The global financial crisis, which has caused such vast financial damage to the interests of thousands of investors and working people, and which has cost the tax payer billions of pounds to prop-up bankrupt financial institutions, was caused, primarily, by the greed and the dishonesty of the major banking system.
For years, the banks had engaged in a series of dishonest and flaky practices which had generated significant profits for them and their investors, and which had been carried out at the expense of the funds of their depositors and customers.
There was a time, not so long ago, when the ambition of every finance CEO was ‘to get as big a share of the customer’s wallet as possible’. Tactics designed to ‘cross-sell, up-sell’ to clients were promoted, and staff were encouraged to aggressively promote new products and services to clients, designed to capture a bigger share of their capital.
It seemed you could not go into a bank or building society without having some new financial product, credit card or loan facility stuffed down your throat. And of course, with every new financial product, came a commensurate encouragement to take out a PPI contract. Of course, you were not to know that the likelihood of the PPI insurance product to operate in your favour should you have need of recourse to its facilities was largely illusory, you were just cheated into believing that you were somehow covered by an insurance umbrella. That justified your taking out the loan, which in many people’s cases, they could not really afford.
There was a kind of collective hysteria gripping the market as ordinary working people were encouraged by slick-talking salesmen to extend their debts, to re-mortgage their houses in order to pay for foreign travel or holidays, secured on credit card debts.
It suddenly seemed as if the whole world was on a huge debt binge, borrowing money without any thought of how it would be re-paid, and this money didn’t even exist! It was being printed by the banks that were operating, as always, with one eye on their bonus targets. These targets were becoming more inflated and staff were being forced to work ever harder to make their numbers, but it didn’t matter, because the banks were busily ‘securitising’ the debts being created, and sold off to other investors who re-packaged these debts in their turn and who sold them on to further groups, generating even more commission for themselves and their institutions.
The whole thing became a merry-go-round of greed and fraud, but no-one seemed to care, as long as the spin-off of constant revenues was maintained.
These frauds were being practiced at the same time as the more traditional models of criminality which underpinned the banks’ balance sheets were being continued. International money laundering on an institutionalised scale was being promoted, and the regulatory controls which were supposed to prevent global money laundering were identified by their absence. It was almost as if the major banks had decided to individually ignore the rules and regulations on money laundering, because they had discovered that the facilitation of money movements for organised crime paid significant profits and dividends.
HSBC were able to demonstrate this very effectively because in 2012 HSBC Holdings Plc agreed to pay a record $1.92 billion in fines to U.S. authorities for allowing itself to be used to launder a river of drug money flowing out of Mexico and other banking lapses.
Mexico's Sinaloa cartel and Colombia's Norte del Valle cartel between them laundered $881 million through HSBC and a Mexican unit, the U.S. Justice Department said.
Stuart Gulliver described this level of drug money laundering as a ‘mistake’!
Of course, at the same time as engaging in money laundering on an eye-watering scale, HSBC was offering its high-net worth clients an opportunity to engage in institutionalised levels of tax evasion, through the facilities offered by their Swiss branch in Zurich.
Of course, we have no means of knowing how much money HSBC was taking in terms of profits and revenues for providing this service. But one must imagine it was not insignificant.
Stuart Gulliver later apologised for the damage this episode had caused to the bank’s reputation.
More recently there have been the huge fines which HSBC has had to pay for their part in the Libor and Forex manipulation escapades.
In the Forex scam, one HSBC trader complained in an email to another team member who had not given him the information he needed: “You are useless... how can I make free money with no fucking heads up.”
Now, it appears that HSBC has got a lot of difficult questions to answer following the revelations in the FIFA bribery scandal.
Some of those questions involve transactions including;
*A $1.2m wire transfer from a Traffic bank account in Miami to a correspondent HSBC account in Buffalo, New York, which was then sent to a HSBC Hong Kong account of a front company for another co-conspirator on November 13, 2012
*Two wire transfers of $750,000 and $250,000 from the HSBC Hong Kong account to a New York account of Standard Chartered, for credit to a Cayman Islands account held by Kosson Ventures, a company controlled by Costas Takkas, the attaché to Fifa vice president Jeffrey Webb on November 21, 2012
*A $500,000 payment from another sports marketing company on December 5 2013 for credit to the HSBC account of a luxury yacht maker in London. Barclays and HSBC have not commented on the matter.
Why am I not surprised.
The purpose behind my reiterating these disgraceful events is to amplify the level of wrong-doing and criminal law-breaking which HSBC has indulged in the past years, activities which have generated huge profits for them, profits which have lined the pockets of their investors.
HSBC has behaved exactly like a main-stream Mafiosi crime group, engaging in criminal behaviour as a matter of course, and taking inflated profits from the outcome of these activities.
Had it been any other organisation which had engaged in these criminal enterprises, the Government would have had little choice than to throw the book at them, ordering wholesale criminal investigations and demanding serious penalties and sentences.
For some reason, because these actions are committed by banks, no-one is at all fazed by these actions. The regulators have done little or nothing to bring this recalcitrant bank to heel, and all Stuart Gulliver has done is to wring his hands and apologise ineffectively.
So now, Mr Gulliver has announced his plans to readjust his banking empire.
HSBC has been under severe pressure since the 2008 financial crisis to cut costs, meet stringent new regulatory demands and satisfy restless shareholders.
To that end, the British bank said on Tuesday that it would shed as many as 50,000 of its approximately 250,000 jobs as it sells several underperforming businesses, reduces the size of its global investment banking business and tries to cut billions of dollars in costs.
The latest moves are part of HSBC’s major strategic revamping . As part of the newest changes, HSBC said it would increase its investment in Asia, where it generates more than half of its earnings. The bank has been evaluating whether to move its headquarters to Hong Kong from London, and it said it would complete that review by the end of the year.
The bank, which traces its roots to Hong Kong and used to be called the Hongkong and Shanghai Banking Corporation when it was founded, still has close ties to the Asia-Pacific region. Asia accounted for 78 percent of the bank’s pre-tax profit in 2014.
Mr. Gulliver is under increasing pressure to satisfy investors after recent scandals damaged the lender’s reputation. HSBC also faces an increasingly challenging regulatory environment in Britain and across the globe. The bank’s shares have fallen about 2.4 percent in the last year.
“We recognize that we need to do a lot more to address the changing environment,” Mr. Gulliver said.
Among the moves announced on Tuesday, the bank said it would eliminate 22,000 to 25,000 full-time jobs, or about 10 percent of its work force, by the end of 2017. About 8,000 of the job cuts are expected in Britain, where HSBC employs about 46,000 people.
The bank faces a major conflict of interests.
Its investors and shareholders are complaining vociferously that the bank is not paying the level of dividends they are used to. Well, this is hardly surprising, the bank has been forced to step back from its organised criminal enterprises, and has had to start to make money out of straight-forward vanilla banking activities.
They have discovered the truth of one of my major assertions which is that the global banks cannot return the same level of investment revenue without committing criminal offences.
They simply cannot make the profits they have hitherto made, without breaking the law, and the increased regulatory environment, which is long overdue, is making it so much harder for the dirty banks to make dirty profits.
They are responding by a major policy of staff-shedding, and by almost certainly shedding their UK retail arm.
They are reverting to an earlier incarnation whereby they will focus their business attention on China and the Far East. Well, this at least should help them build up their profits again, because this area of the world is notorious for the movement of the proceeds of corruption and other forms of dirty money. If they move their HQ from London and re-engage in Hong Kong, they should be able to get back to their dodgy business activities without too much of a time-break. They started life as a drug bank to British opium dealers in the nineteenth century, and their recent activities in Mexico demonstrate that they had clearly forgotten nothing in the interim.
I don’t personally think it will do them much good. The American have now got HSBC clearly in their sights, their latest escapades in the FIFA money laundering will not have gone down well with the US authorities.
Even if they relocate to Hong Kong, the US law enforcers can reach out to them there if they continue to transact business in US dollars. However, there is too much dirty money floating around in China and the Far East for HSBC to resist, and I predict that if they do go back (I still think it is unlikely), they will be up to their elbows in black money before you can say ‘Fei Chien’ (flying money)!
These latest proposals by HSBC management are yet another attempt to bring pressure on the UK Government, to back pedal on the implications of the new regulatory environment, the ring-fencing of retail banks, and the new regime of anti-money laundering.
The Government must not weaken in their resolve to force these criminal enterprises to get back to the straight and narrow. By making a significant number of UK employees redundant and by chopping British jobs, as a programme of re-positioning, HSBC are throwing down a gauntlet to George Osborne. ‘Look how much damage we can cause to British jobs if you force us to smarten up our act’.
This is yet another example of the culture of bullying these banks operate within and shows, if such a lesson needed learning, that they have no concern for UK workers and who are expendable when the bank’s creditors start pushing for more and bigger dividend payments.
The cynicism behind this action is breathtaking, and George Osborn needs to remember this when ‘friends’ of Stuart Gulliver start jockeying and lobbying for him to be given a knighthood!