Jul 01 2013

Is PPI “the worst scandal in the history of British banking?”

Posted by: Nick Shaxson in: Thoughts

John Lanchester has an article in the London Review of Books about financial scandals. He says:

In the midst of this cacophony of largely justified accusations, the banks have had a strange kind of good fortune: the noise is now so loud that it’s become hard to hear specific complaints of wrongdoing. That’s lucky for them, because there’s one particular scandal which really deserves to stand out. The scandal I have in mind is that of mis-sold payment protection insurance (PPI).
. . .
PPI is the worst scandal in the history of British banking

Goodness. That’s quite a claim. I would make a couple of points here, apart from the fact that I think that this is far too bold a statement, in light of the BCCI affair, the HSBC affair, the Standard Chartered Affair, the AIG affair, the . . .

First, not trivially, he uses the euphemism ‘mis-sold’, which is the term traditionally used to describe this admittedly monstrous episode. But I’d take exception with this, and agree with an entry in Rowan’s blog last year, entitled Why the PPI scandal must be called by its proper name – which is organised criminal fraud.

Second, I’ll highlight another paragraph from Lanchester’s article:

“This is a story as old as gambling itself. The question we should ask ourselves about these incidents is why they happened in London, and why London has become the global capital of this kind of trading, and what the costs and consequences are for us as a society. That’s a large question and it’s strange that in all the fury and rhetoric and publicity swirling around the City, it has gone largely unasked: are we benefiting from the fact that London is a global financial centre, or do the costs outweigh the benefits?”

That, for me, is the biggest scandal: the giant to overpower all the others. I’ve just written a blog about London as the epicentre of all this kind of stuff, here, with pointers to some bad recent examples.

And, for the “do the costs outweigh the benefits?” as the largely unasked British question: well, in my opinion the biggest recent asking of that question came here. It’s a work in progress.

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