21 November 2015

Auditors put money before responsibility ………… surely not!

Earlier today, Radio 4's 'Money Box' programme aired a fascinating piece on the part played in the various banking collapses of 2007/8/9 by the various auditors who signed off banks' accounts. KPMG came in for a lot of stick and the suggestion was that KPMG may have buckled to client pressure in giving accounts a rosier gloss than supported by the facts. Unsurprisingly, an HBoS Director, Paul Moore (one time Head of Risk), tried to raise his concerns and was fired for his trouble.

At the same time that self-style City Regulators are about to report on the financial crash, Moore is also about to publish a book which may be a more accurate description of how the bankers behaved.

But none of this surprises me because exactly the same situation existed in Somerton back in 2008/9 when I lodged an objection to Somerton Council's accounts. Having looked through the Council's recordss, it was obvious to me that Somerton's problems had their roots in decisions made by the Council some years previously. But all of those previous year's accounts had been prepared by the Council's accountant and signed off by the Council's auditors. Importantly, when the auditor was examining the Council's accounts for 2008/9, the auditor refused to consider previous years' accounts as they had been signed off (by the auditor themselves) and were therefore closed. How convenient.

Will the same thing happen with KPMG and their colleagues? Probably.

12 November 2015

The pressure to conform……..

I watched a repeat of 'The Lance Armstrong Story' on BBC4 last evening and I found it probably more depressing this time than I found it the first time around. Armstrong's socio-pathic self-belief was frightening to behold, particularly when he went on Oprah to admit his guilt. He did that with exactly the same determination that he applied to his serial cheating and it left me with the belief that he had no feelings of guilt whatsoever. Admitting guilt, in his eyes, was just one more step down the road to recovering his reputation.

What I also found somewhat frightening was the manner in which he was willing to threaten, damage and destroy people's lives if they presented any sort of threat to him. That in itself made it all the more remarkable that a small number of individuals tried repeatedly to expose his activities at great personal cost. And it made me think about the position of Lord Coe with regard to the 'state sponsored doping programmes' which are now in the news.

In August, just 3 months ago, Lord Coe dismissed the Sunday Times/ARD-WDR article about the IAAF failures regarding drug offences as a 'declaration of war on athletics' and the IAAF sought to dismiss the article and its contents. Today we know that the information was accurate and well researched and has led directly to the exposure of the 'state sponsored doping programme' organised by the Russian Federation and reminiscent of the East German programmes of the 1970s and 1980s.

And my question is, why does Lord Coe attack the whistle-blowers when it is pretty clear that doping programmes are endemic in athletics (and other sports)? I cannot imagine that Lord Coe was unaware of the suspicions and possibly also had better information than the Sunday Times yet he chose to attack those he saw as 'detractors'. Read a pithy commentary on Lord Coe's position here.

But Lord Coe isn't the first 'leader' who seems unwilling to lead as we have seen with regard to Jimmy Savile, delinquent bankers, corrupt politicians (both local, national and international), peadophile priests, the list goes on and on and in every case, those in positions of power choose to protect the edifice of the establishment rather than recognising some common moral compass.

Many years ago, when I was at junior school I watched somewhat helplessly as a friend of mine was beaten up in the school playground. Being something of a weedy child I saw that I would take a beating myself if I tried to intervene so I went to get help from the available 'authority figure', a teacher on playground duty. The teacher in question stepped in and sorted the situation out and then turned on me and told me not to 'tell tales'. To say that this left me hugely confused is an understatement but it seems to sum up the adult world rather neatly. Conform, don't rock the boat and definitely don't expect to be thanked for sticking your head above the parapet. Somerton tried to teach me that and, possibly stupidly, I still reject the lesson.

14 August 2015

The Devil Incarnate?

A couple of days ago, I listened with interest to the latest twist in the Labour Party Leadership Election saga - that the election should be postponed because too many people were joining the party and there were doubts about their intentions. What a great story or, more accurately, what a great spin. And it only serves to illustrate the fears that the Labour Party harbours about Labour's electability, should Corbyn become leader. But, at the same time, this illustrates the challenges facing any politician who espouses 'social' values.

In this context, its important to make the distinction between 'social' values and policies and 'socialist' values and policies. Socialist policies lie rooted in the 1960's and 1970's where labour was locked in an idealogical struggle with the representatives of capital and, in that struggle, neither faction truly benefited and everyone lost, particularly the broad swathe of the population who had to endure the three day week and the Morris Marina, both products of the struggle.

Today it's reasonable to suggest that wider society is better off (setting to one side the disparity in wealth between the haves and the have nots) and, as a consequence, society should be better able to invest in social policies, such as those espoused by Corbyn. But the political right are fearful of concepts such as 'social responsibility' and will do anything to denigrate anyone who promotes such values and herein lies the threat to Piers Corbyn.

Corbyn isn't a wide-eyed Trot but the right (including Yvette Cooper, Liz Kendall and Andy Burnham) would want you to believe that he is. The right suggests that Corbyn seeks a return to the confrontation of the 1960s and 70s and they need to represent him that way in order to move attention away from his 'social' policies.

If nothing else, Corbyn represents a return to dialogue and discourse, something that has been sadly lacking from the British political scene for the past three decades. The dominant political view since Thatcher is that unshackled free market capitalism underpins everything. Corbyn questions that wisdom, and rightly so, particularly in light of the financial crash of 2008. In that regard, Corbyn observes that nationalisation was the only thing that saved the banking sector from total collapse so maybe selective nationalisation might not be such a bad thing after all.

Privitisation hasn't been the roaring success that some might wish to suggest. 30 years after it was privatised, BT still owns much of the telephone infrastructure in the UK. Yes, there are other service providers (Vodafone, Orange, 3, EE, etc etc) but they all sit on top of BT's infrastructure. The same goes for the rail network and, most interestingly, for London's municipal administration. St. Margaret so loathed the Greater London Authority that she dismantled it, only for it to reappear in much the same form under the Mayor's office.

Speaking personally, I hope that Corbyn gets the chance to have an intelligent debate about the nature of our society, with particular attention to investment in our social fabric. The profit motive appeals to the basest of instincts and diverts capital away from investment and, yes, Corbyn will question the profit motive and scare the hell out of the City but maybe that is a good thing. Maybe our society, including industry and investment, would be better off were we to recognise that some infrastructure needs to be owned and run by us, for our own good. Maybe there is still a place for public health, public transport, public housing and public education and maybe Corbyn will remind us of that.

16 July 2015

The spirit of Thatcher……...

'I blame Margaret Thatcher' is a favourite phrase of mine, used regularly for comic effect but with a vein of belief running through it. But I can't blame Margaret Thatcher for the fiscal rape of Greece, responsibility for that lies with the various EU leaders and lenders who are going to make the Greek nation pay for the mistakes of others.

Alexis Tsipras seems to me to be a principled leader with social, rather than socialist, values and, having been beaten into submission by the Eurozone bankers, he did make one significant statement. Tsipras claimed, and time will tell if this is true, that he had saved Greece from a 'sell off' of public assets and here is the link with the 'Spirit of Thatcher' which itself is rooted in the ideas expressed by Adam Smith.

At the start of the Industrial Revolution, Smith gathered together and organised a mercantile view of societies, a view which today is expressed by 'deregulated and unfettered free-market capitalism'. At root, Smith suggested that, to realise its true 'value' (in an entirely mercantile sense) everything should be owned by an individual, rather than a communal, entity. For example, 'common land' could not be exploited to its fullest (mercantile) potential until it was delivered into some form of individual ownership. Smith's proposal was that the 'inertia' caused by communal ownership i.e. many entities having a say, restricted the mercantile exploitation of any commodity. And, as we can see today, he was absolutely right. Couple Smith's core proposition with Thatcher's view that 'there is no such thing as society' and you have a complete absence of 'social responsibility' because 'collective responsibility' has disappeared, along with 'collective ownership'.

When your read a poisonous rag like the 'Daily Mail' you would think that the Greek people are a feckless, lazy, stupid, irresponsible nation but that view is far from the truth. The reality is that Greece has a long and illustrious history which has had a huge impact on social and cultural development throughout western societies. But what we see today, a debt laden society struggling to survive, is much more a creation of fiscal vested interests who were only too willing to lend far too much money to Greece when the 'good times were rolling'. And then, when confidence in 'the good times' finally ebbed and the reality of the global 'sub-prime' stupidity dawned on everyone, the reality that Greece could never repay the money it had been loaned finally became apparent. And, as is usual, the lenders are never responsible, only the borrowers, and the lenders send in the debt collectors who grab any assets they can lay their hands on, which brings me back to Tsipras' comment about avoiding a sell-off of public assets.

In the aftermath of the Eurozone's crass lending, now we have an attempted asset-stripping of the debtor nation. Grab anything that is in public ownership and sell it off, in the style of 'fire sales', to get anything you can for it and, usually, far, far less than it is worth. And through this cycle of irresponsible lending and resultant debt, do you realise Adam Smith's view of a world where everything is owned by some individual entity and through this, people and nations no longer think collectively in any socially responsible manner. The devil will, indeed, take the hindmost.

13 July 2015

The hypocrisy is breath taking.

For the last few weeks we've been presented with the spectacle of the Eurozone leadership beating the shit out of the Greeks. Its just a shame that the selfsame institutions didn't act so tough back in 2007/8. At that time, the banking and financial institutions around the world were about to go down the dumper, all because they had put their own interests before those of the wider global economy. Venality and greed ruled the day and when it all went belly up, what happened? Taxpayers around the world stepped in and bailed them out. Not only that, the people who led the global economy into the mess walked away, usually with millions of £/$'s.

Just to remind you, have a look at the news headlines from the USA in September of 2008  and a review of the UK situation at the same time.

So I watch the cavortings around the Greek crisis and am breath-taken at the hypocrisy of the Eurozone leadership. Obviously its way, way easier to kick the shit out of Greece than it is to jail the idiots, many from the Eurozone itself, who handed Greece the money, with assistance from Goldman Sachs and probably many others.

12 July 2015

The usual suspects………...

As the Greece 'debt crisis' slowly unravels another story caught my eye and I have to admit I wasn't surprised by its contents. But, before I explain, let me repeat an old joke about accountants which goes:

A business wants to borrow money and the bank wants to make sure that the lending is secure so asks to see a summary of the business's accounts. The owner of the business goes to see his accountant and asks 'How do the accounts look?' to which the accountant answers, 'How do you want them to look?'.

So, back to Greece and a story in the Independent about Goldman Sachs (who else?) who reportedly made hundreds of millions of $ whilst advising Greece on their entry into the single currency. It seems that Goldman Sachs may have hidden the truth about the Greek economy behind a wall of complex deals allowing the Greeks to enter the single currency which, in turn, allowed Greece to borrow more.

Now, there are two sides to this story, if it proves to be true. On the one hand, Goldman Sachs may have lashed up some sort of story for Greece (which I am sure they will argue was completely within the rules) but the bigwigs in Brussels and the European Central Bank should also have done their due diligence and spotted the story-telling, but they didn't.

So who is the real author of the present shit-storm? I'd suggest that its the banking institutions and advisors who all make humungous amounts of money without any accountability. Sure, we all need to live within our means but the institutions need to play their part and regulate for stability. Instead of which, as before, making money in the short term trumps longer term stability. Greed and venality again.

29 June 2015

The benefits of bankruptcy……….

I'm not a financial expert but I have always understood that declaring 'bankruptcy' was a mechanism which allowed a failed mercantile entity (let's call it Widgets Plc) to negotiate its way out of insurmountable debt. I believe that it works something like this: Widgets Plc trades in its marketplace and either takes on too much borrowing or trading conditions change - either way, Widgets finds itself unable to pay its bills. At that point one, some or all of the creditors (people or businesses who have traded with or lent money to Widgets Plc) move in and force Widgets into bankruptcy in order to realise  some asset value in order to settle debt. Alternatively, the bankruptcy process can force Widgets into a restructuring which usually involves cost cutting, redundancies and refocussing of business activity. This second route is intended to allow some part of the reconstructed Widgets to continue to trade, but profitably, in order to pay off some or all of the debt at some future point.

But key to forcing bankruptcy is timing - lenders or trading partners need to act responsibly and before debt has reached a point where Widgets is guaranteed to collapse completely. In many cases, this doesn't happen and, when bankruptcy is declared, the assets realise far less than the debt meaning that, in the most extreme cases, creditors get only a fraction of what they are owed. Seen this way, bankruptcy can be seen either as a punishment for poor business methods or, on the other hand, as punishment for poor or inappropriate lending.

So, why does this subject interest me right now? The simple answer is 'Greece'.

From where I sit, Greece is a victim of both excessive lending and borrowing. Everything was fine until the global financial crisis of 2007/8 which was caused, not by the Labour Party (as David Cameron and the Tories would have you believe) but by the irresponsible lending practices of banks and banking institutions around the world. When the party stopped, everyone had a hangover and recovery has been both painful and slow. For those economies with something to sell or trade, recovery has been possible. Not so for those weaker economies, like Greece, who were lent money without thought or consideration of their ability to repay.

And now Greece wants to declare bankruptcy which, in advanced economies is a way of restructuring debt but, in this situation, bankruptcy will crystallise the level of debt and it may be that some of the lenders will not be able to survive the losses.

I don't know enough to predict an outcome but, if the Greek people are forced to endure more 'austerity' I can easily see a rise in Greek nationalism where wider European institutions and countries are blamed for the pain. And the Islamic State will look to exploit such an opportunity.

All because the banks can never be blamed for their own mistakes.