit centre!”

Ross Finch (Lloyds victims) re his meeting with an exec of Cerberus who Lloyds sold his loan to “When I expressed disbelief about their behaviour, um, he said, “what you’ve got to understand is I am a prick” – which I couldn’t believe he would say such a thing!”

I’ve just pulled out those quotes because they are either so absurd or so shocking– and they’ve been broadcast on the BBC, the bastion of British correctness. If even the Beeb is exposing RBS and Lloyds as a bunch of crooks, what can we say? Nine years on from the so called Credit Crunch and where are we? I would say, if anything, we’re walking backwards. As one of the founder members of SME Alliance and a member of Whistleblowers UK ( Paul and I blew the whistle on HBOS Reading – the HBOS equivalent of GRG), I hear horror stories about banks v SMEs every single day. But the exposure of banking atrocities is no longer limited to what banks like to portray as ‘the niche market of poorly performing SMEs’. Everyone knows how bad some of our banks are and Andy Verity’s programme should be one of the final nails in the coffin of bad banking.

But will it be? Big question:

Vince Cable, Andrew Tyrie, the Treasury Select Committee, the FCA, the PRA, Mark Carney, David Cameron, Ed Miliband, Nick Clegg – did you watch “Did The Bank Wreck My Business’? And if you did – what are you going to do about it? They certainly didn’t wreck your businesses so I understand that maybe you don’t understand the consequences of what banks do. However, I do and so do thousands of SME owners, employee’s, shareholders and creditors. We live with the consequences.

I also know Andy Verity and Jon Coffey have done extensive research to make this programme and could have used any number of totally outrageous cases because they interviewed loads of SME owners (or ex SME owners) – and I know some of those stories may have been a step too far for the Beeb. In my own case sub judice was a big problem. But I know they made the programme in the spirit of stopping banks abusing SMEs. So has it worked? Has it helped? Will anything change?

Well the Panorama team have done their bit. David, Ed, Nick, Andrew, Mark – over to you. You are the people who can make the banks behave – or at least you should be. If the reality is you’re not – then wow, we have a serious problem in our democracy.

Best quote of the programme, without doubt, has to be Austin Mitchell MP, talking in Parliament about the Keith Ross case and saying it how it really is:

“What I want to do today is tell the story of the theft of a profitable Yorkshire company and I don’t mean the criminal Mafia we often speak of I mean Britain’s dark suited Mafia which in this case is represented by Lloyd Bank and Price Waterhouse Cooper both acting in collusion….”

Here’s the link from Hansard to Keith Elliot’s case: http://www.theyworkforyou.com/whall/?id=2013-11-12a.212.0

Of course, living in Italy for nearly 20 years, Austin’s comments would strike a chord with me. Well said Austin – there’s not many MP’s who would draw Parliament’s attention to the similarities between the banks and the Mafia but I would just put you straight on one thing – our dark suited Mafiosi are, in many cases, criminal.

I’m posting this on my own blog site because this is my own view – but I believe many people in SME Alliance will appreciate this view and I have to give us a plug because the conduct exposed in the programme is one of the reasons SME Alliance was formed.

#SME Alliance – giving SMEs a voice. #nooneisabovethelaw

Save the Bankers v Save the Pandas – now there’s a choice!

This Sunday has not started well. Beautiful crisp morning but pretty damn cold – the beginning of the ice box scenario for many households who can’t afford heating. Nevertheless, Paul and I were up early and ready to go out to our local car boot which has, over the last few years, become like a weekly social event – regular stall holders with irregular wares and prices ranging from 20p to a couple of pounds, regular visitors chatting away with each other, lots of dogs (and their proud owners) and so multi cultural. I often think the car boot sale we go to, which is held in a farmers field in Cambridgeshire, is one of the best and most amicable examples of multi-cultural Britain.

Unfortunately today’s visit did not go to plan as our elderly car decided it does not want to live through another winter – and refused to start. Hey ho, won’t be the first time a car has died on us over the last few years, so I decided to take another pleasant option – read the papers on line, tweet a bit and listen to the Archers.

It was all going really well until I read an article on the Conservative home site called ‘Save the Bankers’ penned by an A level student. Now don’t get me wrong, everyone is entitled to their view and it’s always good to see young people voicing their opinions. The author even made some good points – especially the point that ‘save the bankers’ is unlikely to be as popular a campaign as ‘save the pandas.’ Yep, I’d say it’s a non starter. And he, Joe, also made the valid point that thousands of people are employed in banks – the figure of 3.8% of the population was muted although I haven’t checked that figure. Obviously it’s a big sector – obviously it employs many ordinary decent people – and even makes many of them redundant and, (I don’t know if Joe knows this) sometimes by the most ungracious of methods, like please all attend a meeting in the car park – you’re fired and don’t go back into the building.

However, the overall tone of the article was to praise the contribution banks and bankers make to society; to criticise those who insist banks are the root of all evil and; to have a pop at the Labour party for their manifesto in relation to bankers’ bonuses. With the arrogance of youth, the author insists we must rise above the ridiculous myth that banks or the City are responsible for society’s ills and we must instead take collective responsibility for economic failures.

Fair enough – not many 18 year old’s will have lost their business because of asset stripping or swaps. They probably won’t have been affected by LIBOR or even PPI at that age. They won’t know how the insolvency laws have been abused and manipulated over the years so that solvent companies are pushed into administration by banks who then acquire those assets for peanuts. So they won’t know how many SMEs have been destroyed by deliberate and immoral policy implemented to benefit an elite minority at a huge cost to the majority. And if you don’t research that side of the coin – you won’t know and you won’t include any of it in your article.

But my problem is not about the content of the article – in a world where social media means everyone can share their views across the internet, why shouldn’t Joe share his? And if he had done so on his own blog, I wouldn’t have batted an eyelid (I probably wouldn’t have even seen it). What I found worrying was that the Conservative party gave this blog/article a huge platform on their home site and in doing so, they’ve used an A level student to promote the bizarre propaganda that banks are fundamentally good, we should recognise their contribution to society, embrace the ambitious nature of bankers and allow them to thrive without the constraints of “iniquitous” legislation being imposed by regulators. Bonkers!!!

There are no doubt many good bankers out there Joe. Every sector has good people – personally I always had a bit of a soft spot for Tony Soprano. Some of my good friends come from the financial sector – although most of those particular friends are now better known as ‘whistleblowers.’ Sadly, there can’t be many good main stream banks in the UK – because unlike other European countries, we only have a handful of banks and even if 50% of them were good – that could still only be a few rather than many. In my experience and after 7 years of research, I would say the majority of the big banks have repeatedly demonstrated utter contempt for society and its laws – spurred on by successive Governments.

I have no idea who to vote for next year – almost certainly it will be the party which demonstrates any inclination to support the 4.9M SMEs in the UK who employ 25M people – if such a party exists. Who knows, that could even turn out to be the Conservative party. Like many SME owners, I would just like to see a Government that redresses the balance of the many and varied issues that have caused SMEs to bat on a totally uneven playing field – and banking is only one of the those issues. All the same, while I respect everyone’s views, I feel slightly apprehensive about any political party that gets teenagers to preach on the subject of how good our financial sector is. Poor etiquette Dave. Unless of course you are also going to let someone else have the same platform to put the other side of the argument? I can think of quite a few volunteers.

1st SME Alliance meeting fully subscribed.

Brilliantly we have filled the spaces available for the first meeting of SME Alliance. Many thanks to those who have also pledged support – we will keep them fully updated on the agenda and, of course, the results of the meeting.

While we don’t have any more space for the meeting, please do keep contacting us on: smealliance2014@gmail.com if you want to support this initiative and get updates. It’s early days but who knows? After all it is logical – approx 25million people work for the  4,9 million + SMEs in this country. But in recent years we’ve been like lambs to the slaughter as far as the bamks have been concerned and successive Governments have done nothing to stop what’s happening. Bankers may well control the wealth of the country but they’re not (quite) brazen enough (yet) to pretend they have more power than politicians and Governments.

A journalist asked me today why we are putting together this initiative – and then answered his own questions. The organisations that are in place don’t seem to have been at all vocal about the many problems SMEs face. Most of them have been silent and stood on the sidelines.

As my mother used to say – “if you want a job well done, do it yourself.” That’s what SMEalliance intends to do. This isn’t just about fighting banks. It’s about asking how 25 million people, who are the life blood of British business, can be totally ignored?

We have no more space for the first meeting (which is amazing given we only came into being a week ago) but we do need the support of as many SME owners and employees as possible. A few thousand supporters between now and the general election next year, may just remind people what an election is about?

 

 

 

 

 

 

 

 

To SME friends on twitter

Dear David Cameron, Ed Milliband, Nick Clegg and other party leaders,

In the run up to the next election the owners and shareholders of 10s of 1000’s of SMEs who have been systemically abused by banks are wondering who to vote for and if there is any point? Over the last few years it seems there has been little difference in how the major parties have pandered to the banks and Corporates at the expense of the millions of small businesses in Britain. And while the present Government insists the economy is growing, the situation of banks refusing to fund SMEs while continuing to close them down, steal their assets and knowingly defraud them, continues unabated.

Not only do the banks continue with their unethical conduct to SMEs, we can assure you the majority of business owners find the regulators to be at best ineffectual and at worst biased towards the big banks. In all honesty we have no idea which party, if any, would be prepared to change that unethical status quo and support British businesses.

The following statistics come from BIS (beginning of 2013)

  • There were an estimated 4.9 million businesses in the UK which employed 24.3 million people, and had a combined turnover of £3,300 billion

  • SMEs* accounted for 99.9 per cent of all private sector businesses in the UK, 59.3 per cent of private sector employment and 48.1 per cent of private sector turnover

  • SMEs employed 14.4 million people and had a combined turnover of £1,600 billion

  • Small businesses** alone accounted for 47 per cent of private sector employment and 33.1 per cent of turnover

  • Of all businesses, 62.6 per cent (3.7 million) were sole proprietorships, 28.5 per cent (1.4 million) were companies and 8.9 per cent (434,000) partnerships

  • There were 891,000 businesses operating in the construction sector – nearly a fifth of all businesses

  • In the financial and insurance sector, only 27.5 per cent of employment was in SMEs. However, in the agriculture, forestry and fishing sector virtually all employment (95.4 per cent) was in SMEs

  • Only 22.5 per cent of private sector turnover was in the arts, entertainment and recreation activities, while 92.7 per cent was in the agriculture, forestry and fishing sector

  • With 841,000 private sector business, London had more firms than any other region in the UK. The south east had the second largest number of businesses with 791,000. Together these regions account for almost a third of all firm

24.3 million people equals a lot of votes and that’s without taking into account the millions of individuals damaged by the so called ‘credit crunch’ when banks were given billions of pounds from the public coffers with no reference to the public. That is a statement of fact – not a political point and many of us see little difference in the conduct of the last Labour Government to the present coalition Government. The banks and bankers get richer while the society and the small businesses that are such an essential part of the economy are continually ignored or deliberately impoverished.

We would like to know if any of the political parties are genuinely intending to support SMEs in the next term of Government? We’d like to know if that support is included, or proposed to be included, in any manifesto? And we would like to know what guarantees will be given that any promises made in the run up to the election, will be upheld? In the previous election we were all led to believe miscreant bankers would be individually held to account and bankers would not be handsomely rewarded for causing the austerity most of us live with. It has not happened and, if anything, our banks feel empowered to act immorally and even criminally in the knowledge any penalty will be levied against the shareholders by fines from the regulators. It started with new Labour and this situation has been proliferated by the coalition.

We would be grateful if anyone can clarify what we should expect from the next Government and whether any party is intending to support SMEs. The situation for many SMEs in this Country is catastrophic. We want change – we want to know who is prepared to instigate that change – we want to know where our millions of votes should go.

Yours sincerely

SME Alliance.

Following on from yesterday’s Indy article about the HBOS Rights Issue, can we at least stop subsidising fraudulent conduct in banks?

Tom Harper’s excellent article questioning whether or not investors were given key financial facts regarding the HBOS Rights Issue in 2008, provoked some serious outrage on the ‘Twittersphere’ yesterday – and quite rightly so. http://www.independent.co.uk/news/business/news/hbos-accused-of-misleading-the-public-over-4bn-rescue-9701791.html

I don’t suppose the Government, Lloyds, the Regulator or the BoE will be happy with that line of investigation. Not least because it opens the door to a whole torrent of questions about how many other transactions, involving state subsidised banks, have been less than transparent?

And perhaps the biggest question will be – was the information in the Lloyds/HBOS Merger proposal, as accurate and transparent as it should have been?

I am sure Lloyds bank will say the HBOS Rights Issue was nothing to do with them as it pre-dated the merger. But in order for the Merger Proposal to be correct, it should have contained watertight data about the financial state of HBOS – which, reading Tom’s article, I’m not sure it could have? I’ve looked at the Proposal and it relies on financial accounts for HBOS and Lloyds TSB dating back to 2005 – although conveniently, it only relies on unaudited accounts for HBOS in 2008. Not that it makes much difference because, sadly and to add weight to yesterdays article, the Big 4 auditors appear to have been equally confused as to the solvency of the banks despite the audited accounts, as shown in another excellent article by Ian Fraser, November 2010: http://www.ianfraser.org/connolly-i-do-believe-that-auditors-performed-well/

What I find really upsetting about all this was brought home this morning by an article from the Positive Money site (following up on an article by Jill Treanor in the Guardian). The article dates back to December 2013 and explains, in very clear and simple terms, how banks continue to be subsidised and why. https://www.positivemoney.org/2013/12/uk-banks-benefited-38bn-big-fail-state-subsidy/ And of course, if we are still subsidising the part state owned banks – we are also subsidising bankers’ bonuses – which, considering neither Lloyds nor HBOS have managed to comply with the terms and conditions of the 2008 bailouts, seems entirely unjust not to mention bonkers. In a letter I received from the Treasury dated 15/05/09, Lloyds and HBOS agreed to meet the following terms:

A range of conditions are attached to the recapitalisation package. Lloyds TSB and HBOS have agreed that over the next three years they will maintain the availability and active marketing of competitively priced lending to homeowners and to small businesses at 2007 levels. They will also provide support for schemes to help people struggling with mortgage payments to stay in their homes and the expansion of financial capability initiatives. The remuneration of senior executives will follow strict guidelines – both for 2008 (when the Government expects no cash bonuses to be paid to board members) and for remuneration policy going forward (where incentives schemes will be reviewed and linked to long-term value creation, taking account of risk, and restricting the potential for “rewards for failure”). The Government will also be consulted on the appointment of new independent non-executive directors…”

Joining up all the dots, I begin to get a very clear picture of La La Land and it’s not pretty. As I am definitely a layman in these matters (albeit a fairly well informed one), I thought I’d take this opportunity to share my view of what’s happened over the last few years.

Round up of events in La La Land.

In 2008 and after exceptional spending sprees by both the banks and the public, the proverbial finally hit the fan and many banks ran out of money. The Government, terrified they’d have a repeat of the Northern Rock débâcle, gave the banks billions from the taxpayers’ coffers. As this resulted in mass austerity, the Government were loath to let anyone know exactly how bad a shape some of the banks were in (some were insolvent) and they certainly didn’t want the public to know the exact details of the billions being handed over, so they did their best to keep it all quiet. They (and the banks) even kept it quiet from the people being asked to invest in the banks via rights issues and/or sanction the HBOS-Lloyds merger, although they didn’t have to keep it quiet from institutional investors, because they were ‘in the know’ and had no intention of investing in insolvent banks.

The banks took the money but totally ignored the social responsibility that went with it (terms and conditions) in the same way they ignore little things like money laundering laws or Principle 1 of the FSA Principles of Business: A Firm must conduct its business with integrity. Actually I struggle to see how most banks comply with any of the FCA Principles: http://www.fca.org.uk/static/documents/handbook-releases/high-level-standards136.pdf Section 2.1

However, after the credit crunch the banks could no longer be seen to lend with reckless abandon (which was a bit annoying, as they rather liked basing bonuses on inflated loan books), so they invented other reckless and ingenious ways of making money – e.g crippling the SME sector and stealing assets. Best of all, having totally screwed up and taken everyone’s money, they came up with their most ingenious plan to date – they sold us all the simple concept that – if we didn’t allow bankers to keep taking bonuses, they’d walk away – and then we’d all be screwed. To make sure that dreadful day never comes, we continue to subsidise banks so they all live happily ever after.

That sounds like a pretty dark fairy story and the darkest bit is – it’s not a fairy story. So I hope somewhere, someone in authority (not mentioning any names Mr Tyrie) will have read Tom Harper’s articles, Ian Fraser’s articles and I’m hoping Max Keiser will invite Paul Moore back on the Keiser show to talk about the appalling behaviour of HBOS, Lloyds and other banks. Because, crazy as is it and despite all the rules, laws and regulators we have, I think our best chance of getting banking reform is to report bank misconduct to the media and then spread the word via Twitter? Of course, that could ultimately do enormous damage to some banks but I can see little alternative to this course of action. It’s a huge problem that while we definitely do have regulators, it seems La La land is out of their jurisdiction – which is the obvious reason they cannot do anything to penalise errant bankers.

*Here’s a thought – if we’re going to rely on journalists to clean up the banking world – maybe we should be paying our financial journalists (and their research teams) more and getting rid of regulators? We’d save a fortune and get some results.

Anyway, what upsets me most about all this is how we continue to let ourselves be mugged and my point is: If banks are intent on continuing to cheat their customers, destroy SMEs and refusing to compensate the people they defraud while insisting they still get huge bonuses – fine. It seems there’s little we can do about it. But can we please, please stop subsidising this conduct?

Interesting day – Ian Fraser, Tom Harper, Richard Brooks all aware of FRC conduct.

Interesting day of research (always for the book) and many thanks to Ian Fraser, Tom Harper and Richard Brooks, for pointing me in some interesting directions, especially with reference to my recent blogs.

I started my new blog site with some details about the HBOS rights issue and the Lloyds/HBOS Merger, which, after reading the BoE report on the ELA given to HBOS and RBS in 2008 does, regrettably, seem to have been a rather unfortunate ‘con’ (I just can’t find a more PC word for it) on the shareholders of Lloyds and HBOS and also on the tax payer. I can say that, in the circumstances, I fully appreciate the Tripartite Authorities were definitely ‘over a barrel’ at the time but, all the same, the losers, as always, were the little people. All of us little people who now live with such austere conditions, that hundreds of thousands of people in Britain now rely on food banks:

A food bank charity says it has handed out 913,000 food parcels in the last year, up from 347,000 the year before. The Trussell Trust said a third were given to repeat visitors but that there was a “shocking” 51% rise in clients to established food banks. It said benefit payment delays were the main cause. In a letter to ministers, more than 500 clergy say the increase is “terrible”. The government said there was no evidence of a link between welfare reforms and the use of food banks. http://www.bbc.co.uk/news/business-27032642

Paul has been out all day helping someone with a long running case against HBOS. When he came home, he asked if there were any interesting e-mail or tweets. I said Tom Harper tweeted me an article by Mark Kleinman about: The Chancellor has ruled out a sale of Lloyds shares to the public ahead of the next general election, Sky News can reveal.

I said to Paul (and I said on twitter) I didn’t think this was wise. If I was the Chancellor, I would off load those shares asap. As always, Paul pointed out the folly of my logic. I have just posted a document suggesting the lack of transparency over the HBOS/RBS ELA and the HBOS-Lloyds issue was, potentially, out of order and maybe even fraudulent. Imagine – the Government sell the shares in Lloyds now and then, down the road (and before the election) a scandal – any scandal – breaks about criminal conduct by the senior management of Lloyds Bank or its sick puppy HBOS, that causes the share price of Lloyds Banking Group to drop just after thousands of people have bought shares? Add that to what has already happened. Catastrophe. It’s not impossible in my view.

I think Tom, like Paul, has considered this possibility but me? Well I was so deeply immersed in other research, I didn’t add 1 + 1 up. So well done Mr Osborne, you clearly are wiser than I thought.

Actually, what I was concentrating on was the FRC. Following on from my blog yesterday about the appointment, as Chairman, of Sir Win Bischoff, first to the FRC and then to JP Morgan Europe, ME and Asia, I received two interesting articles from Ian Fraser on the topic. One article was about the extraordinary way in which the FRC had dropped its investigation into BAE Systems (another favourite of mine – and Tom’s http://www.independent.co.uk/news/uk/politics/exclusive-the-cameron-crony-the-private-jet-company-and-a-crash-landing-that-cost-taxpayers-100m-9350090.html ) and the article also said:

The FRC has form when it comes to letting ‘Big Four’ accountancy firms — Deloitte, Ernst & Young, KPMG and PWC — off the hook. On April 11th, The Times’s Alex Spence revealed that the Financial Reporting Council had decided against probing ‘Big Four’ firms’ pre-crash audits of UK banks, simply because it wanted an easy life.

There was a lack of will,” one well-placed insider told The Times. “There was a general reluctance to get into it. It would just be too disruptive, too damaging.

The FRC has yet to make clear whether it is going to bother to launch a specific probe of KPMG’s role as auditor of the disastrous UK bank HBOS in 2001-08. It is apparently sitting on its hands while it waits to see the outcome of the FSA’s whitewash report into the Edinburgh-based bank’s failure. http://www.ianfraser.org/britain-is-fast-turning-into-a-banana-republic-wilfully-blind-to-corruption/

The other article ian alerted me to was one he wrote for The Sunday Times. I can’t read it all because I can’t afford to subscribe (thanks HBOS/LBG) but I trust Ian enough to know it is entirely relevant to my issues about Sir Win and the FRC:

Sir Steve Robson, one of seven RBS non-executive directors to be purged last month, is facing calls to resign as non- executive director of the Financial Reporting Council (FRC).

If Robson remains in his post, critics suggest the FRC could lose credibility. At RBS he was partly responsible for one of the largest bank collapses in UK history.

“The whole civil service ethos is that Caesar’s wife is above reproach,” said Robert Bertram, a corporate lawyer with experience as a non-executive director of listed companies, who served as a member of the Competition Commission.

“Whether or not Robson, a very distinguished public servant, has made his own position untenable, it seems the FRC itself has made it untenable …..http://www.thesundaytimes.co.uk/sto/business/article156107.ece

All serious food for thought from my point of view and the icing on the cake was an article Richard Brooks sent me from Private Eye:

(C) Private Eye

(C) Private Eye

So, an interesting and worrying day. I keep thinking I have discovered important and interesting information. But of course the real ‘investigative journalists’ – and ian, Tom and Richard are three of the best – already know a lot of what I’ve discovered, they’ve published it and, the powers that be have ignored it – so I’m in good company.

Last bit of interesting news I got from my research today, was from the website of 33 Chancery Lane, the Chambers of  John Black QC who is representing the Crown in the Operation Hornet case. Interestingly, while the CPS have not updated their version of events on their website, which refers to 8 defendants and losses of £35M in the Reading fraud, John Black QC has a more updated version:

Operation Hornet (2013-2014) – advising Attorney General, CPS and Thames Valley Police on prosecution of bankers at leading financial institution and other businessmen for corruption, money laundering and fraudulent trading. The forthcoming trials concern an alleged £245m fraud.

As I said, an interesting day.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lloyds/HBOS shareholders – according to the Treasury, the merger was all down to you.

Following on from the last (and first) blog on my new site where I quoted the Bank of England’s explanation of the ELA support for HBOS and RBS, I would like to clarify the Treasury’s position – or at least the version I received. As I mentioned, the first payment of the ELA to HBOS was given on 1st October 2008 and peaked at £25.4BN on 13th November 2008. Like the rest of the population, I had no idea about this huge sum but I did know the situation with HBOS was extremely precarious by Oct 2008 and, in my view, some of the money it had lost was as a result of dubious or even criminal conduct. So, on the 6th October 2008, I wrote to Gordon Brown giving him chapter and verse about what Paul and I had uncovered and explaining why we felt the merger would potentially be a disaster.

On 20th October 2008 I received a reply from No 10 thanking me for my letter and saying: “Mr Brown felt pleased that you were able to write to him about your concerns, a careful note has been made of your comments. He has asked me to send a copy of your letter to HM Treasury as he feels it is important that they are made aware of your concerns and can send you any comments they may have. Yours Sincerely.”

The comments they had were, in the circumstances, less than transparent and not once did they mention the odd £25.4BN. But they did clarify the merger between HBOS and Lloyds TSB was, according to HM Treasury, entirely down to the shareholders of both Banks and therefore, nothing to do with Lloyds, HBOS nor the Government. So don’t go bleating or suing the Bank – it was all down to you guys! Here’s an extract from my book explaining the Treasury’s point of view:

“Back to Gordon and I’m guessing, also with hindsight, Mr Brown wishes he had just ignored my letter instead of asking his office to reply. In total I received three letters from No 10 and three letters from the Treasury, who apparently didn’t have any concerns about HBOS or the merger. In fact they didn’t even seem to realise it had happened and the first reply we got from the Treasury, dated February 2009, made reference to the ‘proposed merger’ expected to take place in January 2009:

Thank you for your recent letter regarding the merger between Lloyds TSB and Halifax Bank of Scotland (HBOS). We have received a large volume of enquiries in recent days and so are not able to provide a specific response to you at this time. I hope that the information below is helpful and answers the questions you raised.

The proposed merger between Lloyds TSB and HBOS was announced on 18th September. Both Lloyds TSB and HBOS shareholders have voted in favour, and it is expected to take effect during January 2009 subject to the approval of the Scottish courts. HBOS shareholders will receive 0.605 Lloyds TSB shares for every HBOS share. The decision on the merger between Lloyds TSB and HBOS was and remains a matter for shareholders.”

All things considered, it probably would have been better if the shareholders had reached their decisions retrospectively! Not least because responsibility for the merger seems to have been laid exclusively with them. On 16th March 2009, we received a second letter from the Treasury saying:

Thank you for your letter of 6th October 2008 to Mr Gordon Brown on the merger between Lloyds TSB and Halifax Bank of Scotland (HBOS). I am replying as Minister responsible for this policy area. I am sorry for the delay in responding to you.

Recapitalisation

On Monday 13th October, in implementing the measures announced on 8th October, the Chancellor announced that the Government would be underwriting capital investments for Royal Bank of Scotland and, on successful merger, for HBOS and Lloyds TSB.

A proposed merger between Lloyds TSB and HBOS was announced on 18th September, and became effective on 16 January 2009 following shareholder and other approvals. The decision on the merger was a matter for the shareholders of both institutions. …”

On 15th May 09 we received a third letter from the Treasury which was basically a copy paste of the second letter – which was more or less a copy paste of the first letter but with corrected time scales. All three letters contained details of the HBOS recapitalisation – how much was being raised and from where. I’m not sure their explanations really clarified exactly how much money the Government was giving HBOS or Lloyds but, crucially, the letters failed to mention the small matter of the £25.4BN given to HBOS:

On 19th November, Lloyds TSB shareholders voted in favour of its merger with HBOS and approved plans to raise £5.5 billion by issuing £4.5 billion of new ordinary shares and £1 billion of special preference shares. In relation to the newly issued ordinary shares, the shares were made available for acquisition by existing Lloyds TSB shareholders. To the extent that such shares were not acquired by existing shareholders (or other third parties) the Treasury has done so. The Treasury has also subscribed for £1 billion of preference shares

On 12 December 2008, HBOS shareholders voted in favour of the merger. In the case of HBOS, £8.5billion of newly issued ordinary shares were made available for acquisition by existing HBOS shareholders. Again, to the extent that such shares were not acquired by existing shareholders (or other third parties) the Treasury has done so. The Treasury has also subscribed to £3billion of newly issued preference shares in the capital of HBOS.

A range of conditions are attached to the recapitalisation package. Lloyds TSB and HBOS have agreed that over the next three years they will maintain the availability and active marketing of competitively priced lending to homeowners and to small businesses at 2007 levels. They will also provide support for schemes to help people struggling with mortgage payments to stay in their homes and the expansion of financial capability initiatives. The remuneration of senior executives will follow strict guidelines – both for 2008 (when the Government expects no cash bonuses to be paid to board members) and for remuneration policy going forward (where incentives schemes will be reviewed and linked to long-term value creation, taking account of risk, and restricting the potential for “rewards for failure”). The Government will also be consulted on the appointment of new independent non-executive directors…” [End of book excerpt]

Make what you will of that but what I make of it is: the shareholders of HBOS and Lloyds are responsible for the merger; the new Bank will, on instruction from the Government, be enormously supportive to home owners and SMEs; bonuses will not be paid to Board members and; I’m a China man. We didn’t know what we were handing to HBOS (or RBS) back then and, as it turns out, the terms and conditions of the bailouts were a lot less realistic or memorable than the fairy tales of Hans Christian Anderson.

Don’t get me wrong – I’m not posting this because I’m a Conservative supporter. I don’t think Mr Cameron has been any more supportive to the taxpayer in the case of Public v Banks than Gordon Brown. At the end of the day “it’s all about the money” and let’s face it we, the taxpayers, don’t have any, we gave it all to the banks. So whoever we vote for we shouldn’t really be surprised when, whatever party wins the election next year, politicians continue to vote for the banks.

My new blog starting with the HBOS/Lloyds Merger and the HBOS Rights Issue

After a very long break I have finally got around to making a new blog site – or at least I’ve got around to asking my daughter to make one for me. I haven’t been too lucky with the last couple of sites about HBOS. I had to take one site down when Thames Valley Police started their investigation into HBOS Reading – because all the blogs were about HBOS Reading and contravened sub judice. So I started a new site with slightly less specific blogs but it was still mainly about the misdemeanour’s of HBOS. And one particular blog I wrote resulted in a rather menacing phone call from an ex HBOS banker and an even nastier virus being attached to the site which contaminated any reader’s computer. So it had to go.

Anyway, third time lucky and I won’t waste time explaining what I’ve been doing since I took that blog down, I’ll move straight on to a subject that is becoming more and more prominent in the news (not that it ever went away) – the merger between Lloyds and HBOS and the legality (or not) of the HBOS Rights issue. I will just add however that I have been busy writing a book about HBOS and while I can’t publish it until next year when the criminal trials re HBOS Reading should be over, I can publish some non-specific extracts from the book as well as some of the research for it – which I have done below.

Recently someone very kindly pointed me in the direction of a document published on the Bank of England website about the Emergency Liquidity Assistance (ELA) HBOS and RBS received in October 2008. It’s a fascinating document and it clarifies some of the myths about how and why the HBOS-Lloyds merger happened. I wanted to share it with Paul Moore as I know he’s also writing a book about HBOS called ‘Crash Bank Wallop.’ To save him having to read the entire document, I extracted some of the key points in relation to the merger and the HBOS Rights Issue. I hope these points will be of interest and of use to others. All the writing in italics is from the BoE document and all the comments I’ve added are entirely my own views:

Some key points from the Bank of England report on ELA to HBOS & RBS. Oct 2012.

21. …..The judgement as to whether or not to activate ELA in 2008 needed to address three core criteria—that the potential failure of the banks in need of support should be judged to be a threat to systemic stability; that the banks receiving support should in a broad sense be solvent; and that there should be a feasible exit strategy from the ELA— …….

22.The second criterion of solvency is never easy to assess because difficulties in funding can quickly transmute into impairment of solvency. But for both banks in 2008 there was a concrete path to future solvency on which the Bank could base its decision to extend ELA. In the case of HBOS, the path to future solvency at the point ELA was extended appeared to be the merger with Lloyds TSB that had been announced on 18 September 2008.

So HBOS was insolvent in the run up to the merger and, as such, wasn’t eligible for the £25.4BN it got in ELA. And the only way around this problem was to merge HBOS with a more solvent bank. I guess Lloyds TSB pulled the short straw and I imagine even the “not given to superlatives” Eric Daniels, would no longer say the merger had a happy ending for Lloyds, its shareholders or even for him. In my book I’ve described what happened as follows:

“Consider this scenario – a previously successful business man who, due to bad judgement and excess, becomes a drunken vagrant, goes into a bank and asks for a huge loan to tide him over a bad period. He tells the bank manager he has no assets, loads of debts and is currently destitute. However, he wants the loan on the grounds he will soon be moving in with his mate down the road and that will solve his problems. His mate is minted and will pay off all his debts even although this means they will both end up strapped for cash. Would he get the loan?”

98. As noted above, the run on Northern Rock marked a step-change in the level of the Bank’s engagement with individual banks and it is clear that the Bank, and indeed the other members of the Tripartite, were fully aware of the vulnerabilities of HBOS prior to its need for ELA in October 2008. By September 2007 the Bank was receiving what it felt were more appropriate data from the FSA, at any rate on banks identified as more vulnerable, including daily liquidity reports from the FSA on HBOS (as well as on Alliance & Leicester and Bradford & Bingley).

The Bank of England were monitoring HBOS on a daily basis by Sept 07 – such was its vulnerability. But, in their trading statement December 13th 2007, Andy Hornby commented:

“HBOS is set to deliver a good full year outcome despite the dislocation in global financial markets. We continue to build on the strengths of our UK franchise and are seeing real benefits from our investment in targeted International expansion.”

And on the subject of capital and funding, Mr. Hornby said:

Our capital strength, the quality of our retail deposit franchise and the diversity of our earnings continue to underpin confidence and support for HBOS in the wholesale funding markets. Our move to lengthen the maturity profile and diversity of our funding in recent years, and our policy of not over-paying during this time of intense competition for funds and capital, is consequently being rewarded.”

http://www.lloydsbankinggroup.com/globalassets/documents/investors/2007/2007dec13_hbos_trading_smt.pdf

101. From late-2007, the Tripartite authorities began contingency planning to map out possible options for resolving HBOS should the key risks facing it crystallise. There was heightened monitoring of HBOS from March 2008 after the emergency sale of Bear Stearns on 16 March and after an unfounded market rumour that HBOS was receiving emergency assistance from the Bank caused a sharp fall in HBOS’s share price on 19 March. At this stage the Bank was considering in detail the consequences of HBOS, like Northern Rock the previous September, being unable to fund itself in the markets.

In other words, by March 2008 the BoE & the FSA absolutely knew HBOS was broke and yet they still let them proceed with a misleading Rights Issue!

102. By mid-April 2008, although still work in progress, a comprehensive contingency plan had been prepared by the FSA, in conjunction with HMT and the Bank. This contingency planning explicitly recognised the possibility of the Bank needing to undertake some form of ELA in the event of wholesale markets beginning to close to HBOS. Although by May the immediate threat to HBOS appeared to have receded somewhat, in part because it was able to utilise the SLS launched in April, the Bank continued through the summer closely to monitor HBOS’s liquidity strains on a daily basis as HBOS endeavoured to scale back assets and increase deposits in order to reduce its reliance on wholesale funding. In the event, wholesale funding became increasingly difficult as the maturity of funding available to HBOS shortened, progressively increasing the ‘snowball’ of funding that had to be rolled at shorter maturities. With the failure of Lehman Brothers on 15 September, HBOS’s position rapidly became untenable. When it finally needed to seek ELA from the Bank on 1 October, the approach did not come as a surprise and the Bank was able to respond rapidly.

That paragraph completely omits the author’s own statement in paragraph 9: “HBOS announced a £4 billion rights issue on 29 April, but only 8% of the HBOS rights issue was taken up by private investors in July, with the remainder being left with the underwriters. ”

Here’s an extract from an article written by Ian Fraser in January 09 re the rights issue:

At the meeting at which shareholders were persuaded to vote in favour of the rights issue, in Edinburgh on June 26, the HBOS chairman said: “The rights issue is absolutely right and will put us in a competitive position.”

He added: “We are saying performance will be satisfactory and resilient. Armageddon may happen and we should be prepared for it and we are.”

And he said: “We are telling the truth; we are truthful people. But if we weren’t, there’s an army of regulators, auditors et cetera to make sure we are.”

My conclusion

The Directors of HBOS, the BoE, FSA and the Treasury, were fully aware when the Rights issue was announced that; the Bank was insolvent but for the fact it was receiving substantial funding from the SLS (Special Liquidity Scheme) as of 21st April 2008 – 8 days before the Rights Issue. By 1st October HBOS was forced to go to the BoE to get Emergency Liquidity Assistance (ELA) which they got and which peaked at £25.4BN on 13th November 2008. This funding was kept secret until 24th November 2009, by which time HBOS was part of Lloyds Banking Group and investors in both HBOS and Lloyds TSB, had lost their money.

Here’s the link to the whole document: http://www.bankofengland.co.uk/publications/Documents/news/2012/cr1plenderleith.pdf