In These New Times

Rather a weak demand by the SWP: why don’t they want nationalisation of the banks? Still, it’s a good article and confirms points we made at the time.

by Simon Basketter

Socialist Worker

4th november, 2008

“This is an investment in the banking system that will eventually pay off,” says chancellor Alistair Darling about New Labour’s bailout of the banks. And pay off it certainly will – to the enormous benefit of the bankers themselves.

Their obscene bonuses are secure. RBS plans to pay out £1.79 billion in bonuses – despite having been bailed out with £20 billion of public cash.

Lloyds TSB has also said it will pay out bonuses to its executives. These will be in shares for some of the highest paid bosses – but they are shares that the government is guaranteeing with our money.

RBS’s new chief executive Stephen Hester has defended these bonuses, adding that he was “mindful” of RBS staff. “Some of them have done an outstanding job for us and need to be incentivised,” he said.

Perhaps Andy Hornby, the disgraced chief executive of the collapsed HBOS banking group, is one of those who needs to be “incentivised”.

He will scoop up £60,000 a month in “consultancy fees” to oversee 20,000 job cuts at Halifax and the Bank of Scotland.

The government is spending up to £17 billion on HBOS and Lloyds TSB and will own up to 43 percent of the company formed when the two firms merge.

Both banks released trading statements this week that uncovered billions of pounds in hitherto hidden bad debt.

At every turn, each promise that the government has made over the bailout of the banks has proved to be a lie. It claimed the banks would not pay out bonuses – but they are carrying on regardless.

It claimed the banks would have to change the way they lend money – but now it turns out they won’t.

Eric Daniels, chief executive of Lloyds TSB, airily declared that he did not think the government “will have an impact on our lending policies or conduct of business”.

Talk of the government appointing directors to the banks has also turned out to be hollow. The government has the power to veto potential directors – but cannot nominate them.

Darling promised a moratorium on banks handing money over to their shareholders. The chancellor insisted he was not going to “put billions into banks only to see it disappear out of the door again” in the form of dividends.

But now it seems the government and Sir Victor Blank, chair of Lloyds TSB, have come to a “private understanding” that will enable the bank to pay dividends to shareholders.

“This arrangement may breach the spirit of accounting conventions but it is positive for Lloyds shareholders,” noted the Financial Times newspaper.

And now the government has created a new “arm’s length” agency that will oversee the government’s stake in RBS and Lloyds TSB, as well as running Northern Rock and Bradford & Bingley, which are wholly owned by the government.

This company is meant to return a profit. It will be run by Philip Hampton, former Lloyds banker and current chair of J Sainsbury, along with John Kingman, a senior treasury official and also a former banker.

Remarkably the government will have NO direct control over this company’s decisions.

At the very least, we should ban all executive bonuses for bankers. We have paid for these banks and bailed out their losses – so why aren’t we seizing their profits and running them ourselves?