David Cameron's Day of Reckoning speech, which has irked the Financial Times so much, sounds quite a powerful call to get the bankers in the dock.
He is absolutely correct that
1. our regulatory system was ineffectual.
2. as with 7/7, we need to know what happened so it does not happen again.
3. if people have done wrong they should be punished.
It is plain common sense.
So why is it not happening?
Why is the FT so against the pretender to the throne?
Millions of people will be thrown onto the dole queue next year. Why? Because the banks abused their position of creating money for a stable economy and instead gambled all the money they could create on "earning" a quick buck from derivatives.
Now to me that is an obvious violation of Section 4 of The Fraud Act 2006.
And that's why the FT is so riled by Cameron.
Sending bankers to jail is the only way they will learn they cannot and will not screw the ordinary British public again!
David Cameron: A day of reckoning
David Cameron MP, Monday, December 15 2008
When the financial crisis happened, I made it clear that the Conservative Party was ready to put aside party differences to help bring stability.
That's why we supported the recapitalisation of our banks.
I also said that we would not suspend our critical faculties over this Government's calamitous economic policy decisions - decisions that helped not only cause this crisis by encouraging government and personal debt to spiral out of control but could also make the recession deeper and last longer.
That's why we have set out a positive alternative, starting with immediate action to tackle the credit problems at the heart of the issue.
So, because the recapitalisation is failing, we've proposed a National Loan Guarantee Scheme to underwrite loans to businesses. The Government could and should take that action now, today. Every day it delays, the Government is making the recession longer and deeper.
We have also put forward a range of other measures that would help right away - including helping small businesses with their cash-flow by letting them defer their VAT bills. In the long term, we would take action to reduce debt - controlling future spending, making government live within its means and getting taxes down for good.
I am in no doubt that the greatest responsibility for this economic crisis lies with the Government. It is first and foremost a debt crisis and it was the Government that borrowed too much itself, and the Government that set the regulatory framework allowing others to borrow too much.
But this debt crisis is not just about the Government. Labour's economic policy mistakes were compounded by the irresponsible behaviour of individuals working in our financial services industry.
As I have argued many times, corporate responsibility and personal responsibility are essential components of my vision of greater social responsibility.
The financial services industry is a great industry and I want to do all I can to make sure the City of London recovers from the crisis and leads the world again. But that won't happen unless the world has confidence in the City. So because I want the City to succeed. Because of my belief in social responsibility. And, vitally, because part of our response to this crisis should be to stop the same thing happening again today I want to talk about the promise I made at our party conference in Birmingham a few months ago.
I said then that there should be a day of reckoning for those whose behaviour helped to bring about the financial crisis. A day when we would not flinch from spelling out the rightful consequences of irresponsible behaviour.
In part, this is a question of fairness. In the good times, some people working in the financial services industry paid themselves vast financial rewards - salaries and bonuses beyond the comprehension of most of us.
Now when it's all gone wrong, they have been bailed out by the taxpayer. Nurses and cleaners and teachers and many millions of others, working in every part of our economy they will foot this multi-billion pound bill.
Well: on behalf of the taxpayer, on behalf of the nurse on £20,000 a year, on behalf of the cleaner on the minimum wage, on behalf of working families worrying this Christmas like never before about what next year will bring I say it is fair and reasonable that those responsible are held to account for their behaviour and that we show clearly that in this country, there is not one rule for the rich and a different rule for everybody else.
Fairness also means understanding that the whole financial services industry has had its name blackened - and wrongly. Over a million people work in this industry, most of whom are honest and hard working. It's in their interests too that we make sure we root out any wrongdoing that may have happened, whoever is involved, however high or well-connected they may be.
That's what's happening in America. At the beginning of 2008 the chairman of the US Securities and Exchange Commission warned: "Any hedge fund or other large investor who thinks they'll get away with dishonest and unfair dealing in our markets will face the concentrated resources of a relentless SEC."
In October, members of Congress came together, across party lines, to demand from Attorney General Michael Mukasey that those responsible for financial wrongdoing are brought to book. So the SEC, the FBI and district prosecutors are right now actively investigating large financial institutions with a view to bringing about civil and even criminal actions.
No stone is being left unturned. The FBI has allocated 177 agents to this and has launched as many as 1,500 "mortgage related" investigations. The SEC has more than fifty pending subprime probes. No company has been immune. Washington Mutual, Freddie Mac, Fannie Mae, AIG - some of the biggest names in America's financial industry are being investigated. And four executives, from Bear Stearns and Credit Suisse, have already been charged with fraud for misleading investors.
American investigations are focusing on three different types of fraudulent activity. Mortgage fraud - which typically involves misrepresentation or deceit to fund, purchase or insure a mortgage loan. Insider trading - where individuals have sold shares on the basis of inside information. And misinformation - the failure to disclose the value of mortgage-related securities and other investments.
In the home of capitalism, a sense of fair play is dramatically in evidence. Why aren't we doing the same in Britain?
Doctors who behave irresponsibly get struck off. Bankers who behave irresponsibly should face professional consequences. And, for sure, if anyone is found to have behaved criminally they must be prosecuted. Of course, this requires clear evidence of wrongdoing. But that doesn't mean we should sit on our hands and say it's all a failure of regulation. Are the Government seriously saying that nothing untoward could have happened over here? How can anyone believe that in the worst financial crisis of our lifetime no proper and thorough investigation needs to happen? After all, we know the same things went on here as in America.
We know there is mortgage fraud. In March the Association of Chief Police Officers estimated that it resulted in annual losses of £700 million.
We know there is evidence of possible insider trading in the UK markets. The FSA have found evidence of "informed price movements" - which indicate possible market abuse - before nearly one-third of takeover announcements last year.
And we know companies invested in securities they didn't understand. Last month, leading QC Amanda Pinto said: "There are many cases of misconduct that the FSA has pursued as regulatory breaches where the evidence suggests that these offences are both substantial and criminal, such as fraud and misleading conduct. These cases could be prosecuted in the criminal courts, yet the FSA chooses to deal with them as if they were simply regulatory infringements."
So to send out the right message about our country's values to help stop this crisis from happening again and to help restore the City of London's reputation I believe it is now vital that investigations are vigorously pursued to their appropriate conclusion. And the fact that the Prime Minister has not been urging our authorities to pursue financial wrongdoing like in America is in my view, a failure of moral leadership.
I do not want this party to duck the issue. In 1980, it was the Conservative Government that made insider trading illegal. It was this party that first called on wealthy non-domiciles to pay their fair share in tax. And over the past few years it is this party that has consistently argued for greater corporate responsibility.
For me, responsibility is the most important value at the heart of Conservatism. But responsibility must be promoted, policed and enforced. That means clear rules of behaviour and the right incentives to create a culture of responsibility. It means effective policing of these rules. And it means that when the rules are broken, you must punish people - not just because it is right, but to help deter others.
That's what I have consistently argued for in our fight against crime and anti-social behaviour. I don't see why financial crime should be any different. We should treat the richest people in our society the same as everyone else.
So how should we go about promoting, policing and enforcing responsibility in the financial services industry?
The first step is to establish clear rules of behaviour and introduce the right incentives to create a culture of responsibility. We need real and substantial change here. In the past, losses were disguised, debts kept off balance sheet and loans offered to those who couldn't afford them.
To change this, government must introduce the right rules and frameworks. That's why I have asked Sir James Sassoon to undertake a comprehensive review of the tripartite regulatory structure. And that's why we will introduce a new Debt Responsibility Mechanism, plugging the hole left by Gordon Brown's disastrous decision of a decade ago to leave the overall level of debt in the economy completely unsupervised.
We will instruct the Bank of England to write regularly to the FSA, setting out its concerns about the sustainability of the level of debt in the economy. The FSA will then be obliged to take that view into account when setting the amount of capital individual banks must hold. If this had been in place over the last ten years our banks would not have become so fragile - and taxpayers' money would not have been needed to recapitalise them.
But creating the right culture of responsibility isn't just about more rules - it's also about creating the right incentives. For the past decade, the incentives have been distorted. The bonus culture encouraged short-term risk-taking instead of rewarding the long-term interests of shareholders and the public. Many bonuses were also calculated using return on equity rather than return on overall assets.
This created a massive incentive to borrow - by financing with debt rather than equity bankers could increase their returns on a small equity base and therefore increase their bonus. That's why at our Party Conference this year we set out proposals on reforming bonus structures, so the FSA has the power to make institutions that use massive bonuses to promote short-term and reckless gambles hold more capital to offset their higher risks. This would create strong incentives for managers and shareholders to design more responsible pay structures. And it should enable our institutional framework to help control excessively risky lending and dampen any future debt-fuelled asset price booms.
The second step in enforcing responsibility in the financial services is to give the principal policing agent - the FSA - the teeth to do its job properly. Despite their business models being completely unsustainable, the FSA appeared to stand by as Northern Rock and Bradford and Bingley ran themselves into the ground. Of course, bankers devised such new and complex financial instruments that not even they - let alone anyone else - really knew what was going on.
I welcome the FSA's own internal review and the determination of its leadership to learn the lessons. But what about this Government? Gordon Brown now says he's "angry...at the behaviour of banks because we did not know what was actually happening behind the scenes." But he's the one who set up the FSA in the first place - what changes is he going to make?
Because surely, the main change has got to be this. The FSA needs the best possible staff at its disposal so it can keep up with the brightest minds in our financial services. So it's only right - and fair - that, as we have proposed, these FSA employees are paid for by an increased levy on the City. And we should also introduce a system similar to the Shareholder Executive, so that banks send their best people to the FSA on secondment.
PUNISHMENT AND DETERRENCE
The third and perhaps most important step we must take in enforcing responsibility in the City is to make sure that when rules are broken, and culprits are found, they are properly punished. That's only fair - because those responsible must be held to account. And it's only sensible - because we will never stop this from happening again if we send out a signal that you can take risks, bring banks down, be bailed out by the taxpayer and nothing much will happen.
Justice is only effective when it is seen to be done. For the thug locked up for mugging people on the streets. To the highest executive in the biggest firm who's been swindling the books.
Around the world, bankers sat up and took notice not when global finance ministers issued some new communiqué on unauthorized speculative trading - it was when Nick Leeson was caught and put behind bars. And corporate America really understood the consequences of dodgy accounting not just when Enron collapsed - but when Jeffrey Skilling was given a twenty-four year jail sentence.
The problem in Britain today is that there just doesn't seem to be the will to see appropriate justice done at the highest level. Not from the Government. And not much will evident in the FSA either. Despite the fact that the FSA itself admits: "that the prospect of criminal proceedings acts as a significantly greater deterrent to those contemplating misconduct than does a fine of almost any size" it still prefers fines and mediation to the full application of the law.
I welcome the recent comments by Jamie Symington of the FSA that they would "bring more criminal prosecutions in the future". But the truth remains that in the last twelve months, they have only brought four cases to trial. And only one of these has any connection to the current crisis - a mortgage advisor who lied and submitted forged documents in his application to become an FSA approved person.
The other three all involved incidences of insider dealing that occurred before the debt crisis. This is not, at root, about more legislation.The laws are already there. Rather, it's about implementation and law enforcement.
Of course, the Serious Fraud Office has an important part to play too. But its effectiveness was called into question earlier this year in a review conducted by American prosecutor Jessica de Grazia. This has to change. The FSA and the SFO should be following up every lead, investigating every suspect transaction. And the government should be urging them on, because we need to make it one hundred percent clear: those who break the law should face prosecution.
I have consistently made it clear that I will not pull my punches when it comes to holding this Government to account for their colossal failures in economic policy. But neither will I rein back from holding to account others who bear responsibility for our current economic difficulties.
We all know there was poor decision-making and some reckless activity in the City of London. But we do not know if there was wrong-doing and the nature of any wrong-doing, because we haven't examined the issue thoroughly in the way the Americans are doing.
The US response has been clear. To root out any wrongdoing, and punish it proportionately. Our response has not been so clear. There seems to be neither the will - nor the means - to bring those who may be responsible for wrongdoing to account, despite the fact that it is scarcely plausible that the things that happened in America did not happen here.
I believe that's wrong. If we're going to build a strong and fair society, individuals must carry the consequences of their own actions - regardless of who they are, where they come from, and what their background is. There cannot be one law for the rich and another for everyone else.
And our economy cannot prosper if neither the public nor investors have confidence in its integrity and honesty. That's why when I see young families and old pensioners, nurses and teachers, entreprenuers and factory workers who have not only been confused by this debt crisis but scared stiff about what it means for their homes, jobs and livelihoods, when I see working people paying through their taxes to bail out a banking industry which has imploded under the weight of its own irresponsibility, I believe we owe it to them to investigate thoroughly what exactly happened in this financial crisis, and to do all we can to stop it happening again.
Through new rules and incentives to create a new culture of responsibility. Through making sure these rules are enforced by regulators that not only have the power, but the will, to do the job. And through making sure that where any wrongdoing may have taken place, it is found and appropriately punished. That is a vital part of creating the conditions for the long-term prosperity we all want to see."