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  1. Wealth
July 24, 2012

Stop blaming financial crises on the City of London!

By Spear's

What drove the Americans was the opportunity to build bulge-bracket banks in London beyond the control of the US’s 1933 Glass-Steagall Act that forbade such groupings

The US and European media want to kick the City off its perch as the centre of the world’s financial scandals. And the scandals have been symptomatic of the Greed Era, not least at HSBC and Barclays Capital. Indeed, the latter should consider changing its name to reflect more accurately its true trading style, namely to Kneecap, following the revelations in The Sunday Telegraph: it was the “wild, wild west” according to one trader, who said Barcap was making “$50,000 per quarter barrel of oil in 2008 as opposed to $5,000, just as the swaps we had sold to clients left them with no cover at all!”

And while BarCap was plundering its client base, HSBC was building billions in deposits from drug barons, gangsters and money-launderers as the only global cartel in a ‘no questions asked’ banker to all the world’s other illegal cartels, as overseen, or not, by its chief compliance officer! These, and the fact that the bankrupt AIG and Lehman all ended up in the fertiliser as a result of their London operations, not to mention rogue traders at Barings, UBS and CS, were all down to corruption in London, apparently.

Hold on a minute: let’s examine the evidence. Corruption in London before Big Bang in 1986, under self-regulation, was minimal: Emile Savundra, Rolls-Rayzor and Triumph Investment Trust come to mind, but not much else. All that changed in 1986 with the move to screen-based trading, which had begun in 1973 in New York. The Americans especially arrived by the Jumbo-load to buy up all the old famous names of the City, whose partners had never dreamt of such riches as they retired to the country as BOBOs, Burnt Out But Opulent.

What really drove the Americans in particular, however, was not just the opportunity to build bulge-bracket banks, but to build them in London beyond the control of the US’s 1933 Glass-Steagall Act that forbade such groupings, and for sound reasons too. This excellent act was finally abolished by the Draft Dodger in 1999, to level the playing-field for New York against London, and particularly for the Fat-Cat Degenerate Sandy Weill as he sought to merge his hotch-potch Travellers Group with the late Walter Wriston’s celebrated Citibank, to create an all-singing all-dancing financial supermarket, selling everything from Alphabet soup to Zebra nuts. The ensuing train-crash was an entirely predictable event.

Fast forward to 2008 and the demise of Lehman, whose London office had written the CDSs for AIG Financial Products, which effectively underpinned the disastrous US subprime market and Wall Street’s dicing and slicing of this low grade shit into lovely US Triple-A rated paper, as their grinding computers turned battery chicken into prime sirloin.

At the centre of this All-American hocus-pocus was a little known entity known as Banque AIG SA based in Paris. The Yanks had figured out that the Garlic Regulators weren’t interested in this non-entity, and the Roast Beef Regulators were only too pleased that Lehman was at least dealing with another bank, albeit one happily beyond its own jurisdiction.

Meanwhile, the Regulator for AIG FP was the US Office of Thrift Supervision, and there wasn’t a lot of that around in the Land of the Free-spenders left to regulate. Add to all this that Lehman was run by one Dick Fuld and AIG FP by one Joe Cassano – not common names in my native Wiltshire – and the only thing involving London was the brass plates on the front doors.

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Meanwhile, Bob Diamond has clawed his way to the top of Barclays on the back of sucking blood out of its clients, dragging a couple of other North Americans with him into the top positions, namely Gery Messier and Rich Ricci, an unlikely trinity that never graced Harvard but were more likely from Exit 35 on the New Jersey ’Pike, and the wholesale destruction of the English commercial bank once known as Barclays was under way.

Varley kept Diamond under some sort of control until Bob became Group CEO, as Bob the Dodgy Builder built up BarCap at the expense of Barclays, not least by ingesting the most lucrative bits of the latter into the former, like treasury, FX and the corporate client base, while leaving most of the attendant cost base in the latter.

No wonder Bob the Rough Diamond walked away with £120 million in ill-gotten remuneration for fancy corporate footwork over five years. And now the Americans blame London as being the centre of corruption? – Get away! Yanks go home, say I, but then they always were over here, over-sexed and over-paid!


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