Banking StandardsWritten evidence from C M Johnston

Your terms of reference seem very wide-ranging and might best be responded to by a similar wide-ranging Political Economist Historian. But what most strikes me is absence of any specific reference (as would surely have been in 16/17/18/19 C+) of any need to re-establish Integrity of money especially as we would now most appear in mist of a crisis of money (much as long predicted). Another harvest of nominalism? Brought about by 40/70 yrs+ of political systemic monetisation of ever increasing levels of debt. Originally, more justifiably, attempting to amortise war debt. But increasingly since c1970 (not only attempting to sustain endemic government deficit spending) but even more associated with continuing unhistoric over inflation of domestic property values. (These often leading to equity release to finance further consumption). Also obligations (often metastasising from US). It must also be recognised that often equally opaque system of fractional reserve banking, easily allows exponential creation of money, given sufficient demand, by apparent solvent borrowers, especially when underwritten by endemic overinflating (untaxed) assets/houses?! So total debt becomes an ever increasing multiple of GNP.

All seeming largely reflective of political policies to reward/bribe the more aspirational classes (another variant of state sponsored dependency) Many traditional forms of economic activity or capital accumulation from compound interest/dividend re-investment having been undermined by technology and other political fiscal policies? (Though maybe this post WW2 scenario now seems on the cusp of fundamental change, again by technology and political market pressures)? Yet Baby Boomers have clearly long/always expected that traditional bond holders and depositors can be systemically defrauded with impunity? At the same time post WW2 monetary and fiscal policy increasingly forced the average person into opaque collective managed life/pension trusts. Yet now it has become increasingly apparent that, especially necessarily long term, the majority of real returns are consumed/filched/stolen by inheretently unaccountable symbiotic corporate and professional conflicts? (Effectively they have consumed the fiscal privileges)? Maybe QE will drive a final nail into the coffin of this system? And the most significant role of the new compulsory/automatic enrolment pensions will be further expose structural and statistical flaws? Yet clearly overinflating house values have massively increased costs all round. Not least government welfare payments, housing benefit? Quite different if house values continue to overinflate, that clearly creates massive generation disadvantages/inequalities. Seeming even more contrary to apparent post WW2 political intentions?

I was amazed to see Sir Mervyn King earlier this year in a public speech, seem to suggest the current crisis arose almost out of the blue! He suggested that growth had been continuing at a regular satisfactory level for several years, with only moderate steady levels of inflation (2%pa above level of great inflation of 16C) but then suddenly we found ourselves in a great crisis. He seemed to completely ignore that over the previous decade house prices had increased 300%. Such an apparent lack of perception in the financial, political, media nexus might seem widespread and seemingly resultant of a blinkered company entlisation and failure to recognise the nature of any integrity of money. Especially that the unhistoric over inflation of house values, essentially only since c1970 (US making the final break with gold in 1971) reflects far more a phenomenon of money, rather than of houses)! Were this merely a reflection of “scarcity” the square footage rather than location fashion height rather dictate prices even in London? Let alone it might appear particularly capricious to impose CGT on equities where long-term returns (ex-inflation and net dividend reinvestment) are rather modest (most apparent gains resultant of the market/monetary near collapses of 1940s and 1970s?) Rather than continually over inflating houses. which consequently can be increasingly leverage at long term effective negative rate of interest especially post abolition (1963) of traditional imputed rental income tax on owner occupied houses surely necessary balancing item?

But I am not suggesting that CGT be imposed on owner occupied houses. nearly that an annual imputed income tax be reimposed, maybe offset by reductions in other taxes? (Based on an annual self assessment on IT form? Easy enough for this to be cross checked. roll ups allowed for some categories). The aim would also be to constitute an effective 1% pa capital levy, such as under old rates plus schedule A before 1963. Another aim being to reduce real value by 50–70% from 200 (in many areas, ex sustained by foreign buyers who very significantly could not avoid this tax. real value seem to have already declined by near half the higher proposed level? And may now happen anyway). So such a tax could be reimposed fairly painlessly over 5 to 10 years. Conservatives tend to oppose re-imposition of such a tax as contrary to ideas of a “property owning democracy”. Yet endemic monetary default and fiscal distortions have merely encouraged people to concentrate their savings/security/property in domestic houses. Quite different than under gold standard and industrial revolution. Maybe also new technology will also hasten change.

At the same time it would seem equally necessary for governments to re-establish some long term instrument (like 3% consols under gold standard and or significant expansion of indexed gilts) to enable average individuals to hold money/savings especially with long term security of capital an income. Some sort of extension of long term indexed gilts, though maybe in certificated form for more easy public understanding, less open to market manipulation maybe sale and repurchase directly under Bank of England/debt office? Such a development might also incidentally restrain both government peace time deficit spending and the housing market. Also, better that state underwrites money than (too) big banks!

In the same context, the 21C sale of c 2/3 of this country’s gold (and at knockdown prices), apparently at whim of a few (one person) seemingly unable to recognise, tolerate anything more important thatn themselves/self? Always appeared near unbelievable foly. Some people now suggest gold prices now v high at 1800 onz, but in real terms is that much different from $350 nz in 1934? (Espeically as to run as effective gold/bullion standing it is necessary to somewhat over value gold). Having survived political attempts to demontise the “barbarous relic” gold would now appear to have triumphantly survived, reasserted its traditional strength? Maybe it will in due course become an integral part of a revived international reserve currency, like Kenya’s Bancor, rejected at Bretton Woods owing to overwhelming dollar supremacy?

Maybe I might also say that I have always had a particular interest in money as a concept. As a small child I continuously asked how much things cost before WW2 effectively under Gold standards (which I have always found a good benchmark). Later at school and university I tended to specialise in doctrinal controversies which often seemed to corolate closely to concepts of money. Especially the (still continuing into modern physics) nominalist realist controversy begun by plateau from which may be deduced “value is the real presence in money”. Everything else likely some sort of Syllogism or fraud (clearly when money becomes controlled by a bank it becomes exposed to at least three forms of risk. Default by the bank, fraud by the bank, political monetary default). This would appear the state where we have now arrived concurrently undermining public trust in politicians, bankers, financial promoters of all kinds and many others who have indirectly ridden the same tiger (concessionary mortgages and pension pots, CGT flipping also being essence of recent MPs’s expenses scandals)?

I enclose abstracts from a recent letter addressed new CEO of BBA, Anthony Browne. Maybe it relates to a specific case ,which may also partly explain from where I am coming, but most of the points would seem widely applicable and maybe further illustrate why so much bank corporate integrity and professional expertise has become myopically self-referential special pleading conventional conflicts. Much essentially “Inside a dealing” against target “customers”/lay victims? Historic false accounting deceits spurious performance, disguise, deny real losses, costs.as no one would reasonably apply to their own affairs ( if they understood them) also seemingly reliant on a privileged essentially collusive clientage of prof/agents. Themselves effectively legally protected by banks espically to default on fiduciary duties rightly owed directly to any (ostensible) joint principal.(often someone to blame having first m isled, deceived).

Another point Anthony Browne made a joking reference on which I did not comment earlier. That unlike “Toxic Tobacco” people actually need banks! Maybe, though not in the form they seem to have become (Let alone that government deficit spending now appears increasingly covered by QE)? Large corporations should be encouraged to securitise their debts or better raise more equity. Clearly there needs to be fiscal equality in treatment of debt and equity. Though maybe debt interest (and other allowances claimed by large corporations) should be disallowed. As it often appears misused to diminish competition and avoid paying reasonable amounts of tax. But MSB could be similarly encouraged, especially with greater fiscal equality in treatment of debt and equity. Though maybe debt interest (and other allowances claimed by large corporations) should be disallowed as it often appears misused to diminish competition and avoid paying reasonable amounts of tax? But MSB could be similarly encouraged, especially with greater fiscal neutrality and monetary stability? Btu it must be very doubtful if big banks have any longer interest, intention or capacity to support small businesses yet there now seems very interesting development online but more generally there needs to be moves towards fiscal simplification towards a flat tax (maybe technology will assist/force this?) Especially as it might be recognised that the over rewards, which have caused so much public resentment , which have largely metastasised from the city, themselves, stem largely from complex monopolies artificially created by the monetary and fiscal system.

Regarding the regulatory ombudsman system, we have always found these systemically obstructive, seemingly consequent of being opaquely nobbled by the symbiotic corporate and professional conflicts? Also by another aspect of myopic compartmentalisation (complained of above), in practice, recreating the problems of pre-fusion law and equity in 1870s). In particular our complaint is not about any bona fide trust company/administration, but that we had the (overriding) “right in possession” to any monies (+ any trust) effectively ab initio. While bank was clearly in a position of multiple corporate conflict against us/ours, in every legal capacity and the bank was ultimately obliged to admit the “merits” of this complaint, by resigning without a release ie becoming legal strangers ab intio, though remaining legally liable essentially as intermeddlers, inherently unauthorised intruders and mischief makers.

The 1st 1987 Bank ombudsman declined to assist us in any way, because he concluded our overriding complaint being “how do we rid ourselves of the bank” and this clearly being out with his terms of reference so he deemed it “more appropriate” to be dealt with by a Court”. The 2nd bank ombudsman in 1999, ie after bank’s resignation without a release, said his terms of reference allowed him to consider only “banking services” (as restrictively defined by BBA) which did not extend to considering complaints from co/successor trustees, “possessors” as a class etc. Also in 1988 we had objected to IMRO against MWT’s authorisation under FSAct, because its practices and behaviour clearly not compliant with published “conditions for authorisation”. But our objections ignored. Though by 1989 IMRO had been quite discredited by Robert Maxwell. Essentially by merely over-exploiting (and too quickly) same clearly widespread malpractices against which we had protested especially deceits against lay co trustee/s including by concealment of data/information, insider dealing with inherently collusive professional agents, historic false accounting conventions to disguise/deny real damage, costs, etc. Yet self regulatory IMRO demonstrated themselves incorrigible by then further indulging symbiotic corporate and professional lobbying to again exclude from the IMRO ombudsman complaints from lay persons with insider legal rights especially lay co/successor trustees possessors as a class. ha! ha!

So far (complaints now with independent assessor) FOS has behaved little better. FOS originally accepted bank’s deceitful defensive spin that the matters time barred (clearly not by application of 1980 Act of Limitations) though later FOS accepted they were still within FOS jurisdiction, by other DISP definitions. But the FOS Ombudsman (apparent past experience as an IFA and mortgage broker) seemed aggressively determined to misstate true, basic “terms of complaint”, still more ignored that banks had already constructively admitted its merits seemed determined to distort it into an entirely different form. Recklessly conflated quite separate, different legal processes and scenarios. Ought to misrepresent it as some sort of trust co/administration dispute, rather than recognise (as admitted by bank) that we had “right in possession” effectively ab initio etc. Totally ignored the legal consequences of bank’s resignation without a release. So he determined to dismiss it. Citing in particular that the 1987 ombudsman had deemed it “mere appropriate for consideration by a Court” (ie before bank resigned without a release see also ombudsman news 49) also that the 2nd ombudsman had excluded it (having been nobbled by BBA). SO this 2012 FOS ombudsman’s reasoning would appear contrary to any objective commonsense , but also contrary to basic principles of equity/English law definition of “subject matter” and “new material evidence” Especially as applicable to a plaintiff’s differential legal persona and consequent different “rights of action” Yet this ombudsman seemed determined to apply his own apparent unaided reason, the crude logic of “the main the the pub” to insist the “crux of the complaint the same”. All along?! Also despite repeated requests for a more defined explanation of relationship between traditional principles of equity, English law and disp ( let alone application of ECHR/HRA). especially as it was surely never the intention of FSM to create an obstructive scenario like pre-fusion of law and equity (1870s) which would inevitably provide a further licence for continuing market abuse, especially in more opaque, less usually exposed areas? FOS attitude here must also compare very unfairly against help to SMEs missold/misled re interest rate swaps?

25 October 2012

Prepared 19th June 2013