(Spanish) Banks Worse Than Pushers

Contributed by Don Quijones, a freelance writer and translator based in Barcelona, Spain. His blog, Raging Bull-Shit, is a modest attempt to challenge some of the wishful thinking and scrub away the lathers of soft soap peddled by our political and business leaders and their loyal mainstream media.

Steppenwolf’s The Pusher exploded on to the counter-culture scene in 1968 and was chosen as the opening song for Peter Fonda and Dennis Hopper’s 1969 cult movie Easy Rider (to listen to the track, click here). As its title suggests, the song is about drug dealers who aggressively “push” their often tainted wares on vulnerable and/or unsuspecting users. The pusherman “don’t care if you live or if you die,” the song goes.

Fast forward to today, and the pusherman problem is everywhere, with global networks of drug traffickers and pushers visiting untold misery upon the five continents. But this post is not about the drug business. It’s about the banking industry.

A Pusherman’s Paradise

In the last five years, myriad cases have come to light of too-big-to-fail banks knowingly offloading tainted products onto unsuspecting customers. They include products that are essentially designed to fail or whose contingent risks are never fully divulged to their buyers. Affectionately termed in the industry as “misselling,” this endemic practice is typically punished with a token fine representing just a tiny fraction of the total revenues generated by the fraud.

Outside the industry, where outmoded concepts such as civic law and basic human decency still apply, such acts are called “fraud and deception” and are punishable with a prison sentence.

But in the financial sector, other rules — or better put, no rules — apply. From U.S. banks’ misselling of subprime mortgages and mortgage-backed securities, which triggered the current global depression, to British banks’ recent offloading of fraudulent card protection insurance and complex swap schemes, financial pushermen have repeatedly ripped off their own customers. And what’s more, they’ve gotten away with it.

Targeting the Most Vulnerable (and Gullible)

One of the most egregious misselling scandals to have graced this fledgling century took place here in Spain. Between 1999 and 2011, the nation’s high street banks sold investment products called preferentes, or preferred shares, to hundreds of thousands of their own clients. Half-way between a bond and a share, the instruments provided the banks with much-needed liquidity while also offering yield-seeking savers and investors some of the best rates on the market.

But there was a problem. Due to some (obviously innocent) oversight on the banks’ part, customers were not informed that what they were actually buying were essentially subordinated debt instruments. This meant that, should the company fall into liquidation — which is ultimately what happened to many of the savings banks — the holders of preferentes would be right at the bottom of the credit ladder.

In fact, not only did bank clerks and branch managers fail to inform their customers of the risks involved in the investment (which, in and of itself, is illegal, according to Spanish law), they actually marketed the preferred shares as fixed term deposits. They also forgot to mention that the preferentes, some of which had terms of 1,000 yearscould never be cashed in.

And like any pusherman worth his salt, the banks intentionally targeted the most vulnerable and least resourceful customers, in particular the elderly. In extreme cases they even sold shares to customers who were illiterate (and not just in the financial sense) and who had to sign the papers with a makeshift cross or fingerprint.

Today most of those customers have lost the vast bulk of their life savings. With many of the former cajas now effectively bankrupt, the FROB (Spain’s bank reorganization agency) has imposed “haircuts” of between 39 and 90 percent on all preferentes holders. To rub salt in the wound, the EU announced that rescued banks would not be allowed to use funds from Europe to compensate victims of misselling — confirmation, if ever needed, that when it comes to receiving European welfare, the banks are at the front, middle and back of the queue. Meanwhile, their once over-trusting customers are “bailed in” so as to cover the costs of the banks’ suicidal recklessness.

Pushing Back Against the Pusher Man

In the face of government inaction and betrayal, the victims of the banking scam have taken matters into their own hands, launching a series of protests in branch offices of the banks responsible.

For many branch staff members, going to work has become a living hell. While clearly not as much to blame as the senior and middle managers who designed and rolled out the fraudulent products, they are the pusherman’s public face. As such, it is they, and not the senior bank executives, who are drawing most of the flak from irate customers.

Just a few weeks ago, a local police officer in Valencia was arrested after stabbing a retired bank manager who had sold him now-worthless preferentes. Such episodes of violence are indicative of a society that has been left out to dry, with nowhere else to turn to, to defend itself from the insatiable greed of an out-of-control, morally and financially bankrupt banking sector.

Yet it’s pretty clear that the pimps, pushers and kingpins of Wall Street, the city of London and elsewhere are not for reforming. Instead, they have subverted and co-opted the legislative and executive branches of most democratic nations and have gained control of the monetary levers of pretty much every national and regional central bank. And for now, the world is clearly a pusherman’s paradise. Contributed by Don Quijones

 

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