IF you're shopped by your ex-wife for point switching on a speeding ticket you face prison; if you are in charge of a department responsible for one of the biggest financial scandals in history, you get a £700,000 pay off.
Well, that's what has happened to the Royal Bank of Scotland executive, John Hourican, who has agreed to step down over the Libor fixing scandal. Step down, mind you, not accept responsibility, let alone admit to any wrong-doing. RBS insists that Mr Houlican had no involvement in, or knowledge of any manipulation of Libor interest rates.
So, er, why is he stepping down? What kind of justice allows companies to nominate someone to shoulder the blame who is blameless in order to divert blame from those who are guilty? Why couldn't Chris Huhne just nominate his driver to take the rap for his speeding ticket, while of course making clear he had no knowledge of any wrong-doing and therefore isn't responsible?
The RBS scandal is another nail in the coffin of British – and Scottish – banking. This omni-scandal is giving us all indignation fatigue. It's hard to remain apoplectic with rage month after month, year after year, as bank criminals are allowed to hide behind presentational resignations and get fines that are paid out of taxpayer's money.
Oh, sorry, I forgot. Vince Cable, the Business Secretary, said yesterday that RBS bankers will pay the £390m Libor-fixing fine from their bonus pool. But where exactly did this bonus pool come from? Yes, the profits of the state-owned Royal Bank of Scotland. This fine isn't being paid by the bankers but by us. It is an insult to tax payers that these executives are earning bonuses at all when they owe us for the £65bn for the recapitalisation – plus interest on £200 billion of public money used to underpin the value of RBS's dodgy loan book in 2008/9.
Let us remind ourselves of what banks like RBS, UBS and Barclays have been up to.
Libor, the London Inter Bank Offered Rate, is an interest rate set collectively by the leading banks on which apply to up to $500 trillion, yes trillion, of loans and transactions across the world. These interest rates, set by specialist divisions of banks like RBS and Barclays, affect the cost of countless loans to local authorities, businesses and mortgages. Minute fluctuations in such interest rates can be worth millions to alert traders or hedge fund managers betting on movements of Libor. If they have insider information, and many finance houses did because they personally knew the Libor fixers, they could make colossal gains. That's what those cryptic cash-for-sushi transcripts released by RBS yesterday were all about. Andrew Lo, professor of finance at MIT, has said: "This dwarfs by orders of magnitude any financial scams in the history of markets".
We don't know who made what because the 21 individuals that RBS say were involved have been disciplined or moved on. But we know this was still going on while the bank was in state hands. A tiny group of mega banks based in London were at the centre of one of the biggest financial frauds in history. This happened here because London, under the "light touch" regulatory regime of a Labour Chancellor, Gordon Brown, became the epicentre of financial corruption. If it hadn't been for the financial regulators in America, we would probably never have learned of any of this. It was only their vigilance and determination to pursue the Libor manipulators that penetrated the wall of political protection these banks enjoyed in London.
Yes, protection. The UK banking system is the most corrupt in the world, and has been responsible for a succession of fraudulent activities over the last three decades that have affected everyone – endowment mortgages, liar-loan mortgages, payment protection insurance, selling interest rate swaps to small businesses. The list is long and keeps getting longer. Banks like RBS lent recklessly to create the housing bubble and then availed themselves of public funds when it popped in 2008. Not a penny was paid back, no-one went to jail, and the bonus streams continued. The financial system became a kleptocracy where fraudulent behaviour became morally justifiable provided it delivered short term gain.
Vince Cable said yesterday that it was very difficult to deal with the Libor scandal because the people responsible "had all moved on". After all, this happened all of two years ago. But I doubt if Chris Huhne would have got much hearing for that in his points-swap scandal which happened all of nine years ago. Ancient history. Everyone has moved on since then.
There is simply a lack of will to pursue wrongdoing in the financial world because the companies politicians are dealing with are simply too rich to control as well as being too big to fail.
And it has to be said that this is a serious issue for a future independent Scotland. What is to stop a bank like RBS from simply buying up the country? RBS in its prime had a balance sheet of more than £1.5trillion, which is more than the GDP of the UK. By offering the prospect of lucrative jobs for politicians when they end their political careers – as happened with Tony Blair – the banks can exert a huge covert influence over policy makers.
It is not impossible to deal with this. Iceland did, by prosecuting not only the bankers themselves but also the politicians, including their own prime minister Geir Haarde, who was found guilty of negligence in April last year. Iceland hired the internationally-renowned investigator, Eve Joly, to investigate financial fraud and send a succession of civil servants and bankers to jail. Iceland is now well on the way to financial recovery. It's not the size that counts but the political will.
What is happening in Britain is Iceland in reverse: the people responsible have been allowed to take the money and run. Indeed, many of them are still in their jobs. There have been zero prosecutions of the top bankers, let alone top politicians. If a country of 300,000 can take on some of the biggest banks in the world, then so can a country of 5 million, never mind a country of 60million.
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