by David Malone
Yesterday I wrote about how the banks are able to routinely make a comprehensive mockery of what are laughingly referred to as ‘regulations’. We all know that at the first sign of trouble Regulators are barely able to ‘regulate’ their bowels let alone banks. Think of the long roll call of incompetence, blind, deaf and dumbness, willful inactivity and incompetence which lies behind Savings and Loans collapses, World Com, BCCI, Madoff, Sub prime and the rest.
But that said, it’s not that the Regulators don’t do anything. I think they work rather hard, just not at what we might have imagined. The evidence I have seen suggests the regulators are not at their most effective or zealous at uncovering wrong doing, but rather at making sure nothing too damaging gets uncovered, and that what does slip through the net and become known, is restricted to as few people as possible.
They are there, in my opinion, to carefully ‘regulate’ who is allowed access to any information that might cause harm or embarrassment to the banks and broader financial system. Whether they tell themselves they do this job “to protect the nation” or are able to admit to themselves that actually they mostly protect the banks, I would love to ask.
In fairness there isn’t a regulator in the world that does not fear for his /her job because they know the government they work for will rarely be on the side of disclosure. To wit, here is a an apposite quote from a senior Irish opposition politician (so not the regulator but someone who hopes to soon be their boss). It concerns a vicious piece of bullying and careful regulatory inactivity that has been unfolding in Ireland.
The upstanding politician said, “We can’t afford the consequences of revealing this story, we already have enough to deal with if we come to power.” Not even in power and already the politician’s thinking has skipped over honesty to concentrate on the acquisition of said power. Moral degeneracy in its larval stage.
OK they can’t reveal. Allow me.
Before anyone gets too excited I am not going to reveal all. I am going to pull together what is already in the public domain. There are enough dots to make the picture obvious. And for the technicolour version we will have to hope Senator Norris continues his crusade.
The story concerns a banker who has recently gone public under the name of Whistleblower. Whistleblower said in the Wall Street Journal today that he/she had worked as a Risk Manager for, one of the biggest banking groups in central Europe. Its main operations are in Italy, Austria and Germany, but operates in many other countries. It also owns one of the biggest fund management companies on the USA’s east-coast
The job of Risk Manager entailed forecasting what risks the bank was running and involved signing legal documents verifying that the bank had the necessary funds to cover its risks and liabilities at the end of every day. The laws in question are very specific. The Irish Central Bank act which goes back to 1942 applies as do several European regulations. The law specifies that the bank MUST have assets to cover its risks. ANY short fall of so much as 1% is considered sufficiently serious that a 1% shortfall MUST be documented and reported to the regulator with all necessary paper work. The Regulator in turn is also legally required to keep “in close communication with regulators of other member states” if the bank operates in different jurisdictions and poses a systemic risk. This one does.
The same laws and regulations also state that should the signing Manager lie, he/she is liable to 5 years in prison.
In 2007 Whistleblower found that this extremely large European bank was falling short. Not by 1% but according to his/her own calculations by 20%. Alarmed he/she told her boss. Who said, ‘don’t worry its an anomaly. It happens occasionally.’ But it wasn’t occasional. It happened night after night. And the shortfalls were billions and billions of Euros.
A systemically important bank regularly came up billions and billions of Euros short night after night. Whistleblower was so alarmed she engaged the services of a forensic accounting firm.. They looked at the figures and within days came back and told her she was wrong. The shortfall was not 20% but 40%.
Whistleblower delivered a full report to the Irish regulator. In it she made it clear that, “it is virtually impossible for it to have been a ‘once-off’ event…” Which means this shortfall could not have arisen all of a sudden. The bank had therefore knowingly allowed this situation to develop to the size where it endangered not just the Irish banking system but the European one as well.
Despite the massive size of the problem, despite the systemic danger, despite independent corroboration of the scale of the problem, by an outside firm brought in by Whistelblower, which was well known to and often used buy the Irish authorities, despite documented evidence from the banks own accounts provided by its OWN risk manager, the incorruptible Irish regulator did NOTHING AT ALL.
Not for six weeks until Whistleblower finally resigned and not in all the time since. NO investigation. Until recently when the regulator, as if by magic, said – oh we’ve had an ‘internal’ look and found …nothing. Sound familiar? No details. No evidence. No documents. Nothing. . I refer you back to yesterday’s post.
Despite the whole affair having been brought to the attention of senior figures in ALL the Irish parties and the Central bank, and despite the barrage of questions which continue to be asked in the Irish Parliament by Senator Norris. Despite all this there has not been one shred of honesty and enquiry.
There has not even been an official denial of the very serious and specific allegations made in public by Whistleblower and in parliament by Senator Norris. If there was no case to answer for either the bank or the Irish regulator and government they would all have been very quick to come out and say so. But they have been deafening in their snake-like silence.
So much for the regulators and their pimps in government who rent out their services.
What of the glorious Press? Kathleen Barrington has been the honourable exception. Otherwise you could have heard a cricket fart louder than the combined voice of the Irish Media.
Now, maybe they are stirring. Individual journalists might have wanted to cover the story. It is up to them to explain why they didn’t or couldn’t. Whistleblower herself suggests that conflicts of interest might be why at least one Irish paper did not cover the story.
Otherwise the story has been covered in Ireland on political online boards most notably all over politicalworld.org for example here and on politics.ie. In the UK the story has been posted by Whistleblower at the Guardian.
Given everything that is going on in the world you might ask, why make such a fuss about one Whistleblower? At one bank? The answer is that this is about if banks are not only too big to fail but also too big to regulate, and too big to confront. One person, an honest one, trying to do her job and uphold the law tried and lost her job and found herself directly threatened.
When a bank with a trillion Euro balance sheet threatens you in writing, on two different occasions, that the consequences of revealing any of your experiences at the bank to a third party would be dire, one pays heed to that.
Do we have the power to regulate our banks or have they now the power to regulate us? Do they now have the power, thanks to the corruption of our politicians, our system of law and even our press, to regulate what we can say, which laws get enforced, which do not and even who is subject to the law and who is not.
It is also whether we, the people, have any allies in this fight or not. If we do not, neither in government nor in the press, nor in law then we must assume a revolution has taken place, a putsch and we must look to ourselves and to our children. We must defend ourselves and our nations as best we an with what means we have.
If the law will not protect us then we must consider the law to be a tool of our enemies. That does not mean we should set the law aside. That would make us no better than those we fight. But we should not look to the law for help. We must speak truth to each other and be prepared to speak it to power.
We must be willing to stand up for free speech, free assembly, the free flow of information, despite the proclamation of D notices tonight in the UK.
That such a notice has been issued even as I type this over the republication of the most recent wikileaks documents bodes ill for us all. How much further is it till we are all deemed to be the enemy within?
This article is reproduced with thanks to David Malone. He is the author of the book Debt Generation. You can read and listen to excerpts from his book here: