NOTE: This is Part 2 of a three-part series. In Part 1 Nick Fillmore described how superbanks that are household names carry out illegal and unethical activities so that top executives can make millions of dollars a year. At the same time, the trillions they gamble puts our whole economy at risk. To see Part 1, Click Here.
Not one of the executives at any of the 10 or so giant international investment banks in the U.S. and Europe that imploded the financial system five years ago by using illegal trading methods has gone to jail, or even been prosecuted.
As a result of lax policing in the U.S., only 17 former bank executives -- mostly from small banks -- went to jail between 2008 and November 2012.
The fact that so-called "business leaders" walk away free, only encourages them to steal again, so, in many cases, that's what they do. It also says to other traders that there's no danger to them personally if they break the law.
Here is a sample of what some have been doing in the last three or four years:
- Bank of America: Rolling Stone exposed the "limitless criminal conspiracies" they're involved in.
- HSBC Bank: The bank paid a record $1.92-billion penalty in connection with a money-laundering scheme involving Iran and Mexican drug cartels.
- JP Morgan Chase: The bank admitted to being involved in a number of criminal activities, including the fraudulent sale of unregistered securities.
- Barclays Bank: They were hit with fines of $448-million for its "serious, widespread" role in trying to manipulate the price of crucial interest rates that affect the cost of borrowing for millions of customers around the world.
Instead of expressing remorse for what they did, the banks are working as hard as possible to keep the same, weak laws in place that allowed them to make billions in profits for themselves.
Headed by unscrupulous executives and with the support of thousands of lobbyists and hundreds of high-paid lawyers, the mega-banks are defying efforts by authorities around the world to stop them from engaging in risky and often illegal financial transactions -- the very activities responsible for the 2007-08 economic collapse.
Giant banks are the most powerful institutions in the world. Perhaps 20 banks make up a super powerful elite network, reigning over much of the business world. They are the most influential businesses among an elite 147 corporations that control 40 per cent of the world's wealth.
Most people have never heard of the ISDA (the International Swaps and Derivatives Association) - an organization controlled largely by the giant sometimes-corrupt banks that is more powerful than any national government. Because these banks own so much of the debt of several struggling European countries, such as Greece and Portugal, the ISDA can decide whether to push them into bankruptcy.
Hmmm... how would you like to have your fate determined by a bunch of bank shysters who are more interested in taking their pound of flesh rather than showing compassion for the general public and the economy?
Executives get the big bucks
No matter what happens with the bottom line of their companies, the men who run the big institutions make certain they get their millions in compensation. In 2010, Bloomberg reported that the eight largest U.S. banks set aside a whopping $130-billion in compensation for their executives -- no matter how well the company performed.
The pay is always good. In 2012, James Dimon of admittedly crooked JPMorgan Chase, carried away $42-million, and Lloyd Blankfein of Goldman Sachs, also admittedly crooked, was awarded with $21-million. In comparison, between 2009 and 2011 in the U.S., worker compensation stagnated - hourly pay grew by just two percent per year, on average.
Of course the self-centred bankers are quick to find a way around restrictions that officials try to place on their outrageous incomes. In Britain, almost two thirds of the financial services firms have raised salaries for their top employees to compensate for an incoming European Union cap on bonuses.
Meanwhile, the biggest governments in the world are unable to tame the investment banks. The politicians -- people like Barack Obama, David Cameron and Stephen Harper -- pretend to be in charge, but they nearly always cave in to the banks.
No major prosecutions are proceeding at this time. Recalling that the failure of big financial institutions led to the 2007-08 recession, officials say they are worried that convicting the banks could lead to a repeat of the earlier collapse. They say these banks are "too big to fail."
Top U.S. federal departments claim they lack the resources to prosecute, but it is just as likely that the government is afraid to go up against the bankers' high-powered, high priced lawyers. Moreover, the bank's lawyers are capable of dragging out a case for several years.
Banks winning battle so far
Meanwhile, governments are trying -- half-heartedly it seems -- to pass new laws that would bring the giant banks under control. So far, the banks are winning.
In the U.S., powerful, multi-million-dollar lobbying by the big banks has prevented the government from enacting legislation that would prevent banks from gaining access to taxpayer funds if a super bank were to collapse.
The bankers have also stalled the implementation of legislation that would prevent them from using the savings and investments of everyday people when they engage in highly risky ventures for their own profit. They also are successfully fighting off proposed legislation that would demand that the banks put up more money to guarantee derivatives they wager.
U.S. President Obama has been a disappointment. Despite his tough-talk speeches about "fat cat" bankers, his actions paint a different picture. He accepted millions of dollars from Wall Street for his election campaigns, and it's of symbolic interest that on his vacation after being elected, his first golf game was with his chief Wall Street fundraiser.
Another instrument of the big banks, the Washington-based Institute of International Finance, is leading the fight to stop implementation of global, voluntary regulatory standards. Known as Basel III, the rules also would make the banks increase the amount of back-up funding. Again, the banks say the regulations would hurt them and slow economic growth. Independent economists say the proposed regulations do not go far enough.
Banks win important victory
The bankers won a significant victory in January when Basel III officials agreed to broaden the definition of the assets the banks can use to back up their loans. The governments also agreed to delay the start of the regulations to 2019 -- an absurdly long period of time.
Many of us are puzzled to figure out why so many men -- probably thousands of them -- have become so greedy and think nothing of carrying out bank transactions that help destroy the livelihood of millions of people.
"I think they simply see themselves as being at the very top of the food chain," says Dr. Ulrich Thielemann, who has taught philosophy and business ethics at the University of St. Gallen, Switzerland. "They feel like they're able to trick others. That is the thinking of a caste of people who have been trained at business schools... It's an economic theory that views the most rational action as what is to your own advantage. Its aim is to maximize its own income and will and -- if it comes to that -- walk over dead bodies to achieve this."
Coming in Part 3 next week: The article will discuss what needs to be done to get the giant banks in line.
Read other articles by Nick Fillmore on his blog, A Different Point of View.