Scandal at Barclays bank

There has been more embarrassment for the banking sector, yesterday Barclays was found guilty of trying to change lending rates to suit its business. The bank was fined £290 million pounds by British and American regulators.

United States Commodity Futures Trading Commission – “as a result of instructions from Barclays’ senior management, the Bank routinely made artificially low LIBOR submissions to protect Barclays’ reputation from negative market and media perceptions concerning Barclays’ financial condition.”

The reason why Barclays was fined so heavily is that by illegally changing the interest rate, it determined how much money Barclays could make or limit how much it could lose. The London Interbank Offered Rate, or LIBOR (despite the name, it is global), governs what is known as derivatives, which is a major international market worth 100s of trillions of pounds, more than global GDP! There were huge incentives for Barclays to fix the rate but in doing so they changed the rates of interest people paid on their mortgages and other loans. This has caused widespread anger amongst the political scene, Lord Oakeshott of the Liberal Democrats has called for the CEO of Barclays, Bob Diamond, to resign or be sacked, and he was joined in this by many Conservative and Labour MPs.

Unfortunately it looks like Barclays won’t be the only bank facing sanctions, Royal Bank of Scotland, the Swiss bank UBS, Germany bank Deutsch bank and the American Citi Group are all thought to have tried to change the LIBOR. The fear in government is that this scandal will seriously damage the City’s reputation for good banking, it is has been less than five years since bad loans caused the recession and this will kill off any reputation the banking sector had left.

Banking has to change as we know it or more scandals like this one and more recessions, like the one we are currently in, will keep occurring again and again. Change has to come before the public will begin to trust their banks.

Victory for Obamacare!

Today Obama can celebrate as he has won a major victory over his Republican rivals.

Obama’s landmark domestic legislation, the Affordable Care Act, was challenged as unconstitutional by 26 states and Republicans. The Supreme Court decided that the provision in the Bill that requires nearly all Americans to buy health insurance was constitutional as it amounted to a tax. The decision has surprised a lot of people, most believed that the provision would be struck down by the Conservative majority on the bench, but of the nine judges, five voted in favour of the provision. The four liberal judges were joined by the conservative John Roberts, most people believed that if anyone was to vote in favour of the provision it would be the “swing vote” of Anthony Kennedy.

This is the biggest decision the court has taken since Bush vs Gore in 2000, in which the court controversially decided to hand the presidency to George W. Bush.

So what exactly is the Affordable Care Act anyway? Well it is basically an attempt to extend medical coverage to all Americans; right now around 50 million Americans are uninsured or underinsured. The Bill has a number of proposals, firstly that health insurance companies cannot discriminate against people who have pre-existing conditions, and they have to provide them with coverage at the same price as a healthy person. The problem with this is that it pushes premiums up slightly for everyone, so some healthy people decide not to buy health insurance, which in turn pushes up premiums for the remaining people. This causes another batch of relatively healthy people to decide not to purchase health insurance, which again drives up premiums for everyone else. This continues until premiums are ridiculously expensive and most people cannot afford to buy them. This is where the individual mandate comes in to force; by requiring all Americans to purchase health insurance, premiums are kept cheap and affordable. This isn’t even theory, in states that introduced the first condition (no discrimination against people with pre-existing conditions) without introducing the individual mandate their insurance markets were destroyed. On the other hand in states such as Massachusetts, which introduced both conditions, have the cheapest health insurance in the USA and most people are covered.

What I find most amazing about the whole health insurance debacle is the fact that Republicans oppose it. They have been claiming over the past couple of years that the individual mandate is unconstitutional and morally wrong. It just shows that the Republicans have no conviction. The individual mandate is a Republican idea. Not only is it a Republican idea, it’s something they’ve believed it for decades, right since the 1990s. In 2006 Mitt Romney introduced it to Massachusetts! The fact that they have changed their minds just because Obama supports it shows that Republicans cannot be trusted.

Today has been a significant victory for the Democrats and a major boost before the November election! Good luck to them.

A Symbol of Reconciliation

Today was a historic day in Northern Irish politics. Martin McGuinness, ex-commander of the IRA, shook hands with Queen Elizabeth II.

Even a few years ago this event could not have happened, but ever since 1998 relationships have become amicable and tensions seriously reduced. The visit by the Queen to the Republic of Ireland in 2011 (the first since 1911) and her visit to the Garden of Remembrance in Dublin, where she laid a wreath in memory of those who fought against the British for Irish Independence, helped to further cool relations between Republicans and the Monarchy.

The public, including hard-line Republicans and hard-line Loyalists, seem to be largely delighted with the handshake. Both sides recognise that normality may finally have come to Northern Ireland after almost 100 years of violence and trouble.

The Queen and Martin McGuinness shaking hands

Yet there is still work to be done, Northern Ireland is far from perfect, to move forward Northern Ireland needs investment and new infrastructure. In moving forward the past should be left behind, but not forgotten, so we can build a better, brighter future for Northern Ireland.

Another Economy Bites the Dust

Cyprus has become the fifth country to ask the EU for a bailout, its failing bank sector has caused it to seek the financial aid of the Eurozone. It is thought that it will ask for between €5 billion and €10 billion. Although this is very small in comparison to the other bailouts, it is still significant; now five of the 17 Eurozone countries have asked for bailouts, with the possibility of more in the form of Italy and maybe even Belgium.

So what is there left for the Eurozone now? Merkel has ruled out the possibility of euro-bonds once again, but this could change; she also said there would be no bailouts. It would appear as if the whole Eurozone is unravelling, there has been very little decisive leadership coming from Brussels or Berlin or Paris. Unless they sort this crisis out we will have a lost generation on our hands.

The Cypriot Bailout Marks the Sixth in the Crisis
source: americanhellenic.org

Syrian Crisis Intensifies

The conflict in Syria has continued to heat up. Accusations have been flying around on the international stage that Russia is supporting the Syrian government and the West is supporting the Free Syrian Army. The reality of it is this; Russia is selling arms to Syria, the West is not selling arms to the rebels.  I find it ironic that in the UN Security Council Russia has vetoed any resolutions on Syria because it does not want to interfere in the affairs of another nation. Whilst it is saying this at the UN it is providing one side of the conflict with arms and helping to fuel the fires of destruction and murder.

Tensions between Syria and Turkey have also been flaring up over the past few days; Syria shot down a Turkish jet that was in international waters and fired at another. Two lives were lost and Turkey has reacted angrily to its old ally.

The whole conflict has raised many questions over what to do, personally I believe a UN Peacekeeping operation is what is required, which would include troops from Western and Arab nations as well as Russia. One solution proposed is arming the rebels, I would be a bit cautious about this, the weapons could easily fall into the wrong hands. America arming the Taliban didn’t work out very well in the long run.

The West should recognise that the MENA (Middle East and North Africa) region is a very unstable one, as the 2011 revolutions show, so acting recklessly could have serious ramifications for the future. 

Suu Kyi Visits Britain

It was Aung San Suu Kyi’s birthday yesterday and she was celebrating it in Oxford. After collecting her Nobel Peace Prize in Oslo earlier in the week, Suu Kyi made her way to the UK where she spoke to journalists and old friends. She visited the BBC World Service earlier in the day, she says that the BBC was her lifeline to the outside world and gave her hope.

Although the progress made in Burma is immense, we must not forget that the transition to democracy is far from complete. Suu Kyi also warns that all the progress already made could be undone if the transition is not handled correctly. Currently in parliament her party control only a small minority of seats; in the “Pyithu Hluttaw” (similar to the House of Commons in the UK or the House of Representatives in the US) her party, the National League for Democracy, has only 37 of the 440 available seats. Compare this to the party of the government (the Union, Solidarity and Development Party) which currently controls 212 of the seats and the military which is automatically allocated 110 seats, 25% of the total. In any new constitution Suu Kyi and her western allies will be demanding that the privileged position of the military be slowly eroded away.

Yet problems in Myanmar/.Burma have been escalating in recent weeks, the government has had to resist rebel armies along Burma’s eastern borders. Ethnic and sectarian tensions are also flaring up between Buddhists and Muslims along the border with Bangladesh. It would not take a huge amount of violence to destabilise the government and hamper the transition to democracy.

To see a country move from dictatorship to democracy is a beautiful one, hopefully Syria can find an Aung San Suu Kyi to lead them out of the darkness and into the light.

The Democracy leader in Oxford yesterday
Source: ITV News

Markets React Poorly to Greek Election

Well the markets didn't react particularly well to the news of stability in Greece, apparently the markets don’t like stability. In the end the results of the election are as follows:

New Democracy: 129

SYRIZA: 71

PASOK: 33

Democratic Left: 17

Communist KKE: 12
Independent Greeks: 20
Golden Dawn: 18

Although the result doesn’t look close between ND and SYRIZA, in a Greek election the first party gets awarded 50 extra seats, in terms of percentage ND was barely ahead of SYRIZA. Now the job of forming a coalition falls to Antonis Samaras, leader of ND; to achieve a majority he will need only 22 extra seats (151 seats required for a majority). It is expected that ND will get the support of pro-bailout party PASOK and marginal support from the Democratic Left.

So there should be no problem forming a coalition, but what is important here is that Golden Dawn still polled strongly at almost 7%. This is despite the assault of two politicians on live television by the spokesperson of the party and the fact that the party continue to back the assailant.

Regardless of the political impact in Greece, the economic impact is what the rest of the world is interested it. Most people were disappointed in the markets reluctance to accept that Greece was at least somewhat stable. Leaders at the G20 summit in Los Gabos, Mexico are meeting to discuss global issues; at the centre will be the world’s 35^th largest economy, Greece.  Almost immediately after the election results were in Merkel issued a statement saying the bailout deal was non-negotiable. This will not go down well in Greece, many Greeks voted for the pro-bailout parties in the belief that they would go to Brussels and negotiate a less tough deal for Greece. But don’t forget Merkel also said there would be no bailouts two years ago; there have been five since then. Most economists do believe that the austerity in Greece is too harsh, even some centre-right economists. Greece needs to be given slightly looser terms, otherwise a third bailout may be necessary. This is something that Merkel will want to avoid at all costs.

The crisis is far from over, it will continue to dominate the news for the rest of the year.