Yves here. This tidbit from HSBC reveals a new low in the standards of banking, which given how low those already are, amounts to an accomplishment of sorts. Perhaps we should create a Stuart Gulliver Award for other instances of creative extreme seaminess. Nominees?
By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Originally published at New Economic Perspectives
Greetings from Quito, where I will be spending four months teaching at IAEN about effective regulation and building ties with UMKC.
The latest twists on the latest HSBC tax evasion and tax avoidance scandal is that it has come out that Stuart Gulliver, HSBC’s head, put his money where his mouth wasn’t. He personally used double tax havens – Panama plus Switzerland – to hide his income and wealth from view because his pay was so outrageous that even other HSBC executives would have been outraged by it. The New York Times’ account of this tale demonstrates that Gulliver needs to fire Gulliver as his spokesperson.
He said he set up a Swiss account to hide his bonus from his Hong Kong colleagues, and then another one in Panama to hide the amounts from the bank’s employees in Switzerland.
“Being in Switzerland protects me from Hong Kong, being in Panama helps protect me from the Swiss bank,” he said.
Yes, the HSBC CEO just said openly that he felt a desperate, personal need to be “protect[ed] “from the Swiss bank” – by which he means HSBC. He felt a similar need to be “protect[ed]” “from his Hong Kong colleagues” at HSBC. Any HSBC customer victimized by HSBC’s PPI and “swap” rip offs of customers and any UK taxpayer ripped off by the tax evasion emporium run for the powerful and wealthy out of that same HSBC “Swiss bank” can empathize with Gulliver. HSBC customers and non-elite UK taxpayers all feel a desperate need to be “protect[ed]” from HSBC – and Gulliver.
What Gulliver was so desperate to have “protect[ed]” from his “HSBC colleagues” was knowledge of his pay. He knew his pay was so excessive that it would outrage even HSBC’s senior managers. Remember this event when the next bank CEO rails against the “politics of envy.” The insanely jealous people that Gulliver feared were his peers, because even in the corrupt culture of HSBC he stood out for his greed.
Only a few things would need to be true to make this nearly perfect story the perfect story of the inevitable result of the City of London “winning” the regulatory “race to the bottom” and becoming the financial cesspool of the world – while being praised by the business press (even the Guardian).
First, the defense of Gulliver’s outrageous pay could actually blame criticisms of his pay on “the politics of envy” by little people rather than Gulliver’s wealthy peers. An article entitled “HSBC’s banking excess or banking excellence?” might read:
Some might say those who fret over Mr Gulliver’s pay are practising the politics of envy.
Second, after HSBC was fined for laundering over $1 billion for the Sinaloa drug cartel, a “think tank” might praise Gulliver’s outrageous pay as the just reward for exceptional performance in an article entitled “Our banks are a national treasure – Britain is good at financial services.” The think tank admitted to only one problem by banks – they have not yet found an effective way of triumphing over our stupidity. Indeed, we are not worthy of Gulliver and HSBC.
Admittedly, banks need to do a better job of explaining to the public what exactly they do. Economic literacy is exceptionally poor….
Third, HSBC’s defense to the Guardian of Gulliver’s use of opaque tax havens was that hiding his income and wealth and his outrageous pay (and minimizing taxes) was the epitome of “transparency.”
“There is absolutely no story here,” said [HSBC Chairman Douglas] Flint of the chief executive’s bank account. “There is nothing that Stuart has done that is not absolutely transparent, legal and appropriate.”
Thank you, Mr. Flint, for demonstrating why relying on a board of directors chosen by the CEO to supposedly keep bad CEOs on the right track results in recurrent, unintentional self-parody. Combining Panama and Swiss tax havens to ensure secrecy is the new “transparent” in banking.