Michael Meacher MP

Ernst & Young, one of the world’s ‘Big Four’ accountancy forms, has been found to have allowed Lehman Brothers, the vast US investment bank that collapsed in September 2008, to hide $50bn (£34bn) of debt off its books in an effort to show its financial position was much stronger than it was.   This misled investors, as it was intended to do, and fundamentally distorted the market until the bank finally crashed for other reasons.

The device used was a sales programme known as Repo 105 which via the artificial sale and buy-back of deals made it look as though a company or bank hadn’t borrowed as much money as it actually had.   The trick has been described as ‘window dressing’ or an ‘accountancy gimmick’.   It may seem arcane, but the deceit is deliberately perpetrated on a scale to enrich or impoverish millions.   No burglary or larceny gets within a million miles of it. (more…)

The news this weekend abounds with conflicts of interest:

*  Insider dealing (making a killing in buying or selling shares by using information to which one is privy inside an organisation, but which is not known to the public outside) persists in the City of London on a huge scale.   There were 1,485 tip-offs (‘suspicious transaction reports’) notified to the FSA over the last 5 years, leading to just 6 rogue dealers being convicted, compared with 584 in the US over the same period.   Why are we so complacent about this?

*  Notoriously the Financial Services Authority (FSA), the bank regulator, has failed over this issue to tackle the big names in the banking and trading establishment – unlike again what has happened in the US.   Might that be because the FSA is funded by the banking industry?