Home > Finance and money > Banks: victims or perpetrators?

Banks: victims or perpetrators?

On this morning’s Today Programme (Radio 4) there was a spokesperson for one of the UK banks (Stephen Hester of RBS), discussing the current economic turmoil in Europe and the US.

Essentially the message from the contributor was that the banks are just innocent victims in all this! The gist of the claim is that “Our economic problems have been created by Government excesses, and so it is Governments that need to show resolve to address fiscal difficulties in order for the financial crisis to be averted”.

In other words he was stating that the Government and the people created the problem, and so the Government and the people need to pay for it through austerity.

What is most troublesome is that this is the popular narrative being conveyed to the public, and most people seem to be buying it. It is little more than the UK’s equivalent of the US anti-state Tea Party movement, yet the logic is a complete contortion of the facts.

Firstly, this assertion completely evades any consideration of how the banks contributed to high levels of sovereign debt. The Gvts borrowed the money from the banks in the first place! If the banks didn’t think that Gvts would be credit worthy, then why in the world did they lend to them. Only a partially sighted amnesiac could make an honest declaration that there has been absolutely no Irresponsible and Incompetent lending by the banks! See Irresponsible borrowing and irresponsible lending.

Secondly, if you want to understand the source of Gvt income woes then look no further than the offshore banking system where the super wealthy squirrel away their assets out of the reach of scrutiny, regulation, or taxation! Nicholas Shaxson’s “Treasure Islands” demonstrates how an ideologically lax approach to taxation has been implemented by the UK, US and others (and not just in far way Caribbean Islands, but actually within the City of London and Wall St). Profits and income gain are booked in low tax, semi-secretive havens, whilst liabilities sit with us full exposed and law abiding tax paying chumps who are lumbered with underwriting losses through austerity and inflation.

Finally, it shows a complete ignorance of historical facts! Banking crises precede sovereign crises. Not the other way round. This is the conclusion of Reinert & Rogoff in “This time is different” where they study 800 years of financial crises.

Credit liberalisation (born from excessive bank lobbying) leads to asset speculation which leads to excessive banking leverage which then embroils Gvt / sovereign balance sheets.

Does Mr Hester not recall that following a pure “banking” crisis in 2007-2008 the UK Gvt stepped in and has underwritten large private sector losses? Not only that but they have lowered Gvt spending and commenced the debauching of the pound.

In sum, the banks are not the passive victims of financial instability, but the very perpetrators of it! The humble UK tax payer and the enviable public services are the real victims of this crisis.

To be told otherwise is a complete insult to everyone’s intelligence.

Categories: Finance and money
  1. johnm
    August 14, 2011 at 10:14 am

    This is the most insidious form of propaganda, i suppose it should be called “the emporers clothes gambit” everyone [insiders and useful idiots] repetatively talks as if something is so until it is part of the air that you breathe, as Chomsky puts it. It makes it difficult for the ‘marks’ to even hear any other argument, as they are necessarily outside the scope of their mental geography, anything outside of your framework means you’re stupid, no-one is stupid, in fact some years ago a report in new scientist shewed that confident stupidity was inversely proportional to insight, more insight – more doubt.
    It’s not just the news and economics that have fallen victim to this kind of programming history and science too have been usurped. For instance the welsh language [medieval] has been discovered five distinct times to translate the hieroglyphs only to be met with silence from academia and egyptologists. Naturally that Irish gaelic too [oldest form] can be used, also met with the tumbleweed treatment. You should now be experiencing exactly the kind of disbelief someone faced with the argument that the banks are to blame.
    Your blog introducing Reinert and Rogoff leads me to think the banking elite were far from passively responsible and one wonders what further white rabbit moments they have in store for us.
    If I were in the position of propagating this madness in the public mind or imposing this type of stress on society, I would certainly keep an honest record for the future generations who I intended to inherit the legacy, so that they could step outside the madness to make a plan and develop contingencies. Also it would serve to give a sense of seperateness and superiority.
    In some way the bigger the difference between reality and the publics view of it the more herdable they are, since they must necessarily be bemused beguiled or bewildered making every argument within the ‘bubble’ irrelevent leaving a clear field for realpolitic.

  2. August 15, 2011 at 8:18 am


    Yes, the R&R framework suggests that we are in a textbook trajectory of Banking Crisis > Sovereign crisis > Currency collapse.

    The circumstantial evidence of banker complicity is therefore strong. But for compelling evidence the film “Inside Job” is as good a summary as you’ll get. The film outright accuses many senior banking figures of fraud & looting. The film-maker has not been charged with libel, so it is no fringe conspiracy theory. In fact it won an Oscar this year for best documentary. So why no airplay about this film?

    This is further evidence of mainstream media filtering out so much from public consumption; white collar larceny (e.g. Control Fraud and Corporate Looting), the fragility of fiat money systems, large scale tax evasion through off-shore & secrecy jurisdictions, the culpability of irresponsible / incompetent lending, the true impact of oil & energy on the economy and world politics, etc.

    An analogy with mushrooms would be apt.

  3. johnm
    August 15, 2011 at 9:35 am

    The fraud and looting I took for a given I meant that behind the scenes the whole process was orchestrated, not from the group-think of kleptocrats constantly pushing the boundaries but the invisible[?] background elites ‘gaming’ the whole process and relying on the stupidity or complicity of politicians blinded or driven by personal ambition.
    The R&R book could have been the textbook that they drew the plan from.
    Saw the film in brixton bought the book too, pity he doesn’t do a show on RT or Press tv like Max Kieser or George Galloway.
    I think the only way this could all be widened out is through some sort of internet/board game called ‘International Banker’ that follows the same win win rules of real life banking including as many close to real life scenarios as possible so everyone gets the point.

  4. August 15, 2011 at 9:43 am

    Hi John

    How about an “App”, and let’s call it “Loot the world!”?? As an international banker you have to grab as much of society’s wealth covertly & squirrel it away in a tax haven, without creating too much attention and social unrest. Do you know any good “App” programmers??

    By the way, I might have been a bit harsh on mainstream media. This from the Guardian was very interesting:


    P.S. I was at the Sunday matinee showing of Inside Job in Brixton where David Malone did a short talk afterwards.Maybe we were in the same room!

  5. johnm
    August 24, 2011 at 9:17 am

    Hi FS
    I missed the talk at brixton, when I called the academy to get the time they onlly gave me the time of the earlier showing, and i couldn’t blag my way in to the talk.
    I don’t know if it’s serendipity but in my recent peregrenations around the web I’ve found lots of stuff that speak to the topic, well more or less.
    I found this in the thread of steve keens aug22 blog and think its a gem.
    http://rt.com/programs/keiser-report/ 175
    In her online book C.A. Fitts gives a rare insight into the spiders web of control that pervades the USA only John Perkins account is more informative. In this keiser report she makes it perfectly clear that she sees this ‘financial crisis’ as the plan.
    Ellen Brown makes a case for the plan,
    A wonderful philosophical rant on where we find ourselves.

  6. johnm
    August 24, 2011 at 11:54 am

    Suddenly thought , it was the ritzy, and two guys walked in with outdoor gear part way through I wondered then if one was David Malone

  7. August 31, 2011 at 8:14 am

    Hi John, sorry for the delay but I was on holiday last week.

    Yes, that was probably David at the Ritzy. The talk afterwards was very good, but unfortunately a bit brief. There were clearly some very astute people in the audience that understood this whole issue, but regrettably we are only talking about handfulls of people here and there. The majority of the UK population has been distracted by reality TV shows, iPhones & Apps.

    Catherine Fitts & John Perkins are a rare breed of former insiders who have had the courage to speak out against venal conduct.

    Certainly seems that the R&R book sketches out the uber strategy. I’d also suggest that for a tactical handbook, the conduct of the financial sector these last 10-15 years has been guided by Akerlof & Romer’s “Looting: bankruptcy for profit” article, which was based on the work of William K Black’s “The best way to rob a bank is to own one”.

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