Choosing whether to laugh or cry is a dilemma familiar to anyone who has followed the behaviour of bankers, and our collective response to it, for any length of time.
This week marks another low point, in an ever-plummeting series of low points, in our ability to bring rogue bankers to book. Mark Carney, the Bank of England’s Governor, no less, has come out and described the conduct of traders at Lloyds Banking Group who rigged fees on rescue loans designed to save banks from collapse as “criminal”.
With delicious timing, the ResPublica think-tank has called on the industry to affirm a bankers’ oath, similar to the doctors’ Hippocratic oath, “to exhibit a duty of care above and beyond what is required by law”.
Oh, to have been a fly on the wall of the traders’ floor when they pored over ResPublica’s words: “May I always act so as to preserve the finest traditions of my calling and may I long experience the joy that comes from supporting the needs of society.”
One Lloyds trader sent an email on the rate-fixing: “Oh dear… my poor customers… hehehe!!” Quite what this trader would make of the ResPublica proposed code is not known: “I will remember that I remain a member of society, with special obligations to the financial security and well being of my customers, their families and the communities they reside in.”
Yet again, the gap between how bankers actually think and act, and our expectations of them, has been shown to be a yawning chasm.
Once more, the fact that no banker has been jailed for their part in the financial crash of 2008 is wheeled out. On this occasion, there is added piquancy where the media’s anger is concerned, in that journalists have been put on trial, and a former editor jailed, for phone hacking. Meanwhile, the Mediterranean resounds to the laughter of senior bankers aboard their yachts and in their villas, their fortunes and reputations intact.
We can carry on like this, going from one scandal to another, venting our spleens, and doing… absolutely nothing. Or we can force change. In this regard, Carney’s intervention is something of a landmark. I can’t think of a Bank Governor making a similar declaration. Tellingly, writing in the Daily Mail, Max Hastings recounted how Carney’s predecessor, Mervyn King, liked to tell him, as a friend, that bankers “are terrible people who will go on behaving badly until they are made to stop.” In private. King was always more forceful in private than he ever was bedecked in white tie and tails at one of the Governor’s annual Mansion House dinners.
If we’re going to get serious about bankers’ misconduct, then we must stop moaning every time they’re seen to stray, and do something about it. That requires a wholesale, cultural change in our attitude to financial crime.
At present, major misdeeds fall under the aegis of the Serious Fraud Office. It operates out of a drab, anonymous building off Gray’s Inn Road in central London. To say it’s not grand and imposing is an understatement. Terrifying, it is not.
It should be slap bang in the middle of the Square Mile, a symbol that we mean business, a permanent reminder to any rogue trader that one day they could be facing awkward questioning in there.
That would be just the beginning. The SFO has a budget of, how much? A paltry £37m. It’s a figure which in many bank departments would qualify as an accounting error, it’s so small. And that sum is due to fall, not increase, in the next financial year.
The SFO employs around 300 people. While they’ve achieved a creditable rise in the success rate of prosecutions in recent years, to 85 per cent, it’s not enough – especially if they’re to really take on the major banks.
Leading City law firms and accountants have treated the SFO as a happy hunting ground for fraud specialists – able to offer much higher rewards, often for switching from gamekeeper to poacher and defending those very same institutions the authorities are attempting to attack.
That has to cease, or at least the flow of expertise has to be reduced to a trickle. It isn’t simply a question of wages – in truth, the top legal and accounting practices are so rich they will always trump a public sector employer.
It’s also got a lot to do with pride and prestige. In the US, for instance, white-collar prosecutors are regarded with a mixture of awe and fear. Among the financial and legal community they enjoy celebrity status – they’re somebody, “the guy who busted X” or the “woman who brought down Y”. They’re the stuff of crime novels and blockbuster movies. Graduates aspire to be them.
Here, that is not the case. Whenever I’ve met attorneys from the two New York equivalents to the SFO, the offices of the United States Attorney for the Southern District of New York, and the New York County District Attorney, I’ve found them to be a combination of fearsomely bright, tough, used to the public limelight, not afraid of anyone, least of all a big Wall Street name.
They exude an aggression and determination, a zeal for combat that their UK counterparts simply lack. The main reason for this is that the case is theirs.
In the US, the official attorneys handle a case from beginning to end, and that includes the in-court advocacy. It also includes the early investigation. From the moment they’re assigned the target, it’s a matter of personal honour as to how the matter proceeds.
They move early and quickly, swooping on witnesses, working in close co-operation with the police. They eat, breathe and sleep the case, working long, punishing hours, but also enjoying the thrill of the chase.
Every tool of evidence-gathering is at their disposal. They’re not scared of anyone. In fact, the reverse is the reality – that the financial community remains petrified of them, fearing a without-warning raid.
London and New York are similar in terms of the size of their respective financial services industries. Yet we’re poles apart when it comes to investigating and prosecuting major financial crime.
Instead of moaning about the latest banking shocker, our political and industry leaders should act. As well as boosting fraud-busting, they need to reform the legal system. I remember covering the trial of Kevin and Ian Maxwell, following the death of their tycoon father, for conspiracy to defraud in 1995. It lasted eight months, before the jury acquitted them unanimously.
Nothing has altered since then. The argument for such cases to be held before specialist judges rather than juries, who cannot begin to understand the complexity of the issues in front of them, is as strong as ever.
Perhaps Carney, a Canadian, an outsider who can see things for what they really are, may make the difference. He’s made his comments about the Lloyds traders. Now he should demand punishment and, if that’s not possible, urgent change. He has a window of opportunity; his stock is as high as it will ever be. For the sake of the City’s future, for the good of the economy which so depends upon an honest, vibrant financial services industry, Carney ought to seize this moment. We cannot go on having many more like it.