A Bank For All Seasons

by Prof Ryan Spox

Things that annoyed me today:

Mostly it has been the vexed issue of how to monetise vulnerable bankers. You cannot imagine how dreary it is to be complaining about bankers again. Haven’t we all made our point and surely it’s time to move on? They know we disapprove of what they did, they’ve said they’re really, really sorry (however unconvincingly) and crossed their hearts, hoped to die and promised really, really hard to try not to get caught again and yet we still keep picking on them. It’s unfair to an entire profession of socially vital individuals as well as detrimental to the economy as a whole. Frankly, we feel rather ashamed with ourselves for bringing it up once more, rather like an early 19th Century politician such as, say Wm. Wilberforce, banging on again about the evils of slavery even though everyone’s heard all his arguments before and, besides, the economy would – maybe – tank without it.

So… what about bankers has annoyed us recently? Ah, yes, the Libor rate scandal. Having been caught in the commission of a crime, the Royal Bank of Scotland (or RBS as ScotGov would prefer as it tries to distance itself) have been roundly punished in accordance with the British judicial system’s long-standing three legged stool of retribution, deterrence and rehabilitation. In short, the bank has been stuck with £390 million in fines and those individuals who foolishly left fingerprints at the crime scene but were not smart enough to “move on” before the Old Bill turned up have been “disciplined” in some vague, ill-defined way which seems to involve neither jail-time nor, in fact, being sacked. But the important thing is that the guilty have been, in some sense, punished in such a dreadful and public way that others will be deterred from committing the same heinous crimes and, at the same time, the guilty perps are being gently rehabilitated back into wider society by, for the most part, letting them carry on with their lives and jobs as if they’re only offence had been sleeping in the toilets.

This has also provided another excellent opportunity for the RBS Top Man “Honest” Stevie Hester to appear on British TV telling us how bad everyone else was and how he has to make sure that the culture is changed to ensure this never happens again. Which, as we have said before, is just a poorly-coded way of making it clear that he has no intention of resigning over this issue. And why should he? Even though he has spent most of his career in banking, he wasn’t involved in the LIBOR fixing, knew nuffink about it (“Honest”) and has only been in charge at RBS since 2008. So, clearly, even though he is paid an obscene sum of money for standing on the bridge of the supertanker, tooting the horn and tinkering with the settings on the GPS in order to give the impression that he is, somehow, actively controlling its destiny, he cannot be held in any way accountable for LIBOR fixing because it was only happening for a couple of years after he took over and, really, that’s barely enough time to find out where the office photocopier is, let alone take a glance at the bank’s internal accounts to see how it’s making its money. It’s really not very fair to expect him to take responsibility for something that was happening in the corporation for which he is responsible during the period in which he had responsibility. That’s not how these things work.

Even more vexing than the question of why responsibility no longer implies being responsible is the issue of how RBS will find the dosh to pay the fines. The total of £390 million is made up of two separate fines  – about £300 million imposed by US authorities and another £90 million by the UK’s Financial Services Authority (Incidentally, the FSA is not an arm of the UK State. Instead it is a quasi-independent corporation, funded by the UK financial industry but tasked by Britgov with regulating the very industry that pays for it. Which makes you wonder – where does that £90 million fine go? Who actually gets the money?). Anyway, Prime Minister of the Exchequer, Giddy Davey Camerosborne has made it quite clear that the UK taxpayer, as represented by Britgov, ain’t posting bail for the bank this time, a bold statement which makes you wonder why on earth anyone might think they would. After all, do they pay your parking fines? Britgov may own more than 80% of RBS shares but that still just makes it one of many shareholders, with the same limits of liability as Great Aunt Mae with her two RBS shares she inherited from her dead husband. Nobody expected her to fork over £390 million to bail them out, so why would anyone expect the UK State to do so?

In fact, Camerosborne has said that the fines should be paid from the money the bank’s Top People have carefully put aside for paying themselves their well-deserved bonuses. Hmm… Sounds good on paper, doesn’t it?

Except… Falling, as we do, into the broad demographic category of “UK Taxpayers” we find this quite unsettling. For one thing, if we are investing our hard earned cash in a publicly traded corporation then we expect to see that corporation’s profits being paid to us in the form of an appropriate dividend which represents our return on our investment. That’s Capitalism 101, that is. With that in mind, if they have £390 million in the bonus pot for clever little bankers then that is £390 million that’s not in the dividend pot for the investors who, technically, own the bank and for whom, technically, all those clever little bankers actually work. (We are simplifying things slightly, of course. For example we are neglecting the effect of the onerous tax burden that the bank’s accountants have to work so hard to minimise.) As a UK citizen and thus, at least in a symbolic sense, a shareholder (Britgov “owns” the shares but Britgov is acting as a representative of the People. Isn’t it?) we are not happy at our employees helping themselves to our profits, without our permission, which is essentially what these bank bonuses are.

For another thing, given the inability of the average corporate executive to understand the basis of Capitalism as outlined above (i.e. no matter how fancy your job title you are a mere employee and you work for the investors who actually own the business) if anything, like paying massive fines, reduces or removes this year’s bonus then the clever little bankers will just have to make it up in the future which means that for the next few years weasel words will be employed to justify increasing the bonus pot at the expense of the dividend and / or that both bonus and dividend pots will have to be dramatically increased by boosting future profits, either by screwing customers in the High Street Banking end of the operation or by taking even stupider risks in the Gambling Investment Banking end. Or both.

So, either way, as a UK Taxpayer, we will end up paying for this. Which is probably what most of us expected all along.

Meanwhile, the new Top Man at Barclays bank has very graciously announced that he will not be taking his full bonus entitlement this year. Given that he’s only been “in post” for a few months, during which even more dodgy and downright illegal activities have come to light and during which the bank’s performance, as a corporation earning dosh for its shareholders, has been simply abysmal we have to admire his chutzpah in declining this bonus that he clearly hasn’t earned and yet expecting us to view this as an act of self-sacrificing humility.

And that’s before we move onto all the naughtiness slowly coming to light that other UK (and foreign) banks have indulged in, whether it be money-laundering, rate-fixing, insurance sale scams or simply breaking international sanctions imposed on Evil Dictatorships…

But, enough for one day. Our over-developed sense of moral outrage cannot take too much of this stuff.

Instead we will change direction and direct your attention to recent developments in the abuse of the English language. The first offender is the tendency of people, especially those in the broadcast media, and including those at the BBC, who really should know better, to ignore the fact that the word “vulnerable” is spelled, well, “vulnerable.” As a consequence, when we hear them describe things or people as being “vunnerable”, which seems to happen several times day now, we get a tad agitated.

The second offender is the neologistic verb “to monetise”. Everything about it is wrong. It’s an ugly, de-humanising and harsh sounding word, used to describe any process where people or things, from High Art to human suffering, are converted into mere mechanisms for generating revenue streams for somebody else. What’s worse, it is much loved by the kind of sleazy little corporate clones who refuse to recognise the fundamental basis of Capitalism: that they do not own the corporations for which they work but are mere servants of the shareholders, to whom they are, or should be, directly answerable. Yes, even to all 60 million of them.