How corrupt are the banks, finance, business etc?

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How corrupt are the banks, finance, business etc?

#1  Postby Clive Durdle » Feb 12, 2014 1:18 pm

Transparency international produces maps of how corrupt different countries are, US and Europe are not that bad on a world scale, compared with Pakistan or Sudan.

But is that misleading? The 2008 crash can be understood to be due to free marketeers persuading government - often quite willingly - to reduce rules.

If you look at lists of current legal actions against banks etc, on insurance, libor, trading etc, you get the impression that oh it is only a problem of some bad apples.

But is that the case? Are not these examples symptoms of a system issue?

What of externalities? How much CO2 production are these organisations financing? What polluting industries are they financing?

Has anyone measured the whole set of inefficiencies and unnecessary complexities of which corruption is but one symptom?
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Re: How corrupt are the banks, finance, business etc?

#2  Postby Blackadder » Feb 12, 2014 2:41 pm

Have you ever tried to do business in Pakistan or Sudan? I have. As well as in Western Europe and the USA. I have a personal view on corruption in these respective countries based on many years of experience.

Western countries don't even come close to the levels of corruption one encounters on a daily basis in places like Pakistan and Sudan. It starts at the airport arrivals area, where you have to pay a customs official to get your fucking suitcase back, and gets steadily worse as you work your way up towards the highest temple of absolute corruption, namely central government.

BTW I am not being starry eyed about Western countries. There is corruption there too. But your title implies all banks, all providers of finance, and all businesses (I have no idea what the "etc" is referring to) are corrupt to lesser or greater extent. I think that is wrong.

Quite what all of this has to do with CO2 production is puzzling. Producing CO2 is not currently illegal. In most developed countries it is monitored and controlled. Are you suggesting banks should immediately cease to provide finance to all CO2 producing industries? If they did, we'd be back in the Bronze Age faster than the Christian wing of the Republican party could get us there.
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Re: How corrupt are the banks, finance, business etc?

#3  Postby Clive Durdle » Feb 12, 2014 2:52 pm

http://blogs.lse.ac.uk/conductcosts/201 ... uct-costs/

This site has £148 billion of "conduct costs". What scale is the corruption in Pakistan and Sudan?

And on CO2 maybe the current weather is also a conduct cost?
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Re: How corrupt are the banks, finance, business etc?

#4  Postby Clive Durdle » Feb 12, 2014 2:56 pm

Mark Carney, the Governor of the Bank of England, has told a group of senior bankers that dealing with the legacy of past wrongdoing is becoming the most pressing issue for the industry.

Mr Carney is understood to have discussed the growing problem of conduct risks with Douglas Flint, chairman of HSBC, Peter Sands, chief executive of Standard Chartered, and Deutsche co-chief executive Anshu Jain, in a private session at the World Economic Forum.

It followed a lunch at the Davos event at which the Governor warned that financial institutions must not see fines for misconduct as “a cost of doing business” and said only “exemplary behaviour” would restore trust in the industry.

“While regulators will fix the mechanics of benchmarks in markets ranging from Libor to FX [foreign exchange], only private individuals and institutions can reform the behaviour that has made such changes necessary,” said Mr Carney at the lunch hosted by the CBI.

“Changes to the structure of compensation will better align the incentives of bank staff and their shareholders, but not every risk can be anticipated,” he added.


http://www.telegraph.co.uk/finance/news ... risks.html
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Re: How corrupt are the banks, finance, business etc?

#5  Postby Blackadder » Feb 12, 2014 3:11 pm

Clive Durdle wrote:http://blogs.lse.ac.uk/conductcosts/2013/12/11/a-review-of-conduct-costs/

This site has £148 billion of "conduct costs". What scale is the corruption in Pakistan and Sudan?

And on CO2 maybe the current weather is also a conduct cost?


The banks broke rules and cost their governments billions. They are being steadily called to account for their misdemeanours. Explain to me how that is corrupt.

What scale is the corruption in Pakistan and Sudan. I already explained that it is endemic in all walks of life in these countries.The rates of corruption are relative to the sizes of the economies concerned. You seem to want to compare absolute dollar values. No one even knows the actual GDP of places like Pakistan and Sudan because of their black economies.

WTF has the current weather got to do with banks breaking rules on mortgage lending and LIBOR fixings?
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Re: How corrupt are the banks, finance, business etc?

#6  Postby Blackadder » Feb 12, 2014 3:13 pm

Clive Durdle wrote:
Mark Carney, the Governor of the Bank of England, has told a group of senior bankers that dealing with the legacy of past wrongdoing is becoming the most pressing issue for the industry.

Mr Carney is understood to have discussed the growing problem of conduct risks with Douglas Flint, chairman of HSBC, Peter Sands, chief executive of Standard Chartered, and Deutsche co-chief executive Anshu Jain, in a private session at the World Economic Forum.

It followed a lunch at the Davos event at which the Governor warned that financial institutions must not see fines for misconduct as “a cost of doing business” and said only “exemplary behaviour” would restore trust in the industry.

“While regulators will fix the mechanics of benchmarks in markets ranging from Libor to FX [foreign exchange], only private individuals and institutions can reform the behaviour that has made such changes necessary,” said Mr Carney at the lunch hosted by the CBI.

“Changes to the structure of compensation will better align the incentives of bank staff and their shareholders, but not every risk can be anticipated,” he added.


http://www.telegraph.co.uk/finance/news ... risks.html


So the new governor of the BoE has called in the heads of the big banks to lecture them about risk behaviour. And this demonstrates rampant corruption, how exactly?
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Re: How corrupt are the banks, finance, business etc?

#7  Postby Clive Durdle » Feb 12, 2014 3:54 pm

If you have been fined for corrupt behaviour, is that not corruption? Just because one system has more effective controls doesn't stop it being corruption in both cases.

It is not obvious we are measuring this properly.
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Re: How corrupt are the banks, finance, business etc?

#8  Postby Sovereign » Feb 12, 2014 5:54 pm

I don't doubt corruption in Western countries at all but if you look at poorer countries, it's bad. I'm with Blackadder on this one. It's one of the reasons, I feel, that those countries can't get anywhere because they are too corrupt to accomplish anything of note. The way in which the corruption is carried out is a little different too. In countries like Blackadder mentioned, it's blatant and they don't care but in western countries, it's subtle and they try not to rock the boat so to speak but it didn't work.
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Re: How corrupt are the banks, finance, business etc?

#9  Postby I'm With Stupid » Feb 12, 2014 6:23 pm

It's called the Corruption Perceptions Index. It's purely a measure of how corrupt people perceive a country to be, not how corrupt it actually is. Most people don't see the idea of big companies paying for politicians' election campaigns to be corruption, for example, but it's basically private businesses giving politicians money in return for favourable legislation. What is that, if not corruption on a massive scale? Hell, they even recently changed the law in the USA (or it was certainly in a pipeline) so that politicians can keep the names of their donors a secret.
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Re: How corrupt are the banks, finance, business etc?

#10  Postby Sovereign » Feb 12, 2014 6:44 pm

I'm With Stupid wrote:It's called the Corruption Perceptions Index.


Thanks for that! :thumbup:
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Re: How corrupt are the banks, finance, business etc?

#11  Postby Clive Durdle » Feb 12, 2014 8:36 pm

http://www.unmillenniumproject.org/docu ... pFINAL.pdf

Sachs here comments it is an important factor, but possibly not that important.
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Re: How corrupt are the banks, finance, business etc?

#12  Postby I'm With Stupid » Feb 13, 2014 1:15 am

I remember this talk being good, talking about how the West facilitates corruption in developing countries.



Speaking of corruption:

The former mayor of New Orleans, Louisiana has been found guilty of corruption and charges that he accepted bribes, free trips, and other favors from private contractors hoping to secure work in the city after the devastating Hurricane Katrina.

Federal prosecutors asserted that Ray Nagin accepted payments worth $500,000 before the storm leveled portions of New Orleans in 2005 and through the city's recovery. The jury found Nagin guilty on 20 of 21 counts against him. He sat quietly as the verdict was read as his wife wept in the front row of the courtroom.


On a related note, McDonalds has just entered Vietnam for the first time after years of being denied entry. And guess who's got the franchise? That's right, the president's son-in-law. There's a surprise.

Yeah, as much as there is corruption in the West, it's nothing compared to living in a developing country. The government jobs that don't go straight to friends and family are basically for sale. And once someone has bought a job, they start using that position to recoup that money through bribes. People talk about it all being low-level stuff, but don't pretend the corruption isn't equally rampant at the top end. In 2008, when Vietnam entered the WTO for the first time, it had more outside investment than ever other ASEAN country combined. A few years later, it all dried up because money was disappearing on a colossal scale. Several government-owned companies and banks (run by friends and family of powerful people) went to the wall after dodgy investments, and yet I'm sure a lot of that money ended up in the hands of the people it was supposed to. Convictions followed, but in a country like this, convictions are largely politically motivated.
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Re: How corrupt are the banks, finance, business etc?

#13  Postby ScientificSkeptic » Feb 13, 2014 5:15 am


On a related note, McDonalds has just entered Vietnam for the first time after years of being denied entry.


They have "entered"? What will they do besides feed people cheap cheeseburgers?
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Re: How corrupt are the banks, finance, business etc?

#14  Postby Macdoc » Feb 14, 2014 9:48 am

But third world is chump change....

read and weep - long, good

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Call it the loophole that destroyed the world. It's 1999, the tail end of the Clinton years. While the rest of America obsesses over Monica Lewinsky, Columbine and Mark McGwire's biceps, Congress is feverishly crafting what could yet prove to be one of the most transformative laws in the history of our economy – a law that would make possible a broader concentration of financial and industrial power than we've seen in more than a century.

But the crazy thing is, nobody at the time quite knew it. Most observers on the Hill thought the Financial Services Modernization Act of 1999 – also known as the Gramm-Leach-Bliley Act – was just the latest and boldest in a long line of deregulatory handouts to Wall Street that had begun in the Reagan years.

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Re: How corrupt are the banks, finance, business etc?

#15  Postby Aca » Feb 14, 2014 10:13 am

Flipping the corruption myth

Transparency International recently published their latest annual Corruption Perceptions Index (CPI), laid out in an eye-catching map of the world with the least corrupt nations coded in happy yellow and the most corrupt nations smeared in stigmatising red. The CPI defines corruption as "the misuse of public power for private benefit", and draws its data from 12 different institutions including the World Bank, Freedom House, and the World Economic Forum.

When I first saw this map I was struck by the fact that most of the yellow areas happen to be rich Western countries, including the United States and the United Kingdom, whereas red covers almost the entirety of the global South, with countries like South Sudan, Afghanistan, and Somalia daubed especially dark.

This geographical division fits squarely with mainstream views, which see corruption as the scourge of the developing world (cue cliche images of dictators in Africa and bribery in India). But is this storyline accurate?

Many international development organisations hold that persistent poverty in the Global South is caused largely by corruption among local public officials. In 2003 these concerns led to the United Nations Convention against Corruption, which asserts that, while corruption exists in all countries, this "evil phenomenon" is "most destructive" in the global South, where it is a "key element in economic underperformance and a major obstacle to poverty alleviation and development".

There's only one problem with this theory: It's just not true.

Corruption, superpower style

According to the World Bank, corruption in the form of bribery and theft by government officials, the main target of the UN Convention, costs developing countries between $20bn and $40bn each year. That's a lot of money. But it's an extremely small proportion - only about 3 percent - of the total illicit flows that leak out of public coffers. On the other hand, multinational companies steal more than $900bn from developing countries each year through tax evasion and other illicit practices.

This enormous outflow of wealth is facilitated by a shadowy financial system that includes tax havens, paper companies, anonymous accounts, and fake foundations, with the City of London at the very heart of it. Over 30 percent of global foreign direct investment is booked through tax havens, which now collectively hide one-sixth of the world's total private wealth.

This is a massive - indeed, fundamental - cause of poverty in the developing world, yet it does not register in the mainstream definition of corruption, absent from the UN Convention, and rarely, if ever, appears on the agenda of international development organisations.


continues http://www.aljazeera.com/indepth/opinio ... 80135.html
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Re: How corrupt are the banks, finance, business etc?

#16  Postby Aca » Feb 14, 2014 11:00 am

also, there is no effective difference between corruption and lobbying.

Lobbying, Corruption and Political Influence
Author(s): Nauro F. Campos and Francesco Giovannoni Reviewed work(s):Source: Public Choice, Vol. 131, No. 1/2 (Apr., 2007), pp. 1-21

Abstract: Conventional wisdom suggests that lobbying is the preferred mean for exerting
political influence in rich countries and corruption the preferred one in poor countries. Analyses of their joint effects are understandably rare. This paper provides a theoretical framework that focus on the relationship between lobbying and corruption (that is, it investigates under what conditions they are complements or substitutes) The paper also offers novel econometric evidence on lobbying, corruption and influence using data for about 4000 firms in 25 transition countries. Our results show that (a) lobbying and corruption are substitutes, if anything, (b) firm size, age, ownership, per capita GDP and political stability are important determinants of lobby membership, and (c) lobbying seems to be a much more effective
instrument for political influence than corruption, even in poorer, less developed countries




LEGAL CORRUPTION, DANIEL KAUFMANN, PEDRO C. VICENTE, Economics & Politics Volume 23, Issue 2, pages 195–219, July 2011

We challenge the conventional definition of corruption through the analysis of legal forms of corruption, and by devoting special attention to influence induced by the private sector. This paper studies the determinants of the world pattern of legal and illegal corruption by proposing a simple theoretical model of endogenous corruption and related legal framework, and its thorough empirical test. Three types of equilibrium outcomes are identified: one based on illegal corruption, where the elite does not face any binding incentives to limit corruption; one centered around legal corruption, where the elite must incur a cost to legally protect corruption; and finally a no-corruption outcome, where the population is able to effectively react to corruption. Testable implications from the model are derived based on country-wide parameters. Crucially, we use a rich corporate survey, including 8,279 firms in 104 countries, tailored for this research, and featuring measures of legal corruption that are novel to the literature. The microdimension of the database enables improving on familiar shortcomings associated with the use of endogeneity-prone, country-wide indices of perceived corruption. The empirical results, making use of a broad range of proxies and sources, generally validate the model's explanations.
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Re: How corrupt are the banks, finance, business etc?

#17  Postby Blackadder » Feb 14, 2014 11:30 am

I am in complete agreement that the lobbying industry in the US is used by global corporations to subvert the political process. It is a national disgrace. But not all businesses are global corporations. Not all bank employees are fat cats raping the system for personal gain.

There are millions of people around the world running small or medium size businesses. I am one of those. We provide jobs, we don't bribe politicians, we pay our taxes and we take all reasonable steps to minimise waste and pollution. We could no have achieved any of this without support and money from our banks.

It fucking pisses me off when we are dismissed as some kind of evil, corrupt blight on society. Especially when it is done with the deliberation of a child booing a pantomime villain. We risk our homes, our families, security and work sometimes for years with little to show for it, in the hope of creating something successful and not having to join those same global corporations for a life of forelock tugging drudgery. So when you have stood in my shoes for a couple of years, then come and tell me how corrupt I am. Until then, you can shove your thoughts up your arse.
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Re: How corrupt are the banks, finance, business etc?

#18  Postby Clive Durdle » Feb 14, 2014 2:50 pm

our banks.


Whose banks?
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Re: How corrupt are the banks, finance, business etc?

#19  Postby laklak » Feb 14, 2014 3:59 pm

They're all as corrupt as the can be without getting thrown in jail.
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Re: How corrupt are the banks, finance, business etc?

#20  Postby Clive Durdle » Feb 24, 2014 5:14 pm

Just found about this

http://whatreallyhappened.com/WRHARTICL ... ankers.php

SOME HISTORY

This story begins back before the United States was the United States.

The original thirteen colonies printed their own currency, and it worked very well at empowering commerce and turning the young America into a powerful growing economy, free of the poverty and unemployment that even then crippled London. The public currency was operated as a public utility. But the bankers of Europe, long used to private banks issuing the public currencies as loans at interest, were horrified by the American approach and saw it as a threat to their deeply cherished religious belief that the gods intended for the bankers to have all the wealth of the world. So, the Bank of England lobbied King George III to impose the Currency Act on the colonies, which forbade the colonies to use their own money and required them to borrow their lawful tender from the Bank of England, at interest. This was the public currency as a private for-profit operation.

It took only a few years for this scheme to reduce the formerly prosperous and productive colonies down to the poverty and unemployment typical of London at the same time period, as depicted in the literature of Charles Dickens, among others.

While the state-run American schools teach that the revolution was about the Stamp act and the Tea tax, it was primarily the rage created by the enforced impoverishment of the Currency Act which fueled the rebellion. Why the Currency Act is not mentioned in the public schools will become apparent further on.

2. THE ORIGINAL AMERICAN ECONOMY

Following the American Revolution, the Founding Fathers reverted back to the system which had worked so well before the Currency Act.

.....



I hadn't heard this private public good argument before, and would welcome comments about it.

"Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by the deluge of bank paper. It is cruel that such revolutions in private fortunes should be at the mercy of avaricious adventurers, who, instead of employing their capital, if any they have, in manufactures, commerce, and other useful pursuits, make it an instrument to burden all the interchanges of property with their swindling profits, profits which are the price of no useful industry of theirs." --Thomas Jefferson


The article describes in detail various shenanigans. I thought I had a reasonable economics background and would welcome discussion about this. The article is well worth reading.
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