Published on 15 Dec 2010

Banks: publish and be damned!

We end 2010 – two years after the most devastating banking crash of our life times with still not a single individual from any UK financial institution prosecuted, let alone in jail.

And now we have the spectacle of Andrew Tyrie, Chairman of the Treasury Select Committee, a Conservative MP, calling upon the financial regulator (the FSA) to publish the report from the only serious City-wide investigation that might have culminated in prosecutions.

This apparently vast tax payer funded investigation into wrong doing, specifically at RBS (of which you and I own 84 per cent), was completed but not published last week. Indeed the FSA has stated baldly that it is simply not going to publish it. Why? Is it because it is such a damning finding that it would bring the entire City down?  I doubt it. Is it on the other hand so limp-wristed an effort that it might proved completely embarrassing if any taxpayer ever caught sight of it?
The public pronouncements thus far may help us answer those questions. Lord Turner says the report’s findings would ‘add little if anything to understanding of what went wrong’ at RBS. Why? How many accountants, detectives, lawyers and the rest does it take to unravel what RBS got up to? Was it so complex a web of activity that even the brightest brains in the FSA cannot crack it? If that’s the case, should even brighter brains be brought in to do the job?

Mr Tyrie himself says that the FSA, is ‘seeking permission from RBS to enable the release of more information from this investigation in the public interest’. Does this all sound suspiciously ‘hole in the corner’,‘old boy’ stuff? The FT tells us this morning that ‘sources close to RBS say it would be difficult to secure the go-ahead from dozens of former directors’.

So Britain tips nearly £100bn into RBS (most recently another £4bn into bad RBS investments in Irish banks) because of, at the very least, gross mismanagement and then pays a few million pounds to investigate what led to it…and must then ask those who participated in it all for permission to identify publicly what they did.

Does anyone know where Alice in Wonderland is playing this Christmas?

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39 reader comments

  1. Braveheart says:

    John

    my mantra since this time two years ago!

    “why are there no bankers in jail?”.

    Haven’t got an answer yet…

  2. Boudicca3 says:

    And the bankers are still getting millions in bonuses this year and who’s paying for it? Students, Pensioners, the Unemployed; those on Housing Benefit, the Disabled, Commuters, the NHS; single people under 35 who are no longer entitled to Social Housing – Oh, and not forgetting the Forests – cos felling all those trees is of course, absolutely necessary to the economy.

  3. Worm says:

    Are the FSA not covered by the Freedom of Information Act? Just request the report…

  4. Saltaire Sam says:

    As i have said elsewhere, I am not entirely comfortable with Wikileaks but it is decisions like this that makes unofficial action inevitable.

    For many reasons, we are no longer a society happy to accept what politicians, bankers, even doctors say without wanting to know how they arrived at their view. ‘We know best’ is no longer acceptable and the sooner this report is published in full, the better.

    IF RBS has any complaints, they can give back the money they were loaned plus substantial interest. But even then I want to see the report

    1. Meg Howarth says:

      Wikileaks spilled the beans on RBS failure of ‘fiduciary’ duty yesterday – link below:
      http://www.guardian.co.uk/business/2010/dec/13/wikileaks-rbs-chairman-philip-hampton

      It’s clearly to stop the detail of this coming out that the FSA wanted to block publication of the taxpayer-funded million-pound report. Wiki’s leak has now exposed Turner who should be forced to publish, be sacked or resign. His standing’s already fallen by choosing to bat with the bankers than level with public – which also pays his salary.

      Turner’s patronising excuse for withholding the report from public scrutiny on grounds that it adds ‘little if anything to understanding of what went wrong’ at RBS is not only anti-democratic – we’re capable of making up our own minds about the bank we largely own; it’s an example of the fear the establishment is feeling about exposure of to the elite’s decision-making. The Irish government has seen the light and halted bonuses being paid to AIB bosses as a result of public outrage – link below:

      http://www.guardian.co.uk/business/ireland-business-blog-with-lisa-ocarroll/2010/dec/14/ireland

      and Tyrie must ensure our gov does the same if ‘we’re all in it together’.

    2. Citizen Smith says:
  5. Bill Clarke says:

    The fractional reserve system of banking has obviously failed. It needs to be replaced by a full-reserve system to prevent any further bailouts.

    No more bailouts will then occur because depositors’ accounts are 100% secure under full-reserve system.

    For more see

    1. Tom Wright says:

      This suggestion would result in the biggest squeeze in lending ever – an economic disaster of epic proportions.

      Banks lend money. They lend the money in our current accounts, they lend based on secured assets like mortgages, both to the mortgagee and to others. They both borrow and lend from each other. If at any point they had to have a real full reserve – the capacity to pay back absolutely everything they owed, lending would stop immediately till they could do it. Every organisation and individual with a debt would have an immediate hike in the cost of repayments would impoverish us all and bring commerce to a crashing halt.

      Heaven knows the amount of capital available for lending now is pitifully small – you’d make it worse!

      Don’t bandy about terms like ‘the fractional reserve system’ when you clearly don’t understand them.

  6. Colin says:

    Maybe Julian Assanges chums have a little nugget or two to tell us ?

    1. Meg Howarth says:

      They’ve already started, Colin. See response to Sam above.

  7. Tiago Menezes says:

    Question 1: why are there no bankers in jail?
    Question 2: why are huge bonuses still being paid?

    Banks say they have to pay such bonus in order to compete for the brightest minds in the job market. I say, aren’t those bright minds the ones that brought us all into this situation? Are they so bright then? I don’t think so!

    There are so many leaving University everyday and being left unemployed, give them the job, I’m sure they wouldn’t mind the lower salary.

    The only reason why bankers are not prosecuted is because politicians are many times in collusion with them, holding many of them great interests in those banks. Many are friends and laws are approved to protect them.

    The system is flawed.

    1. Mudplugger says:

      It’s interesting that the Irish Government has now banned bankers’ bonus payments at AIB.

      If that action does not cause an immediate mass exodus of Paddy-bankers to highly lucrative finance jobs overseas (which we all know it won’t), then the UK bankers’ bluff will have been exposed for what it is – vaccuous self-serving bluster.

      There should be no above-salary bonus payments in any ‘rescued’ bank until at least 5 years after all the costs of the rescue have been repaid. Only that sort of approach will ever gain widespread public support because, if it doesn’t hurt the bankers in their own pockets, they’ll just go out and do it all again.

  8. Alex Wilks says:

    Completely agree – the objections to publishing are totally bogus.

    What are the prospects for a judicial review of this decision? Seems completely irrational to me (a layperson, not a lawyer).

  9. Philip Edwards says:

    Jon,

    My guess for non-publication is that it MIGHT hint at the responsibility of some individuals, and that is about all. But that would be enough for their chums at the FSA to bin it.

    The usual pattern when setting up an inquiry/commission is this:

    1. Delay it as long as possible.
    2. Dilute its Terms of Reference, so diluting the report’s conclusions.
    3. Pick members to ensure questioning is not too rigorous.
    4. Allow suspects to evade serious questions.
    5. Stretch it out as long as possible to cushion the impact.
    6. If, despite this, its findings are establishment-adverse……ignore it.

    These are precisely the tactics deployed in the Chilcott Inquiry, let alone banking spivvery. Don’t be surprised when said Inquiry finds the Iraq War was an unavoidable accident.

    So why don’t you use the Freedom of Information Act to get access to the FSA Report?

  10. @JamesFirth says:

    It may actually be helpful that the FSA has stated “baldly that it is simply not going to publish it”

    The fact that the report is not intended for publication at some future date removes one hurdle from requesting the contents via the Freedom of Information Act.

    Of course one down, 999 hurdles to go!

  11. margaret brandreth-jones says:

    With all these people on the FSA’s back you would think that they would be able to pull something out of the hat.

    Amongst others the Lib dems treasury spokesman has apparently asked for a report of the bail out. Matthew Oakeshott House of Lords party spokesman commented that the public ought to know.He also said that surely the FSA could get to work and take out all the sensitive bits and get a report published.

    What sensitive bits.? is it the sensitive bits which have caused the problems?

  12. the-Richard-of-Nottingham says:

    Q. Is it on the other hand so limp-wristed an effort that it might proved completely embarrassing if any taxpayer ever caught sight of it?

    A. Quite likely.

    Q. How many accountants, detectives, lawyers and the rest does it take to unravel what RBS got up to ?

    A. Rather a lot. And a fair amount of time.

    Q. Was it so complex a web of activity that even the brightest brains in the FSA cannot crack it ?

    A. What bright brains at the FSA ? (or BoE. Or Treasury)

    For a terrific read on the whole thing you could do worse than read “Whoops ! Why everyone owes everyone and no one can pay” By John Lanchester.

    Jon, you might also want to ask your pension fund manager why he had no idea what was going on at RBS (and others). And why he was so happy that they all got paid so well. He will be one of the largest shareholders after all.

  13. Tom Wright says:

    Hopefully the report isn’t being kept secret because publication would irreparably damage the bank and make the massive Labour-led public bail-out the biggest government error in history. Hopefully.

    If that is the case, pity the Coalition who must defend the indefensible to stop all of our cash going down the pan, and watch the hypocrites on the opposite bench decry them for a lack of transparency and looking after their ‘chums’.

    Someone, somehow has got to get the balls to regulate banking properly – I’m all for hedgefunds and all sorts of ‘spivvery’ as one poster above puts it – high pay for high results is a good thing. But there has to be a downside to risk – like no bonus, no pay and no job when you get it wrong and certainly not getting bailed out by the hard-up because you’re ‘too big to fail’.

  14. Philip says:

    There’s quite a simple explanation for this – though it isn’t comfortable. The legislation requires RBS – both the corporate persona & every individual involved – to consent to the publication of information about them. The FSA cannot publish without that consent. Also there are ongoing legal proceedings in the USA about the ABN-AMRO takeover & the current directors of RBS believe that if some of this information was published, this could damage RBS in these proceedings – possibly fatally. As shareholders in RBS, I’m sure we’d rather it didn’t go bust, but prospered sufficiently for us to get out even, ideally with some sort of a profit. So while publication might be well merited & would assist people in achieving closure, as people directly affected by what happens in the UK economy, what is actually happening may well be preferable. (This material won’t be disclosable under the FOI)

    1. Tom Wright says:

      Thumbs up from me.

      NB whatever happened to the thumbs? Ch4 repeatedly said they were coming back. . . .

  15. Mike says:

    Maybe Julian Assange and WikiLeaks could get hold of the report !!!

  16. Thud says:

    I find it almost amusing how two differnt reporters look at this issue, on one hand I would agree with Jon Snow publish and be damned, the BBC on the other hand one R. Peston tells us that if all the information were to be released then the taxpayer may have to pay billions of dollars in the american courts for RBS wheeling and dealing. My question though would be, why us the taxpayers? It was the directors of RBS that took the actions in the first place, it is they who should be held to account bot criminally and financially.
    Perhaps I am a little niave, is the BBC part of the old boys network, on this it looks very likely!

    Publish and be damned, the directors took the shilling, some still are, let them now take the responsibility they claim they get paid for!

    Get the whitewash factory on overtime we are going to need gallons of the stuff for this.

  17. anniexf says:

    Several months ago I wrote about this on Snowblog, saying, in effect, that even if there were a massive campaign, we didn’t have a hope in Hades of ever getting the banks to admit guilt, let alone seeing those responsible brought to justice. I was vilified for that – there were quite a few rue de remarques.
    Well then. Now we have the evidence that backs my prediction. No-one in power has the slightest genuine interest in right for right’s sake, let alone for the sake of us taxpayers. Those in power are still only concerned with protecting their influential friends. What influence do we PAYE taxpayers have? Sweet f-a. That’s the way it’s always been and, short of a revolution, so it will stay. Sorry folks, but I don’t believe anyone who blogs here has any faith in the will of our Government to take on the City. I can’t see much evidence that other Governments are prepared to tackle their money-men either.
    The Freedom of Information Act would only be useful if the information obtained proved to be so damning that it became the catalyst for mass, prolongued and vehemently expressed outrage, worldwide. What chance of that, do you think?

    1. Peter Stewert says:

      The current campaign to raise awareness of the tax avoidance (i.e., the leeway politicians allow for their wealthy and rich friends) has confounded my expectations that stories such Vodafone’s £6 billion tax dodge would be ignored by all mainstream media. Though the lead group, UKUncut, continues to suffer under the media’s to focus on the violence (news night being particularly shameless) they have managed to get attention to several stories that barely got mentioned in an mainstream news organisation.

      We don’t have to give up ad let a story die. We don’t have to let banking continue as the joke everyone tells and no one find all that funny.

      Though higher grade paper now wraps a fish supper, the news does have a long-term memory problem, which is also why brazening-out even the worst press also continues as the default response. No freedom or justice was ever won quickly (universal franchise isn’t even 100 years old for all our centuries of democracy); persistent and somewhat peaceful pressure paid off.

      Protest in numbers (a mass dander about town) that bring a city to a stop and you’ll scare enough MPs to change the agenda.

    2. Meg Howarth says:

      Well-said, Peter. We get the banks, as with everything else, we allow to be foisted on us.

      Turner now agreed that part of the report will be published. It’s up to us to ensure that the whole thing, for which we’re also paying, is made public for us to make up our own minds.

  18. Jim Flavin says:

    Rember Julian Assange was about to blow the lid on a bigger bank in the USA in January . That would / will hopefully make intersting reading on waht they got up to . If it is as I and many others suspect Assange is lucky to be alive – .
    The way he has been treated is bad – while suspected murders – and war criminals – walk the streets . Hopefully he will not meet with some ” unfortunate ” accident – and we will learn more re the workings of these banks – could it get even worse than we already know – I think so .

  19. adrian clarke says:

    Annie, i tend to agree.My earlier blog which hasn’t been published and appears lost in the ether reiterated what i have been blogging since the onset of the banking crisis.What is the point of an enquiry if the person in charge refuses to publish the results.Who the hell does Lord Turner believe he is to deny us the truth behind the collapse of RBS,Why does the FSA need to ask RBS for details.We either own the bank or we don’t,but either way there is a need to know.Certain figures need to be held to account, preferably in a court of law.If Lord Turner is witholding the information pending a prosecution, that i could accept.Failing that he has either not done is job correctly or is hiding behind a smokescreen.These so called Lords , given their titles by patronage are no better than those they enquire of.The whole system stinks.
    I think Eric Cantonas idea to withdraw all our funds from the banks is an excellent idea, if they will not come to heel.Then start a peoples mutual bank

  20. Moonbeach says:

    I was ‘spitting tacks when I read this, Jon.

    This shows all that is wrong with our so-called democracy. We, the owners of RBS, have also paid for the FSA inquiry.

    But here’s the rub. The report does not belong to us. It is Crown Copyright!

    Try investigating wrongdoing in any other business and then keeping the report away from shareholders! I don’t think so.

    Each Director at RBS would have been required to be personally accountable for the well being of the Bank with ‘Fred the Shred’ in the vanguard.

    For a relatively small fee, I’ll find someone to blame!!!

  21. Citizen Smith says:

    The Big Society needd sto know what went wrong if we are to pick up the bill.

    PRESSURE ON THE GOVERNMENT PLEASE.

    I will be hounding my MPs…yes i have two bites at the cherry!

  22. Philip says:

    I repeat that, unwelcome and unjust as it is, our interest as taxpayers & people living in the UK economy is probably that this information should not be published, because of the potential loss to our stake in RBS. If RBS went belly-up, all the money the Government has poured in “on our behalf”, would be lost & any residual value would probably accrue to US creditors/claimants. There’s a place for righteous indignation, but it probably isn’t the real world

    1. anniexf says:

      Righteous indignation be damned – “the real world” is always the patronising phrase trotted out when something devious and nasty, usually at someone else’s expense, is going on.
      We need transparency more than ever now, otherwise it’s all going to happen again when the heat’s off and the “righteous indignation” of the innocent taxpayers who’ve been fleeced has cooled. The reckless gambling culture will re-appear in a different guise but its driver will be exactly the same – mega-greed.

    2. Paul Begley says:

      I disagree, Philip. As a taxpayer, I now find that I am apparently liable for unlimited costs as a result of the “mistakes” which enriched bankers and other players in the financial system, while wrecking the economy.

      At the very least, I would like to see some analysis of how this occurred, and some proposals to prevent future repeats. Currently, we’re already making big sacrifices (recruitment bans, tax rises, pay freezes, education and council cuts) to prop up the system, but we don’t even know the full extent of our liability (and I don’t remember any democratic discussion before it was decided that we should accept it).

      For what it’s worth, I see a lot of parallels between the current behaviour of (internationalised) finance, and UK Trade Unions in the 1970’s. Both seemed willing to inflict unlimited damage on the economy in general, to look after their members’ interests. “Sorting” the unions took 15 years, and I suspect “sorting” finance will take at least as long.

  23. Bill Clarke says:

    Tom Wright said that to replace the fractional reserve system with a full-reserve on would lead to financial disaster. But would it?

    When a bank lends money, say for a mortgage, it does so with the collateral of the borrower as security. It does not lend the money in depositors’ accounts. It creates new, digital, money by crediting the account of the borrower.

    This new money adds to the money supply and can create a bubble as it did in the housing market, which led to the financial disaster we are suffering from. This meant a bailout, which taxpayers will have to fund.

    A full reserve system will give 100% security to depositors’ balances because they will be held in the lending bank’s account at the Bank of England.

    Banks will then become brokers and will no longer be able to create new money, money they don’t have.

    Loans will still be made but they will come from money the bank does have, from investment accounts, shareholders and by banks borrowing what they need.

    For the benefit of depositors we need a full-reserve system.

  24. Bill Clarke says:

    Paul Begley said that he would like to know how the banks’ wrecking of the economy occurred.

    It happened because commercial banks are allowed by government to create new, digital, money whenever they make loans under the fractional reserve system.

    They lend because they make prBofit out of it, even when they create a bubble in asset prices, as they did in housing, by granting even dodgy mortgages.

    This meant that when the bubble burst and some banks had to be bailed out by the taxpayers there was created the government debt which, in turn, led to tax increases, cuts in spending and public services, the loss of jobs, and so on.

    It can be stopped from happening again by banks being made to operate a full-reserve system which means that they can’t use current accounts to back up their lending.

    These deposits will have to be held in banks’ accounts with the Bank of England so they will be 1005 secure, which means there will be no more runs on banks and no more bailouts,

    They will be allowed to use money they actually have, from investments accounts, shareholders holdings and money they borrow from other banks The full-reserve system should be put in place as quickly as possib

  25. Bill Clarke says:

    “We get the banks, as with everything else, we allow to be foisted on us.”

    Basically, this is so because politicians, particularly those in Cabinet who could change things, are too committed to the present system of banking because they are not aware of an alternative system of full-reserve.

    When it is drawn to their attention, they ignore it because they think it will be rejected by their banking friends.

    The only way we can change it is too create such a strong grass-roots campaign that they will realize that they can’t resist it any longer.

    This is because they are afraid of being voted out of power.

    So, let’s build up a strong movement for change.

  26. Potatoefeet66 says:

    The report the FSA refuse to publish on the banking crisis in fear of bringing down the entire banking service is not surprising. After two years of fighting a high street bank and recently after a year of FOS investigation only to inform me that my case file documents have been lost, my own report of my case clearly reveals why we are all in this mess to date, should this case be republished it also would in furiate all. After almost two years FOS have extracted from this high street bank an admission of fabrication which prevented with out just reason the reduction of personal debt. Please help and contact me to get all details of their action that has dire implications for all and our nation.

  27. Bill Clarke says:

    Potatoefeet66 said :

    “After almost two years FOS have extracted from this high street bank an admission of fabrication which prevented with out just reason the reduction of personal debt. Please help and contact me to get all details of their action that has dire implications for all and our nation.”

    I don’t understand. What was the fabrication which prevented the reduction of personal debt?

    What are the dire implications for us and the nation?

  28. Meg Howarth says:

    Link to this blog was posted in comment on Barclay’s Bob Diamond in last Sunday’s Observer, 9 January. Maybe this is why these additional comments are appearing.

    What about Diamond’s having ‘to speak to my [his] family’ before deciding whether or not to accept any multi-million bonus this year? Doubtless a ‘hardworking’ one like the ubiquitous mantra of every political party, if the Diamond family insists insists on being greedy and demanding he take the money, does he really hope this lets him off the greedy hook?
    NB why do the Diamonds need any more squillions? Another way of looking at this is, of course, that it’s simply wrong of BD to drag his family in to this.

  29. Bill Clarke says:

    Tom Wright said that abolishing fractional reserve banking would result in the greatest credit squeeze ever.

    This is what we have in the present crisis and it is fractional reserve banking that caused it.

    How? Because banks do not lend depositors’ balances in current accounts. That money legally belongs to the banks.They lend newly created, electronic money. In the housing bubble some overdid it. So we have the credit crunch.

    With a full-reserve system they would lend money they actually have. This would make them more responsible when lending. They would know that they wouldn’t be bailed out at taxpayers’ expense.

    Full-reserve gives 100% security to depositors. so no state insurance funded by tax

    the capacity to pay back absolutely everything they owed, lending would stop immediately till they could do it. Every organisation and individual with a debt would have an immediate hike in the cost of repayments would impoverish us all and bring commerce to a crashing halt.

    Heaven knows the amount of capital available for lending now is pitifully small – you’d make it worse!

    Don’t bandy about terms like ‘the fractional reserve system’ when you clearly don’t understand t

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