TRAINSPOTTER: Currency collusion scandal – the Great Global Bank Heist comes to South Africa
- Richard Poplak
- 16 Feb 2017 11:31 (South Africa)
Allegedly. Mustn’t forget to say allegedly. By RICHARD POPLAK.
So here’s where President Zuma’s Bell Pottinger-drafted PR bilge has landed South Africans: White people love banks; black people hate banks; the state must develop its own bank(s) that will be owned by, and lend to, black people. (By which he means the Gupta Family)
As it happens, this scenario skimps on a few details. If there’s one axiomatic condition that black and white folk the world over can agree upon, it’s that banks are not your friends. Whether it’s the robo-teller nudging you into a two-hour telephonic death spiral; the usurious fees and interest rates slapped on almost every “financial product”; the small matter of the near incineration of the global economy – find someone outside of a bank who likes banks, and I’ll eat my bank card. (And yes, while financial institutions act like they hate all people, they certainly seem to hate black people worse. The history of the financial sector is also the history of racial economic disenfranchisement.)
Absa, in other words, must fall.
But we’ve been there before, haven’t we? During the Great Recession, when the world’s most powerful countries were finally forced to deal with the wanton lunacy of the financial sector, they instead coined the term “too big to fail”. (Never has anything been more misnamed than the Great Recession. When someone comes into your home and steals all of your shit, is the resulting financial hardship accorded a fancy business-school term? Nope. It. Was. A. Robbery. Finish n klaar.) The American government used taxpayer money to bail out the very institutions that caused the crisis in the first place, and whipped together something called the Dodd-Frank Act, a spaghetti tangle of regulation that ensured a healthy financial future for… corporate lawyers trying to figure out the Dodd-Frank Act. Eric Holder, President Barrack Obama’s Attorney-General, never met a bank that he wouldn’t tummy-tickle into a weak settlement; the administration refused to discipline insanely risk-addicted executives, or so much as wrist-slap a random clerk with a bank logo on his or her nametag. (Now, the Trumpians have promised to kill Dodd-Frank. Good times ahead, if you happen to be a banker.)
Meanwhile, in Europe, banks were “stress tested” in order to find out whether they could withstand more than two £10 withdrawals at a time, and were cajoled by regulators into actually keeping some money in the vaults. (They generally try to avoid increased capital requirements, because the whole scam is premised on using “liabilities” – a.k.a. money deposited by civilians for safekeeping – to buy their own stock, spiking the share price and further enriching execs.)
And that leaves unmentioned other bank heists that have received less airtime. Take, for instance, the Libor scandal, during which financial institutions turned out to be fraudulently inflating or deflating their interest rates in order to milk greater profits from trades, or to lie about how creditworthy they were. (Libor is an average interest rate calculated daily after the big global banks submit their individual rates. The whole matrix operates on it, and yet it’s entirely based on trust.)
The system is so rotten, and yet so entrenched, that this country – nay, any country, really – is gaslighted into thinking that there’s no alternative, and that we’re destined to drift into whatever oblivion awaits us on the far side of capitalism’s Death Star.
How has South Africa, led by the former revolutionaries of the African National Congress, dealt with all of this institutionalised corruption? They have fearlessly attended banking breakfasts, received glowing assessments from the likes of Goldman Sachs, and accepted board positions and other sinecures as a reward for services rendered – all of this while the financial sector mirrored and enhanced the country’s racial economic disparities. Recently, President Zuma has whined about the banking “cartels”, and promised in his State of the Nation Address to radically transform the sector.
Said the president: "Last year‚ I signed into law a provision to criminalise cartels and collusion and it came into effect on May 1. It carries jail sentences of up to 10 years. We are now stepping up our actions to deal with the other challenges‚ namely economic concentration. In this way we seek to open up the economy to new players giving black South Africans opportunities and make it more dynamic‚ competitive and inclusive. This is our vision of radical economic transformation."
But that’s because the big local banks famously unbanked his own bankers. The dumbest of his henchmen, Minister of Mineral Resources Mosebenzi Zwane, even went so far as to claim that, “Cabinet established an inter-ministerial committee to consider allegations that certain banks and other financial institutions acted unilaterally and allegedly in collusion, when they closed bank accounts and terminated contractual relationships with [then-Gupta owned] Oakbay Investments.”
That was, of course, a lie. But his intention was no secret: to replace the institutionalised corruption that benefits Whitey McWhiteface and empowered friends with institutionalised corruption that would benefit his masters.
If you’re looking for good guys, move along – nothing to see here.
Which is all to say that South Africans appeared unsurprised when the Competition Commission on Wednesday stated that it would be prosecuting 17 local and international banks for, among other alleged crimes, colluding to fix the price of our beloved ZAR.
The commission, an institution that in normal circumstances bends over backwards to protect collusion and price fixing, allegedly of course, put it this way:
“The [banks] had a general agreement to collude on prices for bids, offers and bid-offer spreads for the spot trades in relation to currency trading involving US dollar/rand currency pair. Further, the commission found that the respondents manipulated the price of bids and offers through agreements to refrain from trading and creating fictitious bids and offers at particular times.”
Translation: Since 2007, almost all of the big-name financial institutions in this country allegedly huddled together to rig the currency rate – so that they got richer, and South Africans got fucked.
How did they do this? They hung out in trader chat rooms, faked trades to rig the supply and demand of the rand, and scheduled specific times to either trade or hold off from trading in order to manipulate the price of the currency against the dollar.
The Competition Tribunal will soon be graced with a line-up of the world’s most notorious syndicates, including the local plutocrats at Investec, Standard Bank and Absa, and the international megas at Bank of America, Merrill Lynch, BNP Paribas, JP Morgan Chase & CO, JP Morgan Chase Bank, Standard New York Securities, HSBC, Standard Chartered, Credit Suisse Group, Commerzbank AG, Australia and New Zealand Banking Group, Nomura International, Macquarie Bank, Barclays Capital, and Barclays Bank.
To be clear, no bank has yet been found guilty – the Competition Commission is an investigative body, while the Competition Tribunal functions as a court. But it’s worth keeping in mind that this alleged scam has been perpetrated pretty much everywhere these institutions operate, and many of the alleged offenders have already paid $10-billion worth of penalties for currency rigging (which exceeds the $9-billion they were fined for Libor). But even $10-billion doesn’t count as a mortal wound on their combined balance sheets, so it will be interesting to see how all of this plays out in the local context.
So far, so good, if you happen to be a banker. The 17 institutions face fines of up to 10% of their annual turnover.
Bankers will claim that this hideous, communistic torture tactic amounts to annulling roughly a year’s worth of hard-earned profits, and is equivalent to dropping a newborn human infant into a vat of boiling oil, and pouring the resulting concoction into a volcano.
But ultimately, the fine is a penalty imposed on the bank’s shareholders, some of whom are executives, certainly, but most of whom are regular South Africans – black, white and in between – who hold index funds and pension plans as retirement security. No suits, middle managers or actual colluders have yet been charged; not a single cent’s worth of fraudulently earned bonuses will be recovered; not a single day’s worth of jail time is likely to be served; not a single operating licence will be revoked. Oh, and while snitches end up in ditches, they don’t in this game: Absa squealed to the commission early about its involvement, and instead of being shut down on the spot, Maria Ramos and Company appears to have whistleblown its way into a softer penalty.
In other words, even when Absa should pay, Absa doesn’t pay.
The Democratic Alliance, however, has identified a conspiracy in the timing of the prosecution. Said DA spokesman on economic development, Michael Cardo:
“The fact is that there is a cabal of ANC ministers in the Cabinet‚ clustered around the Gupta-lackey‚ Mosebenzi Zwane‚ that wants to do battle with the banks‚ regardless of the economic fallout.”
As if banks need Zwane’s help to precipitate “economic fallout”.
And while a conspiracy may indeed be afoot, it doesn’t mean that the prosecution should be stalled until the DA gives us the all-clear, and nor does it mean that the aggrieved, marginalised financial institutions should receive any breaks just because the president doesn’t like them any more. That the Zupta syndicate is led by a cabal of gangster scum doesn’t erase the fact that some of the world’s most august financial institutions are led by the exact same species.
Let’s insist that our president goes to jail, while simultaneously insisting that some bank executives do time for stealing South Africa. Now that’s a banking transaction that South Africans wouldn’t mind making. DM
Photo: New South African bank notes featuring an image of former South African President Nelson Mandela are displayed at an office in Johannesburg January 17, 2013. REUTERS/Siphiwe Sibeko