The Economic Recession 2008 - Real Problems or Bank Fraud Created? Starting in the United States, but then spreading into Europe through the UK, the bank crisis has shown the results of the fallacy of allowing uncontrolled unethical and (dare we say criminal) lending operation of the banks large and small.
Lets start by imagining the we would hatch a plan to lend money to anyone who wanted it on their say so.
That is, they say lend me money and we say, OK, here it is.
Then because we have lent the money, we claim a commission or bonus from our employers for doing it.
Then we need more money to lend so we can continue, so we package up the debt as a securitised loan.
Well, after all, the borrower said he was good for it and we believed him, so it must be true.
So the loan is secure, isn't it? So now we go to a friendly bank that has money and sell them the securitised debt.
They say is it secure, and we say Of course, its fully checked and securitised.
So they pay us for the debt note.
We also claim a commission or bonus from our employers for being so good and selling the packaged mortgage bonds.
Then with the new funding we start all over again.
Does it sound too good to be true? Does it sound just a little like a license to print money? Well, that is exactly what the banks and mortgage companies were doing, on a scale so large and for so long, that it becomes difficult to imagine the scale of the numbers involved.
The scenario we just created would mean that in fact a number of criminal or quasi-criminal acts had taken place.

1. The original lending mechanism was being carried out, while at the same time the share holders and investors (depositors) in the bank were being kept in the belief that money was being lent responsibly.
   That meant that checks and balances, to use corporate governance-speak were in place and that there was no reckless use of funds.
   Quite frankly this is betrayal of trust and failure to comply with their obligation of care and fraudulent use of funds vis-à-vis the investors, shareholders and depositors.
   
2. The self-certification and no-certification of borrowers flies in the face of safeguards of consumers set up under the auspices of the SEC in the USA and the requirements of the Financial Services Acts in the UK and the so called consumer watchdogs.
   
3. The payment by senior managers and to senior managers for the misappropriation of funds and betrayal of trust would appear at best a further misappropriation of funds if not fraud leading to deprivation of shareholders of dividends that were rightfully theirs.
   That of course is again fraud, obtaining funds by false pretences or even theft.
   
4. The packaging of the debt and its description as securitised is at best misrepresentation and at worst an attempt to defraud the purchaser.
   At this point we must be clear which market was being packaged for.
   
   1. If for the consumer market (ieas mortgage bonds) then the consumer protection legislation as it relatesto product description as well as various FSA regulations had beenbreached.
      At best, obtaining money by false pretences is on the cards,which consumer would have purchased the bonds if they had known they wereunsecure.
      Which depositor would have put savings into a Building Society(UK) or Savings & Loan Institution (US) if the organisation inquestion explained they were lending without surety of repayment?
   2. If for the corporate, interbankmarket, then again false description leads to a call of fraud.
      However,the purchaser was obliged to carry out due diligence.
      
5. The purchasing institution by not carrying our due diligence to verify the backing of the debt bond leaves itself open to accusation of misappropriation of funds if not fraud leading to deprivation of shareholders of dividends that were rightfully theirs.
   That of course is again fraud, obtaining funds by false pretences or even theft.
   
6. In numerous cases the purchasing institution then repackaged and sold on the repackaged debt covering the tracks of the previous deviousness.
   

Where in all this were the nonexecutive directors? Where in all of this were the regulators? Where in all of this were the National Banks and consumer oversight authorities? Where in all of this were the governments? Were we to draw a parallel to Enron or even Worldcom where the crimes were strictly corporate and arguably less heinous, then the authorities were not at all hesitant to drag the directors and managers before the cameras for the misappropriations of funds, the crimes against shareholders and false reporting.
In this whole present debacle, however, the self same authorities are silent.
We hear no cries for the blood of the directors, managers, financial controllers who created this.
In fact, with very few exceptions they are still in place.
No change at the helm.
Are they waiting to carry on? So, in short, we are moving into recession or depression because the banks have curtailed their lending to each other because they no longer have confidence in each other.
Is this surprising, when they continually tried to get money from each other with misdescribed products and could see the constant fraud each set of peer-directors was willing to carry out on the respective shareholders, depositors and investors.
If the banks do not have the confidence in each other to lend to each other, then with what logic, do they really think their depositors should have confidence to give them funds.
In fact there was nothing wrong with the global economy, it was steaming along just fine, thank you.
Then someone pricked the bubble.
The Emperors New Clothes became reality and not just a fairy tale.
The banks were revealed to be, just like the Emperor, naked and not as everyone had thought, solid bastions of ethical and correct behaviour, not as we had been told trustworthy people who could or should be entrusted with money.
Only when the first 1000 bankers, senior ones, have been incarcerated and held responsible for their deliberate acts of fraud (every penny (or cent) of bonus should be returned) will the confidence really start to return to and between the banks.
The faster this happens the better, because the world economy needs that and not just cash injections, but to see justice being done.
Governments who are reluctant to bring retribution to the fore and prosecute can only lay themselves open to the charge that they agree with and condone the behaviour that has led to global economic recession.
Financial regulators who are reluctant to bring retribution to the fore and prosecute can only lay themselves open to the charge that they agree with and condone the behaviour that has led to global economic recession.
National Banks who are reluctant to bring retribution to the fore and prosecute can only lay themselves open to the charge that they agree with and condone the behaviour that has led to global economic recession.
Where are the guardians against criminal behaviour? Where are the police? Even in the UK where fraud is not even registered, let alone investigated, unless it is big enough, say,£10 mio ($15 mio), then this debacle with BILLIONS of pounds or dollars of fraud would seem to be big enough to warrant attention.
But no, just silence.
So while the rest of the country and world waits all who should protect and oversee are propping up and debating ways forward, when what is really needed is to do exactly what worked very well in Enron and Worldcom cases, prosecute, convict and imprison all the senior perpetrators and involved.
Maybe it means constructing some more prisons, but the returned bonuses should fund that, or better the convicted bankers could finally find out what a real days work is and build their own.
Now that would give the rest of us the feeling of security and it would give the remaining clean bankers the clear message never to try it again.
The world economy is too precious to leave to greed by non-producers (and that is what bankers are, they create no wealth) to wreck it.
This method of dealing with the flocks of black sheep would also have the massive beneficial side effect of instantly showing to the banking community that between the remaining clean bankers the trust can be recreated because they are clean.
The dirt having been cleansed out.
It is only by such measures that there can be some degree of retribution for the pensioner in Iceland who lost everything and now has only state support, for the employees of the successful Danish airline with NO debt and which collapsed, for the construction worker in the UK whose employer had funds in Iceland, for the US autoworker in Flint, MI, who has had to see everything go downhill, for the Taiwanese girl assembling electronics, for all who have lost and suffered.
Otherwise it was all in vain.