We in the media are oh so very good at pointing out the warts on other people's noses. But I'm afraid that the pointing of the finger tends to reveal far more about the Wart-Finder General than it does about the warts themselves.
FINGER-POINTING: I
Witness the sentence just handed down to Bernard Madoff. He perpetrated a multi-billion dollar fraud, gulled many well-known figures in Hollywood, business and finance into his Ponzi scheme, and is now destined to die behind bars.
Readers may remember that I reported from New York just after the scandal broke. The levels of indignation and outrage surrounding Madoff and his family were evident from the demonstrators outside the family's house in upper mid-town Manhattan.
That anger has not abated, judging from the latest furious demonstrations outside the US court that sentenced the fraudster. His wife has handed back $80 million (Dh294m) – loose change in comparison to what's gone missing – and Madoff has been give a 150-year jail term. Cue singing and dancing in the streets and shrill satisfaction from many a commentator.
But consider the facts. Madoff is, thus far, the only one paying the penalty for this financial atrocity. Remember how Jerome Kerviel of Société Générale was accused of being a rogue trader, acting alone, when he allegedly blew a hole of several billion dollars in the bank's accounts? Again, it seems like
loose change compared with the catastrophes that followed, but isn't the similarity striking?
Kerviel, it was alleged in January 2008, was a sole agent, who single-handedly outwitted the entire compliance operation of SocGen (all 2,000 employees). I'm no conspiracy theorist, but isn't it convenient when you have sole mavericks acting alone? That way there is no need to look for accomplices. There's no need to challenge a flawed system. There's no need to challenge ourselves and ask how come we sat back and let all this happen.
A further factor is the absurd length of the sentence. There is a juridical aspect to consider in the handing down of a 150-year sentence to a 71-year-old man. Madoff still has plenty of legal firepower at his disposal. Even if he is stripped of every penny he fraudulently obtained, there'll be plenty of lawyers out there willing to represent him for the benefit that the publicity will bring. Plea-bargaining is an important part of the US system of criminal justice, so the 150-year sentence, means that, effectively, Madoff will never see the outside world again, no mater how clever his lawyers might be.
But the length of the sentence also speaks of a wider psychological malaise. We've all seen television footage of mobs attacking corpses of people who've been strung up and killed for crimes, real or imagined. The angry crowds, full of blood lust, will continue to vent their anger by inflicting wounds on a dead man. It makes no real difference, but insulting the corpse acts as a kind of lightning conductor, a pressure valve for anger.
So it is with Madoff's sentence. He has been given a custodial period of twice his putative life span. Does that speak of a clever system of criminal punishment? I'd submit it does not. But it does make some people feel that he's been severely punished, even beyond his natural lifespan, and there's satisfaction in the punishment of the individual. Sadly, that satisfaction makes the issue of reforming the system itself – be it criminal or financial – of relatively little importance.
FINGER-POINTING: II
The UK authorities are quite clear on blame for the banking crisis. The banks themselves were at fault. On top of that, the banks haven't been as helpful as they might have been about making sure that governments get their full share of tax revenue.
The UK finance ministry has just produced a new set of preliminary rules (to be kicked about a bit by politicians and bankers and other parties claiming an interest) on how banks should report their tax affairs and those of their clients. The new proposed code will be a voluntary scheme, which will aim to – wait for it – minimise tax avoidance. Now, tax evasion is illegal. But tax avoidance is what investors and business people pay professionals for.
UK Financial Secretary to the Treasury, Stephen Tims, said: "We will be talking directly with banks to develop a shared understanding of the principles that underpin the code and, in particular, what it will mean in practice for banks. This is vital to ensuring that the code plays a part in changing the behaviour of banks and in turn minimising the loss to taxpayers through tax avoidance."
The code states that the UK Government believes that, "in the light of the significant taxpayer support provided to stabilise the banking system, taxpayers are entitled to expect that banks, important taxpayers in their own right, and their customers pay their fair share of tax".
This is finger-pointing with a difference. The government is blaming the bankers, all right. But it's also admitting it can't do anything about the fact that the bankers have better tax planners than the Treasury. It is a statement of blame and also an admission that the government can't do anything about it.
Or maybe it can. Maybe the code would help. But, tell me: Would you sign up with a bank whose tax department was committed to not reducing your own and your company's tax bill, but just meekly paying up the maximum amount to the government? I thought not.
FINGER-POINTING: III
You may have noticed the brutal treatment of politicians at the hands of UK newspapers, specifically The Daily Telegraph. Now the BBC, as a quasi-public body, has published expenses of its senior employees – under pressure from the UK Government, I suspect. Next up… The Daily Telegraph, owned as it is by ultra-secretive proprietors, the Barclay brothers? I think not. If the finger-pointing continues much longer, the accusers themselves will be accused. And we couldn't have that, could we?
- Martin Baker is a journalist, author and commentator on business affairs
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