Even more on the banks
Today’s newspapers confirm my unease about the Barclays deal.
It is now abundantly clear that the senior Barclays management have favoured their bonuses over the interests of their shareholders. The costs of capitalisation from the Gulf will be greater than the costs of accepting the deal on offer from the British government. The greater costs will be borne by existing shareholders, which – particularly in a blue chip company like Barclays – will include a lot of pensions funds and ordinary peoples’ savings.
“With a government representative on the board, Barclays may also have struggled to rationalise the multimillion-pound bonuses paid to top executives such as Bob Diamond, the bank’s president, who last year took home £21 million in cash and shares.
The Government and the financial regulator have promised to crack down on big payouts at banks that are struggling to get through the financial crisis. A rival banker said: “They’ve put their own personal position above the interests of their shareholders. This is called feather-bedding.” But Marcus Agius, Barclays’ chairman, said: “It’s to do with self-determination and the ability to decide our own destiny.”
Destiny is perhaps the most ingenious euphemism for bonuses so far.
Meanwhile over at RBS the Guardian reports they are set to pay not much short of £2 billion (1.79 to be precise) for pay and bonuses in its investment banking division – which caused a £5.9 billion writedown in Barclays profits last year. I make that 9 per cent of government aid going staright to the emoluments of the Barclay’s investment bankers.
While the government was undoubtedly right to let the HBOS/Lloyds merger go through despite competition concerns, we are going to end up with a much less competitive banking sector – which is bad news for all bank consumers as Which? point out. Indeed they have a great campaign site at www.weownthebanks.co.uk.
And as Polly Toynbee reports small businesses are finding credit harder to get and more expensive. This is clearly a severe problem, and one wonders why small business organisations have wasted so much time arguing against the extension of the simple right to request flexible working. Even if they won this, it is hard to see how it would save a single job or business.
It is becoming more and more clear that the government has yet to think through all the consequences of rescuing the banks – and the failure of the banking business model, which is the root cause of the crisis.
The tabloids love a good scrounger story. It is beginning to look as if the banks are Britain’s biggest scroungers. The government is going to need an extremely tough welfare reform programme to turn them back into useful citizens.