More shame heaped on the dismal record of banks
Just when you thought it couldn’t get any worse, here are the banks lining up like hungover drunks in the dock of the police court owning up to losing another few billion.
After wiping out an estimated $3trillion of the world’s wealth by investing in lousy sub-prime mortgages, they now stand exposed as suckers for investing in Mr Bernard Madoff’s massive Ponzi scheme.
Royal Bank of Scotland, HSBC, Santander, BNP Paribas and Nomura Holdings queued up to confess to losing some £4billion of their customers’ money.
It is all very understandable of course, once you realise that a banker today cannot be trusted with the office tea money.
Here was a man described as “a well-respected investment manager”, a former chairman of New York’s Nasdaq stock exchange to boot, promising to make big profits for anyone sage enough to hand over their cash.
The fact that Mr Madoff did not employ a reputable auditor and would not even talk to his clients about how he made money should have set alarm bells ringing.
But, hey, this guy was given the all clear by the Securities and Exchange Commission, the scrapyard rottweilers of Wall Street so he must be clean.
Except the whole Madoff enterprise was a con from start to finish.
Like all Ponzi scams, it seems he was paying out high returns from money coming in from new investors.
And like all such enterprises, it has collapsed under the weight of its own fraudulence. Madoff, himself, down to his last $300million it seems, ‘fessed up to his family who promptly turned him to the Feds.
As a result, a lot of trusting people and organisations – including some charities – woke up to find themselves a lot, lot poorer – if not wiped out, financially.
Questions are now being asked about the competence of the US regulators. But what about the banks?
Don’t they check anything before handing over the money? Don’t they ask any questions at all?
It seems not.
Madoff himself is reported as saying, “there is no innocent explanation”, Which must rank as one of the biggest understatements since Emperor Hirohito told the atom-bombed Japanese in 1945 “the war situation has developed not necessarily to Japan’s advantage”.
At least Barclays boss John Varley has had the grace to concede that the banks “have to be prepared to have the humility” to acknowledge they screwed up over sub-prime and say sorry.
Big of him, don’t you think?
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