Posts Tagged ‘Northern Rock’

The Young Turks on Snobbery and Sneering by Wall Street Secret Society

October 19, 2015

Here’s another video by The Young Turks from last year. Kevin Roose, a journalist with the New York Times, infiltrated the annual party by a secretive Wall Street society, the Phi Kappa Alpha. The society basically seems like a university frat/ sorority for elite bankers. Their party was marked by some truly outrageous behaviour. Many of them turned up in drag. One leading financier appeared in a Confederate hat, and at one point in the evening a group turned up on stage in dressed as Mormon missionaries to sing a version of ‘I Believe’. What was particularly shocking was the sheer contempt the Wall Street capitalists had for the government, that had bailed them out. The CEO in the Confederate hat used it to sing a song about how they had successfully ripped off the American authorities, who’d been forced to bail them out. The group dressed as Mormon missionaries did the same. This is particularly shocking in an American context. America is still a deeply religious country, with many politicians, especially Republicans stressing their personal religious faith. This incident would genuinely shock many Americans, who would associate such blasphemy only with the Left. It reveals the genuine contempt the rich 1% have for religion and people of faith, regardless of whether they’re Mormons or not. The assembled bankers and financiers also joked and laughed about how they’d wrecked the country’s economy. They also mocked Hilary Clinton, despite the fact that she has herself done much to aid the American financial sector and defend it from attack. When they discovered the reporter’s identity, they approached him in an attempt to do a little damage limitation. One of them said that they could be ‘very helpful’. In other words, they offered him a bribe, which he refused.

Here’s the video:

I’m posting this video because such attitudes aren’t confined to that side of the Atlantic, and the bankers and elite financiers over here have links with them.

About a decade or so ago the City of London was in the news because of the appalling attitude of the financiers and stockbrokers there. The City was accused of being viciously misogynistic with extremely chauvinistic attitudes towards women. The Daily Mail, very definitely not a feminist paper, quoted one former female financial executive as saying that she was miserable all the time she worked there, despite the fact that she was earning enough to afford closets of extremely expensive clothes. All the women she knew were also extremely unhappy.

The financiers also had absolute, complete contempt for their clients, laughing and boasting about how they had ‘shafted’ them.

These are the people, however, which the British government under New Labour, was forced to bail out, but, with the exception of the odd executive, have never been brought to book for their destruction of the economy, and who are continuing to demand concessions from the government. Despite scandals like Northern Rock and the Royal Bank of Scotland, these are the people, who are still awarding themselves eye-watering pay rises. Well, the video might be American, but I’ve no doubt the precise same culture of elitism and sneering exists over here.

One of the regular contributors to Lobster said that he had a friend, who attended a meeting of high level bankers and financiers in New York. Curious, he asked him what they were like. ‘Worse than you can possibly imagine’, was the answer.

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Anthony Sampson on the Meanness of the Rich

April 10, 2015

Anthony Sampson in his book Who Runs this Place? The Anatomy of Britain in the 21st Century has a passage discussing the way 21st century Britain is now far meaner and much less generous than in the 19th century, and America today. The people most willing to give money to charity, however, are the poor. The rich are the least likely and willing to give to charity. He states:

While the rich in Britain have become much richer, they have not given more away. Their incomes relative to the poor have increased, but they feel much less pressed than their predecessors to share their wealth, whether prompted by social obligations or by a religious conscience. The connections between business and philanthropy which were so marked among Quakers and other practising Christians have largely disappeared. ‘As inequality of wealth balloons back to nineteenth-century levels,’ wrote Will Hutton in 2003, ‘there is no sign of nineteenth-century levels of civil of engagement and philanthropy by the rich.’

It is a striking fact that 6 per cent of the British population provide 60 per cent of the money given to charity, but it is more striking that the poor give away proportionately more of their money than the rich. ‘It’s more surprising because the rich can give away without noticing it, while the poor make a sacrifice,’ said one charity chief. ‘But the poor have more empathy with less fortunate people.’

The big corporations have been equally reluctant, and most boardrooms have shown little interest in charities. In 1986 two leading businessmen, Sir Hector Laing, a committed Christian, and Sir Mark Weinberg, and ex-South African, set up the Percent Club to urge companies to devote 1 per cent of their pre-tax profits to charity, but they soon had to reduce the target to 0.5 per cent, and their results were still disappointing: by 2001 the top 400 companies were giving exactly the same percentage, 0.42, as ten years before. A few big corporations stood out above the average. Reuters gave £20 million in 2001, amounting to 13 per cent of its pre-tax profits, which were sharply down. Northern Rock, the mortgage company based in Newcastle, gave away £15 million, or 5 per cent of pre-tax profits. Other big companies provided gifts in kind, rather than money, though they were not always as generous as they looked. (Sainsburys gave away food that was past its sell-by date, which avoided the cost of dumping it in land-fill sites.) Most companies have shown little interest in more giving.

‘Corporate donations … are worth less now than they were in 1991,’ said Stuart Etherington, the chief executive of the National Council for Voluntary Organisations. ‘Clearly it is time for the government to get tough with the business sector.’ But the New Labour government showed little desire to get tough.

By 2000 the two chief overarching bodies for charities – the NCVO and the Charities AID Foundation – were so concerned about the lack of funds that they approached Gordon Brown at the Treasury. His budget provided major tax concessions to donors – which are now as generous as the Americans’ – and he also helped to finance a Giving Campaign, chaired by the former head of Oxfam Lord (Joel) Joffe, an unassuming but persistent South Africdan who worked closely with Weinberg. The campaigners have had some success in giving more prominence to charity, but donors have been slow to exploit the over-complicated system of tax relief; and the charities are still very disappointed by the response, both from corporations and from individuals – whether entrepreneurs, corporate directors or the million-a-year men in the City.

Joffe, like other heads of charities, is struck by the contrast between attitudes in Britain and America where giving is part of the culture. ‘If you’re rich in America and don’t give,’ he said, ‘you’re regarded as an outcast.’ Americans give on average 2 per cent of their income to charity, compared to the British figure of 0.6 per cent. The British have often argued that their governments have take over the roles of philanthropists in health, education and social services, to which Americans devote much of their giving. ‘People still expect the government to pay for the basic social and artistic causes,’ says Hilary Browne-Wilkinson, who runs the Institute for Philanthropy in London. But the expectation is much less realistic since the retreat of the welfare state and the lowering of taxes, while the rich in the United States remain more generous than the British, and more systematic and effective in attaining their objectives. ‘British charity is more reactive, sometimes responding quite generously to television coverage of famines and disasters,’ says Joffe. ‘The Americans have a more strategic sense of what they want to achieve and plan their giving accordingly.

Many of the American mega-rich a century ago, like Carnegie, Rockefeller and Ford, converted part of their fortunes into foundations which today provide a powerful counterweight to the prevailing profit motive. ‘He who dies rich, dies disgraced, ‘said Andrew Carnegie, who gave away his fortune to finance free libraries and a peace foundation. More recent billionaires like George Soros and Bill Gates, have continued this tradition. When Ted Turner, the founder of CNN television, gave a billion dollars to the UN 1997 he quoted Carnegie and mocked his fellow billionaires: ‘What good is wealth sitting in the bank?’ The rich lists, he said, were really lists of shame.

But there are only a few comparable British bequests, like the Wellcome, Sainsbury or Hamlyn foundations, and most of the old rich feel much less need to commemorate their wealth through charity. The British aristocracy have traditionally seen their main responsibility as ensuring the continuity of their estates and families, in which they have succeeded over the centuries, helped by the principle of primogeniture which allows the eldest son to inherit the whole estate. Their argument can appeal to anyone who values the timeless splendours of the countryside, with its landscapes of parkland, forest and downland which owes much to the protection afforded to large landowners. Old money in Britain has been interlocked with the environment as it has never been in most parts of America, where land is less valued, and where the rich have more urban and nomadic habits.

But the argument is less valid today, when much of the responsibility for the environment has been taken over by English Heritage or the National Trust. Many old families with large estates still have incomes which greatly exceed the cost of their upkeep, and they still have responsibilities to contemporary society. Many of the new rich are happy to follow the earlier tradition, but they are still less encumbered. Most people of great wealth in Britain today show a remarkable lack of interest in using their money to improve the lives of others.

Above all they feel much less need than their predecessors to account for their wealth, whether to society, to governments or to God. Their attitudes and values are not seriously challenged by politicians, by academia, or by the media, who have become more dependent on them. The respect now shown for wealth and money-making, rather than for professional conduct and moral values, has been the most fundamental change in Britain over four decades.
(pp. 346-8).

So the rich have become much meaner, while the poor are the most generous section of the population. Charitable giving has declined along with notions of Christian morality and an awareness of need. People still expect the government to provide, despite the attack on the welfare state. The aristocracy don’t give, because they’re still concerned with preserving their lands and titles. While the new rich are feted by the media and society, simply for being rich, without any concern for morals or charity. And because universities and the media are dependent on them, they are reluctant to criticise them for their lack of charitable giving.

This was inevitable. Modern Conservative ideology was all about greed, shown most acutely in the Yuppies of the late 1980s and 1990s. And because the Tory attacks on the welfare state concentrate on attacking the poor as scroungers, there’s no incentives for people to give to them either. If someone’s labelled a scrounger or malingerer, giving to charities to support them is just as bad as government tax money.

This marks another, massive failure of Thatcherism. She thought that if the welfare state was rolled back, charitable giving would increase. It hasn’t.

Thatcherism has made the rich meaner, and the Tories continue with the same attitudes and visceral hatred of the poor.

From 2013: Private Eye on Energy Miss-selling and Connections to Banks

March 22, 2015

One of the other scandals to have hit this country is overcharging and miss-selling by the energy companies. The majority of people in this country would like to see the power companies renationalised. It has, however, become the modern economic dogma that as much of the economy should be in private hands as possible, ever since they were privatised, along with gas and water, by the Tories. Nevertheless, public outrage has been so intense that Cameron recently made a few gestures towards getting energy prices. Much more optimistic is Ed Miliband’s pledge to lower electricity prices and to make sure that they stay down and affordable.

In their edition for 19th April – 2nd May 2013, Private Eye published this article on Scottish and Southern Energy’s miss-selling. They also revealed the involvement of senior bankers, including officials from the Bank of England, who should have been guarding against such fraud.

Energy Miss-Selling
Fried Rice

The shockwave caused by the record £10.tm fine for Scottish and Southern Energy (SSE), punished by regulators for lying to customers about non-existent savings, has reached all the way to the Bank of England.

According to Ofgen, there was a “woeful catalogue of failure” by SSE managers, who allowed “a culture of miss-selling to continue. They weren’t doing enough to prevent sharp selling practices from their selling agents. They actually provided misleading sales scripts.”

All this is very embarrassing for Lady Susan Rice, SSE Group’s senior independent director, who has been on the SSE board since 2003 – and since 2007 has also been a director of the Bank of England where, somewhat alarmingly as a seasoned blind-eye turner, she chairs the audit and risk committee.

“Independent” directors are meant to ask uncomfortable questions that puncture “groupthink”. But this clearly didn’t happen at SSE, which caused “substantial harm” to its customers, Ofgem says. “Failings did not just take place on the doorstep but also in the management.”

Attempts to rein in misbehaviour were also ineffective. While “SSE terminated doorstep sales in July 2011, failure in telephone and in-store sales persisted”. SSE staff were given sales scripts which claimed that switching to SSE was “just like the government intended”. One dishonest spiel ran: “What I’m here to do today is show you a government thing called deregulation which results in your energy prices being lowered by doing nothing at all.” The false claims actually led to bigger bills for customers.

“Lady Susan Rice is, and will continue to be, a highly valued director on the Court of the Bank of England,” was the reply when the Eye asked if the SSE scandal meant she should perhaps resign from her Threadneedle Street Post.

Rice was appointed at SSE thanks to her other job as managing director of Lloyds in Scotland, which she fits in between sitting on Scottish first minister Alex Salmond’s council of economic advisers, chairing the Edinburgh Festivals forum and the city’s book festival, chairing the Chartered Banker Professional Standards Board and sitting on the Oxford Said Business School advisory council. Not to mention the National Galleries Scotland’s patrons committee and something called the Finance Group on Climate Change.

Busy bee Rice isn’t the only member of the miss-selling SSE’s board with a banking background. Chairman Lord Robert Smith was a director of Standard Chartered, which was fined $340m for money laundering in deals with Iran – and like Rice he has a government job, too; last May Nick Clegg announced that he would lead the government-funded Green Investment Bank. He is also chairing the 2014 Commonwealth Games Organising Committee.

Also paying less attention that he should have been as SSE was Richard Gillingwater, a director (£54,000 last year) since 2007. Eye readers will remember him as chief executive of the government’s Shareholder Executive when it oversaw the sale of taxpayer-owned development fund CDC’s fund management arm, Actis, to its former managers for a pittance. Gillingwater is now chairman of CDC itself and has just retired as dean of the Cass business school, teaching up-and-coming suits, er, how to run businesses properly.

In other words, the culture of miss-selling in the banking sector, which led to the collapse of Northern Rock, and the present global economic crisis, spread to the energy companies, on whose boards bankers sat. Contributing to the banking crisis was the fact that the ‘independent’ directors there, who were supposed to check miss-selling and misconduct there, did no such thing. They turned a blind eye, just as Rice turned a blind eye to miss-selling by Scottish and Southern Energy.

Deregulation has not caused energy prices to come down, just as it the deregulation of the banks did not lead to improved and responsible trading. Anything but. It’s time these sectors were cleaned up. And Miliband is a far better bet to do this, than either the Tories or their Lib Dem sycophants. They won’t do anything at all.

Private Eye on the Political Influence of Big Accountancy

February 16, 2015

In my last post, I criticised the pernicious cross-party influence of the think tanks and lobbying firms. I posted up an article on them from a 2012 issue of Private Eye. That same issue also carried another relevant article, describing the way the big accountancy firms, in this case, PricewaterhouseCoopers were also working for all of the major political parties. They were similarly active promoting their polices of tax avoidance, while avoiding the repercussions for their role in the collapse of banks such as Northern Rock and the development of tax avoidance schemes. The article ran

Anybody wondering why the fallout from recent financial scandals never gets too near the big accountancy firms that are at the heart of so many – the failure to audit collapsing banks properly, the sale of billions’ of pounds’ worth of tax avoidance schemes – will be interested n a few lines from the annual report of PricewaterhouseCoopers (Northern Rock auditor and adviser on Barclays’ tax avoidance schemes, among other lucrative lines).

PwC, it emerges, “provided a total of some 3,454 hours of free technical support to political parties during the year”, valued at £400,000, and made up of “2,622 hours ot the Labour Party and 832 to the Liberal Democrat Party”. In recent years, it reveals, “the trend has been that we have provided more hours to the opposition parties as they have less support infrastructure”.

Small wonder coalition and opposition alike are expanding the opportunities for PwC’s offshore tax schemes (<Eyes passim) and overlooking the obvious need to rein in Britain’s big beancounting operations.

This is exactly correct. Mike over at Vox Political has sharply criticised Rachel Reeves, for example, for accepting the help and advice of the big accountancy firms. This help isn’t free. The cost is the continuing corruption of British politics and the erosion of public confidence in the willingness and ability of their leaders to represent them, not corporate big business.