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bankers bonuses, financial crisis banks HBOS RBS, public spending cuts

Tell the bankers where to go

   There comes a time in the affairs of men, as Roosevelt said,  when the  people decide that enough is enough.  When the national mood hardens from indignation to resolve, and politicians are forced finally to act.  It happened when the House of Lords, a bastion of unelected  privilege, tried to destroy Lloyd George’s welfare  budgets before the First World War – that led to a curb on the legislative power of the Upper House.
  Arguably it happened again during the Winter of Discontent, thirty years ago, when the public finally decided that the trades union barons had simply got out of control. That led to Margaret Thatcher, the industrial relations acts and the destruction of the trades union movement.  And I believe it is happening again with British bankers following last week’s disastrous attempt by the Royal Bank of Scotland to hold the country to ransom 

  A bit over the top that? Bankers don’t do ransom, do they?  They’re decent chaps who went to good schools and give to charity.  They wouldn’t hold a gun to the head of the government and demand £1.5 billion pounds with menaces, like Alan Rickman in Die Hard.  Actually, they would and that is exactly what they did last week.  The board of Royal Bank of Scotland said, in effect, give us the money or we will wreck this bank, bring down the government and endanger the financial system.  The RBS is one of the biggest banks in the world, with a balance sheet of over £2trillion – more than the GDP of the entire UK..  If the board had resigned the City of London would’ve been plunged into chaos: bank stocks would’ve crashed and other banks would likely have withdrawn their funds, risking another Lehmans. 

   The Royal banksters were behaving far worse than any trades unionists in the 1970, using their economic leverage to demand excessive reward, holding the country to ransom, threatening the livelihoods of millions.   The difference is that no trades unionist never went on strike for a million pound pay claim.  And when they went to number ten, they only expected beer and sandwiches – not a banking rescue that has so far amounted to £850,000,000,000 of taxpayers money, according to the Audit Commission. 

   Now regular readers of this column will know that I don’t hold bankers in particularly high regard.  Banking is relatively simple way of making money.  When you borrow money from the Bank of England at base lending rate of 0,5% and then lend it out to mortgages at 5% and to small businesses at 10.5%, it doesn’t take a genius to work out how they make their money in RBS.  There is nothing in retai banking that couldn’t be done by a competent civil servant earning £60,000 a year.  

   Not, I grant you, investment banking which is an altogether more demanding activity, involving big risks on complex financial instruments.  But surely we have learned by now that high street banks should not be engaging in casino banking because it puts at risk the savings of millions of people.  Speculation with other peoples’ money is not only immoral, it is highly dangerous to the fiancial system as a whole.  Investment banking should be a wholly private activity –  like hedge funds and private equity – conducted by savvy investors who get high rewards when they win, but don’t come running to the government when they lose. 

     Forget the nonsense about “fiduciary duty” and the risk of RBS losing its best bankers.  There’s no fiduciary duty to pay excessive salaries in a nationalised industry, and if the speculators want to leave, let them.  There are traders in Royal Bank of Scotland earning £20 million a year, and they don’t behave like Captain Mainwairing in Dad’s Army.  These were the over-paid spivs who caused the crash. A culture of avaricious self-destructive short termism is alive and well in the City and living off our tax receipts.  Which is exactly what this column forecast would happen after the banking rescue last year when,  instead of restructuring the banking sector,  the government allowed giant behemoth banks, unreformed and unrepentant,  to gain access to almost unlimited amounts of public money. They know they are too big to fail, so they are throwing their weight about.    

   This isn’t just an issue for the City of London.  We learned last week that over eight hundred public sector employees are earning more than the prime minister.  Nowadays, it is possible to earn more than a million a year as a public servant.   Pen pushing bureaucrats in dowdy council offices, many of them virtually unemployable,  are now strutting around like Fred Goodwin shooting their cuffs and demanding bonuses to give them an ‘incentive’.   Countless hospital administrators are parking their BMWs and gabbling clichés from The Apprentice.  Finance culture has damaged he fabric of the economy by turning us into a nation of bonus hunters, while, British manufacturing has shrunk to only 11% of GDP. 

    Thanks to our overdependence on financial services, Britain is last out of recession and so heavily overdrawn that there’s a real danger that the world is about to foreclose on Great Britain PLC.  We are on course for a deficit of 13% of GDP – the highest in the G8 and unsustainable.  The public sector is going to have to be cut.  People are going to lose their jobs.  Services will disappear.  No government can curb public sector pay and demand these kind of sacrifices while allowing state owned bankers to pay themselves billions in bonuses. Every one of those RBS board members would have been out of a job if the Bank of You and Me hadn’t come along with unlimited overdraft facilities. 

  Well no more. The British public will not stand for it.   Across the entire United Kingdom  on Thursday, motorists were pulling into lay-bys and furiously texting to the nearest radio station their disgust at what they had been hearing from RBS.   BBC drive time presenters struggled to cope with the magnitude of public anger. The  government must now listen to the people, block the bonuses, and drag bankers into the real world.  And if the RBS board threaten to resign, the Chancellor should say, in the words of Oliver Cromwell:   ‘Depart, I say, and let us have done with you. In the name of God, go!’

About iain2macwhirter

Writer and journalist.


6 thoughts on “Tell the bankers where to go

  1. yes – just call their bluff. Eeither way, we win

    Posted by Aye We Can ! | December 6, 2009, 10:45 am
  2. It's time for change for sure Iain.Time to say no to the bankers as Thatcher said no to the unions.Time to look at the Commons and the Lords, the BBC and Quangoland, councils and the civil service.The banking crisis has left us in a mess as you point out. We are broke, bankrupt (maybe Mr Murphy would like to take the next opportunity to apologise to Iceland and Ireland) and we need to re-evaluate what is important, what deserves money, and what does not. There will have to be changes. Some people will have to take less, have fewer privileges, lose some pension… It happens to shipyard workers and steel workers; it happens to shop workers and call centre workers. Why wouldn’t it happen to “deputy assistant under heads of equality”?Why is it that pensioners and sick people will be the ones to suffer as we cut our coats according to our cloth? Why not some of the well offs, the glitterati, the chatterers?And if the answer is that they will go elsewhere, then my response is bye bye, adieu…If they are the brightest and the best and they got us into this mess, then them going aboard in a hissy fit because they can’t have everything they want when they want it, seems to me, will be someone else’s misfortune, and cause for us to celebrate.I wonder: Who would want them?

    Posted by tris | December 6, 2009, 4:26 pm
  3. "There’s no fiduciary duty to pay excessive salaries in a nationalised industry"But it's not a nationalised industry, is it? RBS is still a publicly quoted company with shareholders around the world and probably in your own pension pot. As such the directors have a fiduciary duty under company law to all shareholders, not just to the majority state shareholding. I certainly wouldn't want to be one of those directors no matter what the salary. Things would be different had the government actually nationalised the bank, but they didn't. The loss of the top revenue generators in RBS will certainly make it less likely to survive and repay its loans to the taxpayer.Needless-to-say, I don't think that the banks should have been rescued by the taxpayer, or rather by the political class using the taxpayers' money. The whole mess will continue to get worse until we get rid of the underlying cause – the politically created fractional reserve banking system.

    Posted by David Farrer | December 6, 2009, 5:10 pm
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    Posted by Anonymous | December 6, 2009, 10:07 pm
  5. Bravo, Iain. I love the way we're constantly told that if we don't pay these people obscene amounts of money, they will leave. Looking at the events of the last 18 months, had we had our banks run by Wayne Rooney, the cast of Big Brother 8 and a monkey, exactly how much more damage could they have done to the economy than these business geniuses actually did?

    Posted by RevStu | December 7, 2009, 9:35 pm
  6. These banksters are behaving like spoiled brats, stamping their petulant little feet in a tantrum because they're not getting the sweeties they are demanding. Greedy little boys (and girls).I wonder what their mothers used to do when they behaved like that as children?Mine would certainly have spanked me soundly on the bottom for such bad behaviour. (I do remember a tartan slipper, in fact. Thankfully, only the once). You can't do that these days, of course (more's the pity, some might say). But these greedy, spoilt banksters can certainly be rounded up and sent to the naughty corner.For good.Without any sweets.

    Posted by Quinie fae Angus | December 8, 2009, 4:21 pm

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