A New Low for High Finance

We know how the international financial sector plunged the world into crisis, by creating inflated security values that bore only a tenuous relationship with real (or, as they are modestly called, “underlying”) share values. A few recent examples show that the sector, operating according to its own peculiar logic, is now also creating problems for the fiscal regulations and civil laws of its host countries.

A former employee of UBS has reported 19,000 clients, who between them had €13 billion worth of secret accounts with the bank, to the American IRS. In return, he was supposed to receive a reward that would leave him financially secure. But because he “forgot” to include one of his principal clients on the list, a Swiss judge has given him a sentence for being an accomplice to fraud. If he had carried on with “business as usual” and kept the whole thing covered up, the Swiss authorities would never have had anything to complain about – but now they are handing him a sentence for having forgotten about just one client. The U.S. Treasury is still rewarding him for having reported all the others.

Another employee, also in Switzerland but this time of HSBC, has given another list of secret bank accounts to the French tax authorities. Officials in Switzerland are accusing the French government of receiving stolen money and have started to wrangle with them over morals. The French Budget Minister, Eric Woerth, neatly summed up his view of the situation with the question, “Who’s swindling whom?”

These two episodes lead us to one conclusion. Deceit and hypocrisy in the world of banking have become so normalized that it takes an extraordinarily attention-grabbing crime before anyone even notices the level of general criminality. In this topsy-turvy world, when national governments demand that their laws be respected, the financial sector’s response is to accuse those governments of violating financial law.

The financial sector, emboldened by its own attitude, seems to be drawing up a new kind of united front against the legislative policies of governments. Goldman Sachs and JP Morgan are threatening to leave London if Gordon Brown does not change his mind about the tax on bonuses. We’ve already had fiscal pollution and the toxic economy, and now the sector is openly attempting to contaminate politics. In this new struggle, the position of Washington will of course be a determining factor. Once again, the ball is in Obama’s court.