Barclays took the right path
Fraser Nelson 12:54pm
The angry reaction to Barclays' decision to recapitalise using Middle Eastern money rather than a taxpayer bailout mystifies me. In my News of the World column today, I argue that Barclays may well become 30% Arab but its 100% correct. It has no duty to accept a UK taxpayer bailout over more expensive Arab money, as is widely suggested. Its duty, in fact, lies is in the reverse. A taxpayer bailout is supposed to be the last resort, preventing the banking system from collapse.
I'm glad that John Varley, Barclays' chief executive, realises that even if some politicians do not. As Guido notes, Vince Cable has disgraced himself in claiming Barclays should have gone with the taxpayer. The patriotism argument, that British taxpayer financing is preferable to Arab money, is also nonsense: who do you think the British government borrows from? Barclays has just cut out the middleman.
Another popular argument is that the only possible explanation for Varley's actions is that he wants to keep paying himself and his directors bonuses. In fact, they have bought something far more precious: freedom from government. As Varley knows, the road to disaster starts when you start inviting government to help manage your company. The last thing any company wants is Gordon Brown or his proxies popping up saying "Only me!" and then launching on "You dont want to do it like that" Harry Enfield-style diktats, which the Scottish banks now have to swallow. If Barclays' rivals are operating under state directions (including demands to keep mortgage lending at 2007 levels) then they will soon be in real trouble. Barclays shareholders will realise this, I suspect, and for all their moans vote the new deal through.
As John Waples argues today, the big picture is that a British bank has been saved and without recourse to semi-nationalisation. If the Barclays deal goes wrong, the UK taxpayer will have no liability (one shudders to think how we'll be stung by what horrors the semi-nationalised banks have to unveil). In the last analysis, we should all be glad that Barclays has (as the Guardian put it) avoided taking cash from the British taxpayer because the British taxpayer has no more cash to offer. Varley should be knighted, not pilloried. He has fended off immense pressure from the Treasury to swallow the bailout, and preserved for the nation a strong, independent bank. I only wish that the Scottish banks had been in a position to do the same.
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Kevyn Bodman
November 2nd, 2008 2:57pm Report this commentLet's keep some sense of proportion in using the language.
Vince Cable has not 'disgraced himself'.
He has come to a different judgement.
Another Day
November 2nd, 2008 3:48pm Report this comment"If the Barclays deal goes wrong, the UK taxpayer will have no liability"
Fraser, do you really think if the deal goes wrong that the Government is going to let Barclays fold? Of course it will be the British taxpayer who will be left picking up the bill.
By taking this source of funds, Barclays has the opportunity to keep the rewards if things go well, knowing full well that if it all goes wrong another source of funds will always be available to bail it out.
The British taxpayer still bears the risk and that is something that can not be acceptable to those of us on the right of centre...
Nicholas
November 2nd, 2008 3:48pm Report this commentI'm starting to believe that this whole credit debacle has been deliberately engineered by this atrocious government to permit an acceleration of their socialist "revolution". I'm not wearing a tinfoil hat, btw, but I am bemused by how much it is "going their way" after 11 years of nightmare incompetency and corruption.
The one thing the many facets of the Left have managed to promote throughout all this is a fairly simple, single narrative with which they (mostly) all agree. In that way the Left have become a clique, a single voice where they each inherently understand what the agenda is, who are the friendlies and who are the enemies. That may explain how, as a minority, they have managed to seize such awesome power.
The right/centre-right, although I suspect a majority, is much more fractured in its message and much less able to operate as a clique within government and the media. Too often its proponents are at best weak or at worst scoring own goals.
I love the Harry Enfield reference but New Labour's meddling is being delivered in a much more sinister way. More "You won't be allowed to do it like that" than "You don't want to do it like it that". One of the most depressing images today was of Brown, Mandelson and Millipede descending the steps of an aircraft. The Fourth Horseman had not made an appearance.
ChrisD
November 2nd, 2008 4:55pm Report this commentThis should have been a good news story as a British Bank manages to find extra financing in the open market.
The sheer scale of the negative reaction to Barclay's not costing the taxpayer any money is mystifying.
And when you consider that Brown is over visiting the Arab head of State, among other things he is looking for their money to prop up the IMF, you wonder about the British press and some of our politicians.
TGF UKIP
November 2nd, 2008 6:57pm Report this commentYes, as a Barclay's shareholder, I profoundly support the course they have taken.
Do I detect though a very loud absent voice (squeak) here, though, Fraser - that of the the Tory Opposition. Vince makes the running, but again your client Osborne is silent.
More importantly, though, in their extremely questionable support for the the effective nationalisation of HBOS/Lloyds and RBS how loudly did your mates call for a hands off, no government interference in management guarantee from Gordon. As it stands there is every likliehood that he will use the government stake and board representatives as political engineering tools.
Right from the start and the use of Peston to drive the share price of all the banks down there was a big smelly dead rat here.
So well done Barclays and do the Cameron Tories really believe in free enterprise banks or are they so Blue Labour that they are happy to go along with Gord and Vince on this too?
floatingvoter
November 2nd, 2008 9:13pm Report this commentI do wish people would stop talking about Vince Cable. Anybody would think he knew what he was talking about. Oh and I wish he would buy a decent suit
Tiberius
November 2nd, 2008 9:45pm Report this commentI too am pleased about Barclays' stand - as I have posted before, I hope Lloyds TSB walk away from the HBOS deal to avoid suffering Brown sticking his mug round the door.
Vince Cable - a good cameo act, an affable joker, but never a serious commentator. The truth about him is finally out there.
It can be difficult enough holding a meeting with your bank's relationship manager knowing there are suits in the regional office about whom you know nothing. To think Brown lies somewhere down the line with an option to swing the sword of Damocles is frankly shocking.
will h
November 2nd, 2008 10:15pm Report this commentIf this deel does not save the bank long term the taxpayer will bail it out as HMG has no real option even to the point of honouring the interest payments on RCI's and MCN's
Sam Armstrong
November 2nd, 2008 10:21pm Report this commentNicholas,
I agree with you completely. I smell something fishy about this whole debacle. Barclay's has not towed the political line and is being denounced because of it.
To me it seems that the Government threw cheap credit at the masses, offering them no moral guidance whatsoever in handling such unprecedented amounts of cash, only to turn around when the thing blew up and say: "Told you capitalism was bad, now maybe we have the right answer after all...".
Quite a lot of the general public who would identify as right/centre right are completely unaware that pre-1979 economics are being slipped through the back door.
luke
November 3rd, 2008 8:10am Report this commentGood article. You are right.
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