News & Analysis
Financial Crime Must Be Punished!
Four In Five Want Bankers Prosecuted ... Four out of five people want individuals to be prosecuted when banks break the law, according to a new survey. Research by consumer watchdog Which? also showed that two-thirds of people believe the Government will not act in their best interests when implementing banking reform. And only one in five think the Financial Services Authority is effective in regulating UK banks. The watchdog is calling on the Government to ensure criminal prosecutions can be brought against individuals – up to boardroom level – who have presided over corrupt practices. – Yahoo News UK
Dominant Social Theme: Get 'em, whup 'em and impound 'em.
Free-Market Analysis: The bankers are up to no good. This is a fact and the poll referred to above is further evidence of it. Eventually, laws must be changed and hearings must be held to ensure that the financial industry is made as transparent and honest as every other part of Western industry.
That's the elite dominant social theme, anyway. Now the power elite that wants to run the world intends to disassemble capitalism once and for all. The elites that apparently control central banking and are able to print as much money as they want are going to make sure that every part of the financial mechanism is painfully regulated.
It is the European royalist approach to finance. Of course, Wall Street and the City of London are virtual government appendages already. But once this latest chapter is written, it will likely be impossible to fund a company via formal financial mechanisms unless your connections run up to the highest levels. Here's some more from the article excerpted above:
The head of the Financial Services Authority, the industry regulator, has acknowledged tighter laws to deal with failing bankers. Lord Turner told BBC One's The Andrew Marr Show: "I think if you go back over 20 years we started with a very light touch self-regulatory approach. Slowly, over the last 15 years or so, we have toughened approach.
"Further steps were made a few years ago to give us the ability to bring criminal charges in particular areas of market abuse, but they did not cover the libor market. I think we now have to look further and see whether we should strengthen these powers considerably on top of what we've got at the moment. It has been a gradual strengthening over time but I don't think it has gone far enough."
Chancellor George Osborne has confirmed that HSBC, RBS, Citigroup and UBS are also under investigation over the inter-bank rate rigging. On Sunday, Sky sources said RBS had sacked four employees over the last two years over the issue.
Which? chief executive Peter Vicary-Smith said: "Consumers are clearly fed up with one banking scandal after another. "Banks and bankers will continue to be seen as untouchable unless individuals are held to account for their actions and the culture of banking is changed for good ... "The Government needs to change the rules so that criminal prosecutions can be brought against individuals if banks have flouted the rules.
"We also want the banking sector referred to the Competition Commission immediately. More competition is essential to force a change in the culture of British banking."
This last statement is a strange one. The inexorable advancement of regulation in the financial sector as well as its criminalization is not creating a more competitive environment by any means. Thus those at the top are working at cross purposes.
There is an admission that the financial sector in the UK, and the US, too, has been drained of the competition that would make the sector more effective but at the same time, the additional regulation and law enforcement is only further consolidating what is already impossibly centralized.
Regulation is always a centralizing measure. The more regulation there is, the harder it is for new entities to join the industry. Regulation inevitably increases barriers to entry.
The consolidation of Wall Street, for instance, has been astonishing. In some 20 years the entire top rung of firms have been almost entirely wiped out via mergers and bankruptcy. London's City is subject to similar forces.
Regulation benefits few indeed. It surely does not benefit consumers, as they rarely are compensated for losses they may have received. It tends to be arbitrary when it comes to those who are actually snared. The ones who are disciplined tend to be those at the very bottom of the hierarchy.
Finally, the regulators themselves aspire to work for the companies being regulated and are apt to reduce or eliminate the regulations that are applied to the largest industry participants.
Every regulation is a price fix, reducing efficiency by transferring wealth from those who have created the initial wealth to those who have not. What regulation is best at is consolidating power among those who wield the regulations and can apply them.
Since the 1930s, when initial financial regulations were put in place, there has been some 80 years of increasing scandal and financial corruption. The global financial market can be seen as more centralized and regulated than ever but the problems only seem to be increasing.
Regulation really solves nothing. Only significant competition can make a difference, for markets are self-regulating and not prone to market failure, as often suggested.
But the more regulation there is, the more fragile the system is as a whole. This is because regulation inevitably concentrates order flow and negates strategies that would make the market more robust.
Regulation empowers those who are already dominant and removes competition and strategies that might provide a break to market volatility.
But the main problem with regulation is that it does not recognize the monopoly central banking paradigm that drives the current business cycle. Thus the application is surely cynical in our view.
The people involved in central banking are the same ones, basically, writing the regulations. These individuals are well aware that it is the boom/bust business cycles that cause most of the financial market's problems.
However, this is never recognized by regulatory authorities that continually produce more regulations every time the larger market suffers from another fiat-money crash.
Yes, the entire exercise is cynical because those driving it know it is designed to give them maximum control over their competitors and squeeze entrepreneurs out of the market.
Conclusion: It has nothing much to do with "protection" and everything to do with creating a financial environment that favors the empowered few over the regulated many.