Banks and Politics Do Not Mix Well

Human Wrongs Watch

By Roberto Savio*

Hardly any week goes by without disclosure of some scandal related to banks. Now it comes out that the British Standard Chartered is accused by an American regulator of having schemed with the Iranian government to launder billions of dollars for the potential support of terrorist activities. What gives an added value to this allegation is that Standard Chartered was until now considered one of the cleanest banks, and was not associated with any scandal.

**Image: Standard Chartered Bank Tower in Pudong, Shanghai, China Baycrest | Wikimedia Commons.

Not long ago, the American Senate had alleged that HSBC, another British giant, was supporting activities smacking of terrorism for which HSBC has apologized. It also has put aside 700 million dollars for potential fines and sanctions.

But we are entering into a new development in this ceaseless flow of financial scandals. It is now starting to affect some of the mightiest in the world of finance, much beyond the banks themselves.

Rato and the Spanish Banking System

It started in Spain, where former finance minister Rodrigo Rato, once an influential man at home and abroad (he was director of the International Monetary Fund), has been accused of letting the Spanish banking system spin out of control, and there are various calls for bringing him to justice.

He was questioned at a parliamentary hearing that turned out to be hostile, in spite of his political kinship.

Far away in the United States, the secretary of the treasury (minister of finance), Timothy Geithner, was questioned over the fact that though he knew about the rigging of Libor (the interbank loaning rate), he did not do much to stop it.

The House Financial Services committee called him to a hearing, where he defended his call for new regulations, but he did not explain why he did not actively intervene to stop what he knew Barclay Bank was doing.

Draghi Investigated

And now something unthinkable has happened! The European Union Ombudsman office has announced that it is launching investigation into allegations of Mario Draghi’s membership of the so-called Group of 30, which it says, “is incompatible with the independence, reputation and integrity of the ECB”.

Draghi was a vice chairman and managing director of Goldman Sachs, and the Group of 30 (a private organization of influential regulators, financial executives and academics) is accused of putting together very important people, like the former managing director of Goldman Sachs, William Dudley, to take decisions on international issues of economic, financial and political governance.

Such accusations have been escorting for years the meetings of the Trilateral Commission, the Bilderberg Commission, and the World Economic Forum.

The difference is that the Group of 30 is especially heavy on finance.

Mario Monti, the Former Goldman Sachs Man

A NGO dedicated to denounce the tight relations between lobbyists and senior decisions-makers in Europe and the EU, the Corporate Europe Observatory, was quick to point out the case of another one of the ex-Goldman Sachs man: the unelected Prime Minister Mario Monti of Italy who was international adviser to Goldman Sachs from 2005 to 2011.

In Goldman Sachs job description, Monti’s work was to “provide advice on European business and major public initiatives, worldwide.”

Whether all this will lead us anywhere, is very doubtful. The web of finance, corporation and politics is so close knit that nothing short of a French revolution could decapitate that world.

The best example of where it is leading up to is the United Sates where the presidential campaign will now probably overtake the staggering amount of 2 billion dollars.

This is due, in a good measure, to the ruling of the very Conservative Supreme Court, that corporations have the same right of free speech as individuals, and therefore are no longer subject to limitations in their funding of electoral campaigns.

Secret Donor’s Money

Secret donor’s money went from 1% in 2006 to 44% in 2010. This year a mere 26 billionaires have given 61 million dollars to Political Activations Committee (PAC), which had stringent limits before.

Those 26 billionaires have a net worth equal to 42% of all American households, about 50 million people. Compare the freedom of speech enjoyed by a couple of dozen of super- rich people on the one hand and 50 million ‘normal’ citizens on the other!

One of the super donors is a Casino magnate, Sheldon Adelson, who is putting 100 million dollars into Romney campaign. (If he is elected, better watch out for new casino rules.)

There are many more donors of that campaign, whose identity is not known, because they donate to Non-Profit like structured PAC, whose donors can remain secret. According to Rick Maloney, of the Committee to Protect Ethics, the largest part of that money comes from banks.

One clear result is that Romney is outspending Obama. The President has spent 400 million dollars in the last 18 months, and now as we are approaching elections day, more money is needed.

Meanwhile, the debate has shifted entirely to personal attacks, repeated thousand times on radio and TV day in and day out, with little vision or policy issues as the center of the debate.

Not Sustainable

Maybe the awareness that all this is not sustainable is dawning on some minds. What was really surprising was to see Sanford Weill (an American banker, financier and philanthropist) declare on TV: “What we should probably do is go and split up investment banking from banking.

Have banking do something that it’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.”

Weill, a former boss of the mega group Citibank, for years had a plaque in his office, which read “The Shatterer of Glass–Steagall”.

That law, created after the Great Depression of 192, regulated a strict separation between banks of investments and banks of deposit, which could not use customer’s money for speculation.

That was abrogated by President Bill Clinton in 1999, to please Wall Street. Since then John Reed, the co-creator of the mega Citibank, apologized for creating a lumbering giant that needed multibillion dollars bailout from the government.

Also Philip Purcell, former chief executive of Morgan Stanley, and David Romansky, the onetime leader of Merrill Lynch, both major actors in getting the Seagall Glass repealed, have expressed similar concerns.

Even a Small Harmless New Measure is Rejected

Now, let me just quote the ending lines of the editorial of the New York Times of the 27th of July: “We forcefully advocated the repeal of the Seagall Glass act. Having seen the results of this sweeping deregulation, we think now that we were wrong to have supported it.”

It is a pity that Weill and friends are not any longer in power.

Even a small harmless new measure, like a symbolic tax on financial transactions, the so-called Tobin Tax, is rejected by the City and Wall Street, in spite of respectable advocates like German Chancellor Angela Merkel, former French President Nicolas Sarkozy and now his successor Francois Hollande.

*Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Othernews, a personal initiative seeking to provide information that should be in the media but is not, because of commercial criteria. It welcomes contributions from everybody. Work areas include information on global issues, north-south relations, governance of globalization. The author granted permission for publishing on Human Wrongs Watch.

**Image: Standard Chartered Bank Tower in Pudong, Shanghai, China Baycrest | Wikimedia Commons.

Read also:

Finance’s Ethics: a Leap into the Past

The Untrammeled Dictatorship of the Banks in Europe

The Uneven Fight Between the Banks and the Peoples

“God, It’s Great To Be A Banker!”

“Human Capital Is Every Bit as Important as Financial Capital”, UN Now Realizes

Just Help the Banks, Not the Cooperatives!

EU Bailouts: For The Bankers Not For The Workers

2012 Human Wrongs Watch

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