Author: by Stephen Hill
After five years of recession, and one of very slow global recovery in which indebted banks have not played their part, RBS still had the gall to announce an £8 billion loss while trying to pay their staff up to 200 per cent bonuses on basic salaries.
RBS still owes the taxpayers some £43 billion of rescue money, and HMG holds 80 per cent of the equity. It was obviously outrageous to everyone, apart from the directors of RBS, that a massive loss-making bank financed by the taxpayer should pay any bonuses at all. Indeed, the previous boss Stephen Hester was put under fierce political pressure not to take his bonus for four of his five years.
So HMG had to step in and limit bonuses linked to basic salary, which still seems too much for the man on the Clapham omnibus. The directors complained that they would be unable to retain their high-quality staff – ? – and that the business would suffer. Don’t they get it?
Their statement is saying that they are running a business which isn’t viable! It’s time to break up RBS into its viable constituent parts: Nat West, Citizens in the US, Ulster Bank etc, with RBS a profitable rump, and leave the rest to rot.
Instead the directors’ reaction was to get around HMG’s veto by raising basic pay, conjuring up allowances and no-strings attached share allocations, led by boss Ross McEwan with a £1 million top-up for next year. Is this tantamount to false accounting? His pay next year will be £2.4 million minimum and could reach £4.8 million… while the bank reports yet another massive loss?
But the truly astonishing thing is that this is the only occasion bankers’ bloated bonuses, which busted the global banking system just five years ago, have been firmly quashed on either side of the Atlantic.
Meanwhile, in the US Elizabeth Warren, the Democratic senator for Massachusetts and former Harvard Law School professor specialising in bankruptcy, has said some of the bankers should have gone to prison. Her ‘send-them-to-jail’ attitude is rapidly making her become a challenger to Mrs Clinton for the presidential nomination.
Her main message is that the middle classes have been hammered, which has re-energised the Democratic left wing. She cites student loans, education, the minimum wage, housing, retirement… and the big banks: ‘Their problem’s not that I don’t understand what they do. Their problem is that I understand exactly what they do.’
Senator Warren’s message is not leftish any longer: it is fast becoming mainstream – take note, all UK policy wonks, for the 2015 general election. She reflects the US Progressive Era at the turn of the 20th century, when the power of the railroads, the political machines and the big banks were challenged by Teddy Roosevelt and others.
So, watch out, you bankers: whatever happens in the US will mould UK policy too, and Warren has the big bankers right in her cross-hairs.