Banker Cats Guard the Cream…Again!  (It Just Gets Worse and Worse)

By Shlomo Maital  



And you thought the LIBOR-rigging case was scandalous, unbelievable?  Where major banks (not just Barclay’s) rigged the daily LIBOR figure, almost openly, to keep it low, to underestimate bank borrowing costs, to reassure capital markets and make balance sheets look better? (As one cartoonist put it:  Swindle and cheat, so that people will believe in the banks’ integrity). 

   Well try these two additional variations.

  • ·         HSBC, a major British bank, (Hong Kong and Shanghai Banking Corporation), world’s second largest bank, indeed world’s second largest public company, one that has come unscathed through the global crisis,  has now been caught guarding the cream rather badly.

An American Senate subcommittee found the following:  “The investigations found that HSBC, with its headquarters in London, allowed affiliates in countries such as Mexico, Saudi Arabia and Bangladesh to move billions of dollars in suspect funds into the US without adequate controls.  Besides, HSBC in 2009 authorised its affiliate to supply Indian rupees to Saudi Arabia’s Al Rajhi Bank, which, the report said, has links to financing terrorism.  The report also said that Al Rajhi Bank handled IIRO’s ( International Islamic Relief Organisation) “charitable contributions intended to benefit suicide bombers by directing Al Igatha Journal advertisements … in Somalia, Sri Lanka, India, and the Philippines.”

   Now – who actually tries to see that HSBC doesn’t help money-launderers, shipping an estimated $7 b. from Mexico to some really bad places?  Well, it’s….would you believe, HSBC itself? Its own compliance staff.   In fact, its employees in India, a kind of internal outsourcing.   With a huge backlog of transactions, the overworked Indian workers were swamped.  Could it be that HSBC knew this, organized it purposely to avoid excess scrutiny for highly profitable deals?   No, that couldn’t possibly be true.

 ●  Credit default swaps (not swaps at all, but ‘insurance’, called swaps to avoid regulation) are a huge multi-trillion dollar market, unregulated.  When nations can’t redeem their bonds, the CDS pays up, billions of euros or dollars.  Who decides that nations are in default?  Who decides that the banks get paid billions and billions in credit default insurance?   Well, it’s a shadowy body called the “Determinations Committee of the International Swaps and Derivatives Association”. And, who are they? Who are the members? 

  You guessed it.

  The major banks, and their traders and dealers.  They decided that Greece was in default, after the recent ‘haircut’ reducing Greek debt in return for EU cash.   It is not at all clear that this in fact was a default. 

   The banks themselves decided if the banks should be paid the ‘insurance’. 

    There is nothing fundamentally wrong with capitalism. There is a great deal wrong with crony capitalism where the fat cats guard the cream.  This isn’t capitalism at all.  It’s simply corrupt.  And it is taking a very long time to clean the filthy stables, with no Hercules in sight.