Banking regulation, crime and punishment

A major distraction of the last week for politicians has been the issue of banking regulation. Firstly, I would query how can it be that, five years after Lehman brothers collapse, the government is only now considering that banks need to be regulated more tightly. And since then we’ve seen numerous other scandals, but notably recently, LIBOR, PPI (and personally I reckon the banks are also secretly behind those guys constantly ringing about PPI claims as part of an effort to discourage us from claiming) and that drug money laundering scandal.

Let me give an an analogy. Let us suppose that a bunch of bank robbers ran into a high street branch, held the place up at gun point, ran out of the bank and bumped into the keystone cops (who were out chasing after I guy on a bicycle whom they thought had called them a “Pleb”). Now let us suppose the judge, rather than giving them ten years inside, instead merely told them off, fined them a fraction of the money that had stolen, allowed them to keep the rest and walk out of the court free as birds. My suspicion is that the thieves would be not in the least bit deterred and as soon as they’d lodged the loot (not in a bank mind!) they’d be out robbing again.

Now if we reverse this story with it the banks doing the robbing, which is pretty much what’s been happening with these banking scandals. They caused tens of billions in damage (most recently with LIBOR) costing some people their homes and businesses and yet they escape (if they are caught of course) with a fine a fraction of the economic damage they caused and not a single night in jail! While the US courts seem keen on prosecuting one or two traders. But it seems the majority (some 45 within UBS alone) involved in this scandal will be getting away scot free!

Why is anyone surprised that the banks are continually involved in these sorts of scandals when they aren’t being punished for these crimes? Its a case of tails they win, heads we loose. Every few years we see, the banks get involved in some horrible scandal, the politicians wring their hands and cry to heaven “why are these bankers so corrupt and greedy” (hint, because many those running the banks are psychopaths! As I discuss here). The banks get a slap on the wrist fine and no sooner has the ink dried on that cheque, they’re at it again….cycle repeats!

If we want to see these continuous scandals within “the city” stopped then that requires punishing the ring leaders within the banks for they’re crimes. Now if a couple of the ring leaders (rather than some hapless fall guy) such as Bob Diamond (Geezer) were to be perp walked into the High court (in hand cuffs), given ten years and a massive fine (enough to see him sleeping on the streets once he was out, like this guy) I suspect you’d find the rest of the financial industry quickly scared straight.

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