the Greek case
If we take a look at the Greek legislation, we can understand why the country is totally controlled by big private banks. According to the legislation concerning operating rules of the Primary Dealers selected in order to provide specialised services in the government securities market , one can read that:
From article 1, paragraph1: as Primary Dealers are appointed institutions authorised as credit institutions or investment firms in a country which is a member of the European Union or authorised as such in another jurisdiction by a regulatory authority which, in the opinion of the Minister of Finance and the Governor of the Bank of Greece (hereinafter “the Competent Authorities”), imposes an adequate supervisory/investor protection regime. Primary Dealers are selected in order to provide specialised services in the government securities market, i.e., to participate in the syndications and auctions of Greek government securities in the primary market as well as to trade such securities in the Electronic Secondary Securities Market (hereinafter “HDAT”) at prices that they are obliged to announce.
From article 4, paragraphs Da and Db: Primary Dealers are required to facilitate a broad distribution of Greek government securities domestically as well as internationally and provide the Ministry of Finance, the Public Debt Management Agency (PDMA) and the Bank of Greece with advice, information on and assessment of market conditions, and other information pertaining to their status as Primary Dealers.
From article 5, paragraphs 1d, 1e, 1f, 1g: Primary Dealers enjoy privileged access to information pertaining to the borrowing needs of the Hellenic Republic and issuance planning, new financial instruments and relating operating rules, securities in circulation, volume and turn-over as well as auction results. Exclusive access to short-term securities lending mechanisms that may be created in order to facilitate hedging (short selling). Privileged access to syndication pursuant to Article 13. Privileged access to liabilities management. The Public Debt Management Agency (PDMA) shall take into account the credit rating of the counterparty with which it shall perform such transactions.
From article 9: The Committee responsible for Primary Dealers’ Supervision and Control is set up by a joint decision of the Competent Authorities and consists of 10 members representing the following institutions: two representatives of the Bank of Greece, three representatives of the Ministry of Finance, one of which from the Public Debt Management Agency (PDMA), three representatives of the Primary Dealers, one representative of the Dealers, one representative of the Hellenic Banks Association. The Committee is presided over by one of the two representatives of the Bank of Greece and decides with a majority of at least seven of its members.
According to the Greek PDMA website, the primary dealers are currently the following 22 banks: Alpha Bank, Banca IMI Spa, Barclays Bank plc, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Emporiki Bank, EFG Eurobank, Goldman Sachs, HSBC, ING Bank, JP Morgan, Merill Lynch, Morgan Stanley, National Bank of Greece, Nomura, Piraeus Bank, RBS, Societe Generale, UBS, Unicredit.
Despite the swap scandal of "fixing" the Greek deficit by Goldman Sachs, for which the Greek government paid the bank at least 300 million euros, (http://www.nytimes.com/2010/02/14/business/global/14debt.html?pagewanted=all&_r=0), Goldman Sachs is included in the Primary Dealers list, in order to continue providing "valuable services - advice" to the Greek government. Another two banks, Merrill Lynch and Citigroup, are included in the Primary Dealers list, despite that according to the US Financial Crisis Inquiry Commission (FCIC) report, together with Goldman Sachs, are those responsible for the "creation" of 30% of the destructive financial "tools" known as CDOs during 2004-2007, which contributed significantly to the creation of the housing bubble in US. Two more banks which had significant presence in CDOs that time are Deutsche Bank and UBS, which also continue to be two of the twenty two Primary Dealers.
Another bank based in Greece, Piraeus Bank, is also included to the Primary Dealers list. It is worth to remember the scandal of "selling" the healthy part of public bank Agrotiki to Piraeus Bank in July 2012. The governor of the Bank of Greece, George Provopoulos, had stated that it was a necessary action because the European Central Bank was about to cut the necessary amount of 6,3 billion euros and Agrotiki would have closed, so, many people would have lost their jobs. However, according to the bill concerning this "selling", the difference between assets and liabilities of Agrotiki Bank, was nearly 6,67 billion euros and should be covered exclusively by the Greek Financial Stability Fund, ie the Greek taxpayers! Which means that the "selling" was targeting only to assist a private bank (Piraeus) to eliminate a competitor (public bank Agrotiki), and secure its position in the "Too Big to Fail" category.
Those banks are permanently included in the Primary Dealers list and according to a "riddled" legislation, they have the right to participate in all liquidity processes by the Greek Public in money markets, to supervise and control these processes, as well as enjoying special privileges.
It is characteristic that the committee, which is responsible to control and supervise primary dealers, consists of 10 members, 5 of them represent private banks interests, according to the article 9. However, knowing that the Bank of Greece is, in high percentage, a private institution, then private interests dominate in the committee with a fraction of 7/10, just as much as they need to decide in favor of banking cartels.
Also, since no one knows who are the basic stockholders of the Bank of Greece, it would be no surprise if the basic stockholders are the same private banks which participate in committee which supervise the primary dealers.
The Greek case shows that the supposed free market is just an illusion, especially in the banking industry. The biggest private banks created a complex financial environment with complex financial destructive "tools" which governments are unable to manage. Governments are forced to turn to the same banks for "advising services" while they are flooded with former bank executives placed in key positions. This explains why the biggest private banks receive bailout packages of billions at the expense of taxpayers, loading governments with more debt.