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Facing a mounting row over bonuses, bank chiefs are running out of arguments against nationalisation...
Even six months ago, it would have seemed a preposterous comparison. But as the row over bank bonuses rages, it is clear that the trade union barons who regularly held the country to ransom 30 years ago are the role models for today's bankers.
Just as the union bosses came to believe they had a divine right to whatever they could loot from the rest of society, so is it with the bankers. They have lost the ability to see themselves as others see them. They have become so wrapped up in themselves that they cannot see that their talk about risk and reward is to most observers nothing more than a self-serving fig leaf for unbridled greed. And just as for the unions in the Seventies, that hubris will have political as well as economic consequences.
The bankers may get a nasty shock this week. The Treasury has ordered an inquiry into bonuses, headed by ex-City regulator Sir David Walker, although it will not report for almost a year. Less comfortable will be the grilling the bankers get tomorrow and on Wednesday from the Treasury Select Committee. Several of the most prominent - including Sir Fred Goodwin, lately of Royal Bank of Scotland, Eric Daniels of Lloyds and John Varley of Barclays - will appear before MPs trying to get to the bottom of why this banking crisis happened.
Or at least that's what the committee claims to be doing. One suspects, however, that having got the bankers in the stocks, the committee will treat them like the villains of medieval times, whether or not they are guilty as charged. The accused may escape physical punishment but there will be a lot of stuff thrown at them with considerable force from very close range, very little of which will be pleasant.
But who is to say they don't deserve it? They are the leaders of a bankrupt industry destroyed in large part by their own hand - yet they behave as if life can go on as it did before. There can be no other explanation for the decisions to continue to pay bonuses to all and sundry.
Reports over the weekend suggested that upwards of £1 billion will be paid out to selected staff at RBS, regardless of the fact that the bank lost £28 billion last year and only remains afloat thanks to state funds and who knows how much in guarantees.
Reports circulate that Lloyds will go down the same path, its justification being that its people hit all the internal targets set for them. Perhaps they did, but they also hit some they were not meant to - not least of which was the truly disastrous decision to buy HBOS, which has almost wiped out their shareholders, forced the company to scrap the dividend and reduced to penury many people who were relying on it for income in retirement. Meanwhile, Barclays will today announce more than £600 million in bonuses.
In any other walk of life, if the company goes bust, everybody loses their job - the rich and the poor, the innocent and the guilty, the hard-working and the feckless. The Lloyds board says that the HBOS deal will still turn out all right in the end, provided taxpayers do not withdraw the support that keeps the bank afloat. But if they are so sure, why don't they wait until that is proved before claiming their bonus?
What is it about bankers that makes them think their business can go bust but they must feel no personal pain? Part of the reason is that they have had it their own way for so long that they now think this is an entitlement. For some years now, politicians in thrall to the apparent wealth generated by the City have allowed them to be a law unto themselves - a view summed up in Peter Mandelson's famous comment that Labour was "seriously relaxed about people getting filthy rich".
The City took the hint. Typical was the head of one investment bank who in happier times, two years ago, turned down a request for a media interview with the boast that if he wanted some law changed he went into the Treasury and demanded it. If the politicians wanted a law changed, he had them so cowed that they would sound him out in advance and give him the chance to kill it. So why should he care what the press and society thought of him or his organisation?
Just like the union leaders of 30 years ago, bankers completely fail to see that they have gone too far, that politicians and the public have had enough. Gordon Brown may still be desperately trying to avoid nationalising the banks because he thinks it would be electoral suicide to appear so socialist. But the reality may well be that by the end of this row over bonuses, it will be electoral suicide not to nationalise them - so dramatic has been the shift in public mood, so far have we moved in the few short months of this crisis.
Labour prime minister Jim Callaghan, when he saw the rising tide of popularity for Margaret Thatcher in the Seventies, talked of a once-in-a-generation shift in the public mood that politicians were powerless to resist. The pendulum may be about to swing again.
This gives a new twist to the talk of bank nationalisation. Thus far the driver has been economic - it is discussed as a quick way to get to the heart of the financial crisis, and put to an end what might otherwise become a painfully long-drawn-out, zombie-like existence of RBS and possibly Lloyds, in which they will be too weak to do anything useful and too poor to solve their problems on their own.
This rationale largely recognises the fact that if everything is brought under state ownership it would become much easier to hive off the toxic assets into a "bad bank" where they could be left like a nuclear waste site, gradually to become safe and re-usable, while the clean part of the bank could quickly return to its traditional business of deposits and lending. In this case nationalisation works not because the state has deep pockets, but because it removes the private-sector conflict between who pays the costs and who gets any profits. The taxpayer does both.
Now, however, the national mood is changing: the economic rationale is giving way to the political. Growing numbers of the public, including people who have never voted Labour in their lives and do not intend to start now, are coming to see nationalisation as an instrument of revenge - as the only way to clean the banks out, purge them of their excess, put a stop to the greed and restore this arrogant breed to their rightful, much-reduced place in society. They want the Government to do to the banks what Thatcher did to the unions.
This week's grilling may well be the banking industry's last chance to explain why it does not deserve such a fate.
Reader views (23)
Wonder if the leaker of MP's expenses was offered any inducement. Certainly has taken the heat off the bankers.
- Andrew, Stockton, UK, 12/05/2009 22:36
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Does anyone really believe that handing the banks over to this shower in Westminster will improve them, or that we taxpayers will ever see any "return" on our investments in them thus far? It was the government regulators that didn't do their job in the first place.
- Wa, Oxfordshire, UK, 11/02/2009 11:58
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Kuklip, London.. The utilities in Britain have already been nationalised but by the French government.
- Casper Slides, France at the moment, 11/02/2009 11:07
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Why dont we nationlalise all essential services, gas, electricty, water, banks, railways. That way these companies wont be trying to make profits for their shareholders, they will be providing an essential service to the general public, who they will be directly accountable to.
- Kuldip, London, UK, 10/02/2009 14:40
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Let's simply get on with immediately nationalizing the banks for the good of Britain PLC!
- Fraser, Telford Park, 10/02/2009 13:53
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Before anyone considers nationalising the Banks they should think about the British Car Industry, British Coal Industry, British Steel Industry etc. Where are they now? If they do nationalise them most sensible people will move their money out and into Abbey or a Building society.
- Roger, London, 10/02/2009 13:36
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When every last penny has been drained by these greedy pigs, only then will they offer it to be nationalised (when completey bust, empty and unhideable). We as taxpayers need to watch out....
- Dc, London, 10/02/2009 11:52
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Barclays, while not receiving government funds, benefits from depositor insurance backed to the hilt by government. It's in the frame. Attitudes of its senior executives differ in no way from those of RBS etc: It's just had a bit of luck this time, in that it lost out in the ABN acquisition.
Let's get back to the careful banks of the early Eighties. This means new leadership and a renewing of the culture of thrift and prudence.
- Dr G Ledgerwood, Maidstone, 10/02/2009 11:05
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Why are Barclays mentioned in this article. They have not gone to the government for cash. They are a private company, free to do what they like. The shareholders are mainly middle-east based. I wonder why they are mentioned in the same sentance as the truly bankrupt UK banks?
- Fred Robinson, london, 09/02/2009 23:30
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.. and Lord Mandy will return his EU payoff I suppose?
- Joe, Thornton Heath, UK, 09/02/2009 18:20
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Please take me back to 1949. so I can start again.
- David,Chertsey, Chertsey.UK., 09/02/2009 18:17
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Go ahead. Stop the bonus's. Nationalize "the banks", great! Now send the mediocrities from Whitehall in to run them. Great! The clearing banks were appalling anyway so who cares?
Within 2 years the real talent would have left these national banks and reformed elsewhere and start again.
Corporate lending is a ultra low margin business, consumer lending is in deep trouble. Look at all the other profit centres in banks...most if not all losing money right now! But guess what there are some very profitable areas, I wonder why? Simple, talent, trading talent which is very mobile. These bank assets leave the building every day .. if they don't come in to work...well then all you have left are loss making businesses! Great so now the tax payer ownsand controls a financial version of British Leyland ... what an exciting thought!
- James Ritchie, Oyster Bay Cove, NY, USA, 09/02/2009 17:13
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It is an easy target to accuse the bankers of greed, ignoring all those customers who tried to buy their new life style on credit. Is a bank run by the government going to be any more efficient? If you limit the salaries here, the good and talented bankers will go elsewhere, and why people might say good riddance, they forget that everyone, from the very top to the very bottom participated in this belief that you could live on credit, and the property market would continue going up and financing it. Forcing the top talent to go elsewhere for their rewards will just leave us with the dross, like the people who run our government, and who must take a very large part of the blame. Our country is based on the financial services industry now. Sarkozy was right about that at least. Force its talent to go abroad for their jobs and we will lose even that.
Then who will be laughing?
- Stephen Rothbart, Prague Czech Republic, 09/02/2009 17:11
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As I approach eighty after fifty five years of scrimping to save for my old age,
I have lost most of my Equitable Life pension thanks to Gordon not paying any compensation for Government mistakes
I have lost my Bradford and Binkley shares to nationalization.
I have lost all the interest on my savings.
Now they want to nationalize my few remaining bank shares.
Meanwhile a footballer, or BBC presenter can earn more in a few months than I did in a lifetime, and Gordon urges me to save more, so doubt so he can nationalize everything
- Alan Green, woodford green, 09/02/2009 17:09
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The bonuses seem to have be paid on the basis of "profits" and "success" that never existed .In the previous years the banks were creating a false world for their own advantage . Give the dealers a choice of no bonus or prosecution . As for being paid for "risk" . They were paid very well for no risk as they were playing with our money and knew whatever happened they would get paid.
- Terry, Hennebont France, 09/02/2009 17:04
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Could the destruction of banks' long term prospects be somewhat balanced by freezing banks' and regulators' decision makers' long term (investment, property, and pension) assets above the national average - unless either bonuses were repaid or their decisions justified by results?
- Stan, London, 09/02/2009 17:04
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WHOA. It is not only the bankers who have their snouts in the trough, industry leaders are as greedy, and for equally short term goals.
It is very rare that I agree with the PM, but I agree that bonuses should only be paid when long term goals are achieved, and then the goals should be challenging, not soft, slightly increased targets from the previous year. Bonuses should only come from profits, and if there are no profits, then no bonuses should be paid, even to staff, save perhaps a token figure as appreciation of the effort put in, but then only to the deserving, as would be the case in a small business.
- Hugh, Middx, 09/02/2009 16:08
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The banks and their former shareholders must be cleaned out in order to put an end to the moral hazard which has been escalating at least since the Long Term Capital Management collapse in 1998. Otherwise, it will be back to business as usual, with the banking profession operating without pricing systemic risk.
- Bloke, London, 09/02/2009 14:18
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They are contemptible, not better than thieves.
I wish one or two of the banks had been allowed to go under in the Autumn. That would have focussed the mind.
Gordon Brown, I am a lifelong Labour voter, and I am appaled at what I am seeing from you. Stop this theft NOW.
- Ant, London, 09/02/2009 13:36
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What superb timing all this has. Focusing on the 'evil Bankers' lets the Dear leader off the hook for getting us into this mess in the first place.
All together now..this global hoohah started in America....doing right thing...not my fault....real things for real etc etc etc.
After all Crash McIdiot was only Chancellor then PM it's not as if he had any influence on financial matters or set up the FSA or allowed his famous light touch regulation is it. That must be another Gordon McClown -our one is blameless you only have to see in the main stream media 'it was the global bamkers which started in america...etc etc etc.
Your letting him off "scot free"!!
- Ethan, UK, 09/02/2009 13:29
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The banking crisis is only going to be over when the public's faith in banking is restored.
This is not going to happen until the public have faith in bankers again and THAT'S not going to happen until bankers have shown some humilty and accepted much reduced salary.
ANY banker who doesn't understand this simple truth (which should be self evident to ANYONE who claims to know anything about finance) should be fired purely on the grounds of being a cretin who doesn't understand their job. The idea that such a person would have the nous to actually get us out of the mess would be laughable if it wasn't so terrifying.
And while we're on the subject, why is it assumed that the high fliers who were earning the most are neccesarily the cleverest ones we most need to keep anyway? The number of these former geniuses who've been caught out by things like the Maddoff scandal suggest they were more lucky than smart in the first place...
- Tam, London, 09/02/2009 13:08
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these bankers having broken our economies are now behaving as if they have nothing to loose so are prepared to ransack whats left of our money.we should view these people with desdain and start all over again and this time if the government really wants to kick start the economy again then pay the deposit on a home for all new homebuyers.much cheaper than paying the fatcats in banks and soon d.i.y.shops would need to hire staff for a start...
- Joe Martins, london, 09/02/2009 12:47
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So vote Tory to nationalise the Banks? 'Cos those socialists won't do it. Errr so was Tony Benn right all along, obviously a man ahead of his time.
- David, London UK, 09/02/2009 11:22
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