(Nouvelle Solidarité)—Last week, the Liborgate and HSBC
scandals were fully relayed by the French media, most notably by
the daily Libération, whose July 18 issue carried a front-page
cartoon of three "banksters," leading inside to four pages, with
a blowup quote reporting that HSBC had laundered $7 billion of
mafia money at the high point of the liquidity crunch when the
crash started. Libération also reported that pressure has
massively increased in the U.S. on the top banksters, including
J.P. Morgan and Citigroup, which are being called every week to
report on how they are progressing in the adoption of all kinds
of new regulations. Liborgate is now fully in the media with Le
Figaro reporting for instance early in the week that the banks
would have to cough up EU20 billion in fines, between what they
will have to pay to the states in legal fines and what they will
have to pay to private plaintiffs. Note that since the beginning
of Liborgate, early July, three French newspapers—Le Figaro,
La Tribune and BFM news—have noted that Liborgate has created
the backlash in which many heavyweights in the financial elite,
are now demanding to go beyond the Vickers regulations and for a
full Roosevelt-style Glass-Steagall.
In the last days, the calls for banksters to go to prison
have multiplied. Les Echos, our number-one conservative
financial daily, seems to be leading the pack at this point. On
July 17, François Vidal signed an editorial entitled " Bringing
The Banking Empires to Submission” ," which castigates the banks
for not having learned the lessons of the 2008 crash, going
through the list of current scandals: first J.P. Morgan, then
Barclays with Libor, and now, HSBC. "The evidence can no longer
be hidden. Certain traders, but also ... certain bank owners have
learned nothing of the financial tempest of 2008.... This is no
longer tolerable." "The states must go beyond" what they have
done so far: "first hit the guilty in the pocketbook.... Next,
improve surveillance of the sector ... go for ’zero tolerance’
without geographical exception," since most of the scandals
involve companies based in the "City of London and Wall Street."
Finally, "one must ask whether the great banking empires are not
too vast... which would lead us to say that the J.P. Morgans,
Barclays, and other HSBCs must be broken up. A sacred challenge,
of course. But such a reform would make more sense than simply
attempting to separate artificial market transactions from the
deposits of companies and individuals." It remains ambiguous
whether he is referring to the real or the phony Glass-Steagall.
On the same page, however, Favilla, a pseudonym for several
authors in the paper, writes something much more scathing under
the title "Bankers in Prison ." "If the average citizen said that
bankers using their position of power to influence interest rates
should go to prison, one would take that for a joke. If it were a
political figure, one would say he’s incompetent or a follower of
Mélenchon (the Left Party); if it were a Finance Minister, one
would say that he is surely a Greek or a Spaniard. But when it is
the Treasury Secretary of Great Britain, the temple of world
finance, one is tempted to say that we heard wrong. Yet, that is
what the very conservative Mark Hoban, Financial Secretary to the
Treasury, just stated" when talking about Liborgate.
Favilla notes that the French criminal code has several
articles which can send people to jail for up to five years for
organized fraud. "When some high-level bankers ... agree to make
false declarations to the monetary authorities and manipulate
figures which they are responsible for, with the aim of fixing an
international interest rate, is that far from the activity of an
organized gang? Only the justice system can say. Meanwhile, our
brave average citizen ... thinks to himself, since not one
country in the world is seriously regulating the financial
system, if some of these people who committed fraud in the
billions should find themselves keeping company with burglars who
are sentenced every day for stealing a few hundred dollars, that
might uplift his spirits."
Christian Chavagneux from Alternatives Economiques, a
magazine for regulation but also "sustainable growth," reports on
all these articles, noting that when Les Echos calls for
bankers to go to jail that means that "the fraud of the
financiers is no longer acceptable." Chavagneux himself is for
this solution, noting that "to the extent that there has been
organized fraud, they deserve not only to lose their jobs and
their bonuses, but also to explain their behavior in court," and
cites Frank Partnoy in a recent article in the Financial Times,
that "so long as the bankers will not pay legally for that type
of wrong behavior, they will just continue."
Chavagneux concludes his article with a long development on
the Pecora Commission approach to the problem in the ’30s, saying
that Ferdinand Pecora deliberately chose the boss of City Bank,
Charles Mitchell, then the most powerful banker in the U.S., as a
target because he thought if he managed to show that corruption
was massive and widespread, he would get the necessary political
means to have regulations. Despite all his efforts, Mitchell got
off with just a fine, but in the meantime "Roosevelt was able to
use the pressure created by Pecora to go for new financial
regulations. Bankers before the investigatory commissions and in
courtrooms who are making headlines are less able to demonstrate
that they should not be regulated. Roosevelt had understood this
well."
Last but not least, a couple of major national TV and radio
talk shows, have featured the exact same themes, adding
discussions on the need for Glass-Steagall. The first was a
national TV program, "C’est dans l’air" (It’s in the Air), whose
host interviewed several top financial journalists and others.
The general tone among the guests is that the bankers’ refusal to
change their ways has become unbearable and that the time for a
major ovehaul has come. On this show, the host raised the
question as to whether all these Pecora-style revelations are not
being somewhat organized by the G20 countries, to pave the way
for a vast financial reform. In the same program, a financial
analyst argues in favor of full banking separation,
Glass-Steagall, as being the only way to break up the "too big to
fail" bailouts. The Volcker Rule would not have stood in the way
of J.P. Morgan’s losses, or the Barclays affair.
This noon, on France Culture, a very similar program took
place. One participant was La Tribune financial correspondent
Valerie Second, generally a harsh critic of the system. She
argued for full banking separation, also quoting Martin Wolff,
who is also a member of the Vickers Commission on British banking
reform. When the host said: "but Mr. Hollande has promised to
carry out banking separation," Second responded resolutely, "I
don’t believe at all that Hollande will keep his promises because
the Finance Ministry, Bercy, has taken Paribas as its advisor."
She added that in Germany there is a bigger willingness at this
point to go for banking separation, and if they propose it, "you
can count on Bercy and BNP Paribas, to stop it."
