Another Chapter Out of the Bad Banker Playbook

Then put your little hand in mine
There ain’t no hill or mountain
We can’t climb

I got you babe
I got you babe

– Sonny & Cher

Rise and shine folks, it’s Groundhog Day.


And so we wake up (or in the case of us Antipodeans, go to bed) as another summit to fix something or other gets underway.

This time, Germany, Italy, France and Spain meet in Rome on Thursday to decide how to get blood out of a stone. Germany wants more reform. The others want more money. Good luck with that.

The only solution these bureaucrats / technocrats / politicians have stumbled upon is a way to indefinitely prolong the crisis. Just plan rolling summits…keep dangling the carrot in front of the market and hope the speculative / dumb money plays along.

The promise of an imminent ‘fix’ is always enticing for speculators. It’s a chance to make some money for a few days before reality sets in.

But, like you, we have euro fatigue. We couldn’t give a hoot what the bozos come up with at the summit. Only a debt union can take the pressure off Italy and Spain’s economies, and that is just not going to happen.

We also have ‘banks behaving badly‘ fatigue. Regulators busted British bank Barclay’s for manipulating interest rates. But is anyone really surprised? It’s just the tip of the iceberg. The industry is full of crooks.

All the regulators did was give the bank a slap on the wrist. And opening up the bad banker playbook, the bosses offer words of contrition and pledge to forgo their bonuses for the year. How generous.

Let’s be honest here. It’s not the bankers that are the problem. It’s the system. Central banks manufacture money 24/7. The big global banks, being lucky enough to surround the bank in the middle, get first use of this new money…or we should say, credit.

The banks are the distributors of global credit. They siphon off huge wads of it as it travels to the outer reaches of the economy. When the flow of money and credit is so strong, is it any wonder that some stray into manipulation?

To the perpetrators, the act of manipulation itself doesn’t seem so bad. We’re sure they see it as a victimless crime. It involves no violence or obvious coercion, which makes it all the more insidious.

It reminds us of something Diggers and Drillers editor Dr Alex Cowie sent around the office earlier this week. It sums it all up, really.



Greg Canavan
for Markets and Money

From the Archives…

The US Deficit of Deceit
2012-06-22 – Greg Canavan

How Nice to Have Friends At the Fed
2012-06-21 – Bill Bonner

Deep in the Stock Market Trenches
2012-06-20 – Murray Dawes

In Praise of the Eureka Rebellion
2012-06-19 – Dan Denning

What Could Possibly Go Wrong With Infrastructure Investment Bonds?
2012-06-18 – Dan Denning

Greg Canavan
Greg Canavan is a contributing Editor of Markets and Money and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to Markets and Money for free here. If you’re already a Markets and Money subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Markets and Money emails. For more on Greg go here.

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NAB employee
Great week for British banking. Channel 4 news reported late last week that RBS (the subject of an off-shoring core banking screw up lasting a week) that when they began their off-shoring venture, a member of staff wrote to his MP about his concerns of weakening expertise and elevated risk in pursuit of cost savings. He sited in his letter the now infamous NAB breakdown late 2009 as a direct example of the risks Steven Hester (CEO) was bringing to the U.K banking system. Hester was then brought before a Parliamentary enquiry where he alayed their fears. Roll on 16… Read more »
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