Page 141 - Articles Written by JGJ EF DPS

How the banks responded to this cataclysmic crisis was not what most
of their customers and tax payers expected of them. Instead of operating
in an honest, prudent and transparent manner many of the banks
engaged, in the following years, in fraudulent activities with an
introverted focus for their actions (Diagram 2).

Diagram 2: Bank Shareholder Value Maximisation

It would be natural in a period of crisis, to expect banks to trim their sails
by reducing costs. Unfortunately, bank costs were not limited by pay
freezes for higher executives nor were profits redistributed to those who
bailed them out. Moreover, new legislative processes were actively
circumvented. In the case of Wells Fargo ghost accounts were created
whilst HSBC became the ‘Financier to drug gangs’. Barclays on the
other hand manipulated the LIBOR Rates whilst RBS was accused of
exploiting small business through the creation of its Global Restructuring
Group (GRG), Bank of America incurred the greatest fines over
Residential Mortgage-backed Securities (RMBS) whilst Lloyds
Banking Group engaged in the mis-selling of Payment Protection
Insurance (PPI), and finally, Standard Chartered was fined for money
laundering and criticised on social responsibility grounds for its
investment policies.

Current Debt Situation – USA

Currently, in the US, lenders are giving more lines of credit to sub-prime
borrowers than ever before. Collectively they now have the most
outstanding revolving debt (credit card debt) in U.S. history (Diagram 3).
They are borrowing money at a rate that approaches pre-2008 recession
levels with credit cards along with mortgages, student loans and
automobile loans the major drivers.