‘The men who plundered Europe’: bankers on trial for stealing €60 billion

‘The men who plundered Europe’: bankers on trial for stealing €60 billion, by Philip Oltermann.

They have been called “the men who plundered Europe”: a group of cowboy traders, seasoned tax lawyers and mathematical whizz kids who are alleged to have conspired in the heart of the City of London to siphon at least €60bn in taxpayers’ money from the state coffers of several EU countries.

In Britain, the so-called “cum-ex” scandal, named after the complex derivatives juggling act employed, gained little attention amid the frenzied debate around the UK’s departure from the European Union when the fraud scheme was discovered in 2017. …

Hailed as a maths prodigy at school, Shields accepted a junior position at Merrill Lynch after studying engineering, economics and management at Oxford University because the trading room floor offered him a thrilling, dynamic environment. He was not alone: of 120 engineers in his year group at university, Shields added, only five went into engineering. …

The financial rewards were breathtaking: for the five years in which Shields practised cum-ex trades through Gibraltar-based investment vehicle Ballance Capital, his personal income amounted to €12m. In 2010 Shields and his wife managed to purchase a £9.7m mansion on Chelsea’s Egerton Crescent, followed by a €6m Edwardian terrace on Shrewsbury Road, Dublin’s most expensive residential street. …

Estimated losses include an estimated €31.8 bn Germany, at least €17bn for France, €4.5bn in Italy, €1.7bn in Denmark and €201m for Belgium.

“The Cologne investigations have now reached a point that prosecutors say that cum-ex wasn’t a legal tax-driven trading strategy, but organised white-collar crime of unimaginable magnitude,” the minister said.

Philip:

Perverse incentives producing perverse outcomes. From this superficial reporting, it would appear that all of it was completely legal. Of course the market is smarter than the treasury and tax gangs. They will jail them for long periods on the basis of technicalities because it is impossible to ever completely comply with any regulation.

One of the best lines from Minder was Denis Waterman, who said he thought “merchant banker” was just rhyming slang.

Since freeing the currencies from the discipline of gold in 1971, the finance industry has gone from making about 5% of profits in the West to about 50%. What a waste of talent and energy. Obviously it’s good for some, but it’s no coincidence that working and middle class real incomes basically stalled around the 1970s and never resumed going up.

hat-tip Philip Barton