Sir Mervyn King Condemns Banks Following Controversy
It hardly comes as a surprise that the fleet-footed banker managed to offer his two pennies worth on the latest scandal to hit Britain’s banks. Not only did he manage to present an opinion on the debacle but he managed to rub noses the wrong way with his complete and utter drivel. Of course one should get used to him delivering the coup de grace to people’s faith and trust (or what little is left of it) in the banking system.
As the Bank of England governor, he is charged with great responsibility pertaining to setting interest rates and providing a direction for banks across the country to follow. One must also note the celebrity he enjoys in the world of finance and the comments he makes in the media certainly carry weight. So for the life of many sane economists no one can understand why he said “there is no need for a Leveson-style inquiry but something went very wrong with the UK banking industry and we need to put it right.” This was said after he launched a “stinging” attack opining, “a real change in culture is needed.”
For realists that are entrenched in the murky world of crooked corporations and dodgy traders, one is only far too familiar with this old song and dance that Mr. King often parades in front of the press after a banking scandal unfolds on an epic scale. After the housing market imploded in 2008, there he was in front of cameras looking pristine and polished talking about the mechanisms that were needed to be put in place to help the country recover from a stagnating economy. Four years later and nothing has changed except the country is deeper in debt, taxpayers are stuck in a quagmire and traders wallets are a lot thicker than they were before the recession.
One must digress from the platitudes displayed at the behest of Mervyn King and put his comments into perspective. They unfolded after another piece of humiliating news was unveiled concerning the selling of hedging products against a rise in interest rates. This would have certainly confused a standard customer unaware of the downside risks they could potentially involve.
Many of the big banks were cited as carrying out such acts of misdemeanour in order to line their own coffers and they did so successfully. According to the Financial Services Authority, this practice has been conducted since as early as 2001 and the selling of products number at least twenty-eight thousand. The cost to customers would have been in the hundreds of millions Lloyds, HSBC, Barclays and the Royal Bank of Scotland have all agreed to payback customers that have been a victim of this regular procedure.
The fixing of interest rates isn’t a small crime; on the contrary they’re certifiably heinous. These bankers and traders have wreaked havoc on the economy as a whole and this “culture of greed” that Mervyn King so often refers to but does nothing about has ruined lives. Whilst banks lend money to each other at a low interest rate, they rigged the interbank lending figures, literally driving small firms into the ground and foreclosing on homes where people can no longer afford to pay their monthly mortgage. This would essentially lead to people being kicked out of their own homes, further “enhancing” the already tarnished image of banks as vultures.
Despite calls by Mervyn King to avoid wholesale changes within the banking industry, his calls have been ignored thus far, to the credit of the government and financial regulating bodies’. Prime Minister David Cameron stated, “Somebody at Barclays has a lot to answer for” which was clearly a reference to American Barclays bank executive Bob Diamond, who he chose not to mention directly nor comment on considering his financial influence and a general election around the corner. Serious Fraud Office investigators were in talks with figures from both the government and financial regulators on how best to bring possible criminal proceedings against those found guilty of serious misconduct and fraud.
On a contradicting note Mervyn King added: “Observations need to be made of actual market transactions.” But at the same time King implicitly said that there was no need for any rigorous inquiries and is a staunch opponent of any kind of regulation that may impede investment arms of banks that “bring so much to the country.” Another fear is more regulation could deter not just banks but a conglomerate of corporations as whole from investing in the country, a point he does make routinely and with some credence.
However he made no suggestion of how to curb the culture of greed and deceit that is so rampant in London’s financial centre. What he instead offered was a few paltry words at least acknowledging that there is indeed a serious problem that needs addressing quite urgently but his comments hardly had economic analysts on the precipice let alone the average banking customer.