Blog Archives

Golden parachutes offer financial insiders an easy descent into government

golden parachute graphicGolden parachutes provide income when the executive leaves the company before the end of a specific period of time and – in the Financial Times – Ben McLannahan reports on top banking executives pocketing millions of dollars before taking jobs in government:

“Critics argue that such benefits, which do not apply to people quitting for other jobs in the private sector, have ensured a succession of financial insiders in senior policy positions and deferential treatment towards Wall Street”.

The revolving door

Citi is among a handful of big banks allowing government-bound staff to cash out of incentive programmes by accelerating the vesting of their stock awards. Citi has been a particularly rich source of state appointees in recent years, from Jack Lew, the Treasury Secretary, to Stanley Fischer, vice-chairman of the Federal Reserve. The latest to move was that of Antonio Weiss, a former banker now serving as a counsellor to Mr Lew, who acknowledged December that he would leave Lazard with up to $21m in unvested income and deferred compensation.

AFL-CIO, America’s biggest trade union federation which manages $94bn in assets, will begin a campaign against this practice at Citigroup’s annual shareholder meeting on Tuesday and put similar proposals to the shareholder meetings of Goldman Sachs, Morgan Stanley and JPMorgan Chase in coming weeks.

67.9% of those who voted in Switzerland’s referendum seeking constitutional limits on remuneration came out in favour of the initiative, which was passed in every canton. Swiss Justice and Police Minister Simonetta Sommaruga told reporters that the result was “the expression of widespread unease in the Swiss population about the level of salaries paid to top managers.” There is also widespread unease in the British population about such matters.

thomas minder 2The Swiss have shown the way for Britain to start curbing its revolving door, conflicts of interest and golden parachutes or handshakes.

The Golden Parachute ban on excessive executive salaries and other means of compensation passed into Swiss law in 2014 but some parts only come into force this year, including the binding shareholder vote on remuneration.

Or will we need a Thomas Minder (above right) to come to the rescue?

Updating our special friend’s revolving door – and the tightening corporate grip on the British government

The activities of powerful corporate lobbies on armaments, genetic modification and pharmaceutical issues in USA and UK are more frequently highlighted than those in the financial sector. Recently, however, leaks have propelled news of the ‘revolving door’ between the New York Fed and Wall St into the media.

Former New York Fed president, Paul Volcker, went on to become the chairman of the central bank in Washington and Timothy Geithner was in charge during the last financial crisis before moving to the US Treasury.

us fed logoThe Federal Reserve System, designed to avoid concentration of power, in practice – with Wall Street on the New York Fed’s doorstep – appears to lead decision-making.

Geithner has been variously reported as saying that the Fed is ‘perceived as vulnerable to capture’ – or that the Fed is now vulnerable to capture.

Its decision, made with Washington officials, to let Lehman Brothers fail and rescue AIG, was widely criticised and the lack of oversight in the run-up to the last crisis is acknowledged – an awareness also frequently expressed in Britain.

New York Fed investigations under way

carmen segarraA Senate Banking Subcommittee on Financial Institutions and Consumer Protection is to hold a hearing to investigate allegations that Fed supervisors are too cozy with the banks they oversee. Fuelling the politicians’ anger were tapes from Carmen Segarra, a New York Fed examiner who  pointed out weaknesses in the supervision of Goldman Sachs. She had recorded her colleagues conducting a gentle cross-examination of Goldman over a questionable 2012 transaction.

The next day, the New York Times  revealed that an investment banker at the company had blown the whistle about another Fed official passing on  confidential information to a junior banker at Goldman. The New York Fed was then obliged to report its own staff to the FBI and prosecutors.

‘ . . . the real corruption that has eaten into the heart of British public life

cameron lobbyingAnd in Britain, Seumas Milne in the Guardian reminds us that before he became prime minister, former lobbyist Cameron predicted that secret corporate lobbying was “the next big scandal waiting to happen”, adding: “We all know how it works.”

Milne makes powerful points:

  • Over half Tory party income comes from bankers, hedge funds and private equity financiers.
  • Peers who have made six-figure donations have been rewarded with government jobs.
  • Politicians, civil servants, bankers and corporate advisers increasingly swap jobs, favours and insider information

revolving door peopleRead the Guardian article for detail about senior civil servants and ministers’ moves to corporates they had been regulating – or failing to regulate – such as Deloitte and Barclays.

Milne singles out the cabinet secretary, Jeremy Heywood, as “the living embodiment of the revolving door, having moved effortlessly from the Treasury to Blair’s office to the investment bank Morgan Stanley and back to work for Cameron”.

Read the Guardian article about the politicians. New Labour embraced corporate power and it became a cross-party affair. Supremo Blair is followed closely by New Labour ministers, “who moved out of government into lucrative corporate jobs, often for firms hustling for contracts from their former departments”

broken britain 3 mps bankersMilne sums up the shameful situation of politically broken Britain: “It defies rationality to believe that the prospect of far better paid jobs in the private sector doesn’t influence the decisions of ministers and officials – or isn’t used by corporations to shape policy.

Who can seriously doubt that politicians were encouraged to champion light touch regulation before the crash by the lure and lobbying of the banks, as well as by an overweening ideology?”

Milne points out that any loosening of the corporate grip on government and public institutions demands radical change: closure of the revolving doors and a ban on ministers and civil servants working for regulated private companies

– but that leaves in place arms length inducements open to their families and friends . . .

Royal Mail privatisation: Government yet again rewards multinationals for failure

This link was sent by a reader with the comment “Stupefait!“

The government has announced that Goldman Sachs, which has ‘sparked a great deal of controversy over its alleged improper practices’ – especially since the 2007 and ongoing financial crisis – and UBS, fined £940m for its role in the Libor rate rigging scandal – are to be the global co-ordinators and bookrunners of the Royal Mail privatisation.

The department for business, innovation and skills (BIS), which is in charge of the sale, refused to say how much the banks will collect in fees, but they will collect 1% of the flotation value.

A BIS spokesman declined to comment on the banks’ roles in recent scandals.


Plutocracy in the news: the FT has at last noticed that the political-corporate revolving door is spinning at an even more alarming rate

A few days ago Anne sent a link & expressed concern about the news that Dave Hartnett, formerly HMRC chief, has secured a new job at Deloitte.

revolving doorrevolving doorHer misgivings were echoed by Margaret Hodge MP, chair of the public accounts committee, which criticised Mr Hartnett for agreeing the deal with Goldman Sachs, which waived up to £20m of interest penalties on offshore bonus payments.

Earlier, David Hencke of Exaro News reported that Ed Lester, former chief executive of the Students Loans Company,had been appointed by the Department of Business, Innovation and Science to head the troubled Land Registry – despite the SLC’s poor performance, including:

  • problems with lost documents,

  • equipment failures,

  • difficulties with the online application system,

  • and answering only 5% of peak time phone calls.

An accelerating trend

Now the FT politely notes “The trend of ministers and officials leaving for the Big Four seems to be accelerating. PwC announced last week they had recruited Alan Milburn, the former Labour health minister, to advise on change in the NHS, sparking anger from local union leaders”.

Opening with Hartnett, it continues with Paul Kirby, who returned to KPMG after heading the Number 10 policy unit, and Neil Sherlock, the former adviser to Nick Clegg, who has moved to a senior post with PwC, adding that some time ago former home secretaries Charles Clarke and Jacqui Smith also made the move as consultants for KPMG.

The analysis from publicly available data shows 18 people have left top positions for KPMG, Deloitte and PwC, a sign of the symbiotic relationship between government and the companies at the centre of recent tax avoidance rows”.

Following the money:

The findings also show the companies themselves have spent a total of more than £1m paying for staff to work within the main three political parties, fuelling claims of a “revolving door” between politics and tax planning . . . Since the 2010 general election the three main UK political parties have received £1.14m in kind from three of the biggest accountancy firms: KPMG, Deloitte and PwC. PwC has given £503,442 to Labour in the form of multiple secondments. It has also given £289,619 of advice to the Liberal Democratsand £12,634 to the Conservative party”.

Under the last two governments, big money has increasingly skewed the decision-making process in favour of the corporate world – meanwhile the electorate suffers higher utility bills and other essentials rise in price, further enriching the few.


PCU: the ‘captive state’ – a Britain organised under successive governments to suit the corporate few – grossly mistreats people like the late Stephanie Bottrill

Following posts on Birmingham and Solihull websites, readers who have responded fall into two categories:

Some – living on average or above average incomes have been quite unsympathetic:

  • In her place I’d cut my coat according to my cloth
  • Would losing £20 be such a big deal?
  • These people are always whining.
  • The son’s approach to the Sunday papers was motivated by financial gain.
  • Think of the mothers and children cramped in one-bedroom accommodation.
  • She didn’t care about the trauma she would be inflicting on the lorry driver

Others affected:

  • are thankful that this issue has been raised,
  • have written about similar problems they are facing,
  • say that their grand-children will not be able to stay with them if they move,
  • point out that to a person with a disposable income of £77 – £20 is a 25% cut,
  • and that for a single person, £20 is the amount a person will spend on food bill – not including fresh meat.
captive state cover
PCU sees the captive state – Labour and Conservative governments alike, in thrall to the rich and powerful.
Many politicians are eager for the crumbs falling from these corporates – not usually in brown envelopes but in the form of declared directorships and also undeclared lucrative opportunities for family employment.
Two of many examples where the ‘captive state’ is easy on the affluent but bears down on people like Stephanie Bottrill:

The government commandeered taxpayers’ money to bail out other affluent bankers and HMRC created a “bespoke” tax arrangement for Goldman Sachs in order to resolve a “huge relationship issue” with the bank. It excused Goldman Sachs from paying £10 million interest on tax it had not paid. The government also commandeered taxpayers’ money to bail out other affluent bankers.

No parallel desire is shown to create relationships and help the poor and powerless.

The case underlines the need for a new (cross-party?) incorruptible politics designed to offer equality of opportunity and security to all its citizens – not just the affluent few.
cllrs jc, ss, cw
Do readers know of any energetic and innovative, public-spirited politicians likely to make a difference? Three named in the West Midlands are pictured above.


Government ‘sweetheart’ tax deals and yet another revolving door reward for failure

Yeah, we’re all in this together? 

So said the reader who recommended the Guardian article by Rajeev Syal which reveals the scale of the government’s “sweetheart” tax deals – individual secret agreements drawn up between tax officials and corporations to settle disputes.

Another whistleblower revelation

A leaked document sent by Dave Hartnett, the former head of tax at HM Revenue and Customs (HMRC), to David Gauke, the exchequer secretary at the Treasury, discloses a figure of £4.5bn for four settlements.

Conflict of interest: the government’s civil servant too close to the corporate world

dave hartnettTwo years ago the Telegraph and others reported that Dave Hartnett, during his service as ‘permanent secretary for tax’ at HM Revenue & Customs, was entertained 107 times by some of the UK’s biggest banks.

These included law firms and accountancy firms and other corporates, amongst them, Goldman Sachs, JP Morgan, Ernst & Young, KPMG, PriceWaterhouse Coopers and Deloitte.

Revolving door

In January he was hired by HSBC to help to enforce the highest standards in dealing with international money transfers.

The leaked document describes deals in excess of £1bn as “not uncommon”.

The disclosures about the multibillion-pound scale of the government’s deals come from a seven-page memo sent by Hartnett in December 2011 as he asked for public support from Gauke in the face of growing criticism in the media and parliament.

Margaret Hodge, the chair of the Commons public accounts committee, said: “If we got £4.5bn in, how much did we not get? That is what taxpayers will want to know, and I’ll be raising this with HMRC through the committee.

Whistleblower protected? No: treated like serious criminal

Separate documents disclosed in the Guardian show that tax officials used intrusive investigative powers designed to help them catch serious criminals to try to prove that the whistleblower who uncovered one of the first sweetheart deals, involving Goldman Sachs, had spoken to the Guardian.

Read more about HMRC’s draconian action against its whistleblower and deals with Vodafone and Goldman Sachs here: