Labour's free for all

toco

Someone should grab hold of the hapless Brown put him in a corner and not release him until he admits he knows nothing about Economics and Financial Regulation and further insist there should be clawback for the taxpayer against his remuneration and expenses from the day we had the misfortune to allow him into Parliament.

THX1138

That didn't take long. I was waiting for The Speccie post on how Dubai going bust was Brown's fault

chris as usual

Surely there is a case for clawing back these phoney bonuses. Whatever the basis for their original payments, its it obvious that the shareholders, and then the taxpayers, have been swindled.

I would have no problem with Cameron & Co announcing that all bonuses paid over the previous 5 years (and in the future) will be subject to clawback based on the true accounts of the banks over the period. In other words, the books are not closed for 5 years.

Quite frankly, if the long term future of the country is going to depend on overpaying cowboys (definition: gambling with other people's money, fixing the odds, and then threatening to abscond if they look like being punished) the sooner we face up to this and put a stop to it the better.

Combining these people with Brown's similar habit of spending money we haven't got tells it all.

michael

Banks...The only institutions ever, who have remained completely untouched by there own self destruction.

The bill?

Herbert Thornton

Despite this being flippant, I can't resist asking whether history will give the disastrous consequences of Gordon Brown's financial machinations a catchy name. I suggest - 'The North Sea Bubble'.

Jupiter

In the 2nd graph, it is very interesting that Lloyds lending only grew by a very small amount. Too bad that they stopped being sensible and bought that pile of dung HBOS.

Snowman

far for me to defend the banks, but not all of the massive hike in their overseas assets classes as junk. Quite a lot will be akin to a family that bough a house at the peak of the insanity, and is now suffering from negative equity. If you believe that economic growth will recover, it has always recovered in the past, the negative equity will vanish.

It wouldn’t surprise to discover in 3-5 year time that the Treasury may in fact make money on the rescue packages. The banks, scared to death from going under ala Lehmans, were willing to accept conditions that may not be in their favour.

the objectionable bonuses will not disappear any more than we can cut the inflated salaries of the Premiership footballers. It’s the nature of the beasts. Both are but small universes of a limited number of participants gorging on a huge and growing cake. If you were a part of the set-up would you decline to have as big a bite as the opportunity offered?

oldtimer

Thank you again for a timely post. Just a couple of observations.

1 There is a world of difference between HSBC and RBS, to name but two, in respect of (a) deposit coverage vs liabilities and (b) lending x capital. HSBC is a relative conservative in these respects. Your charts do not make this clear.

On the subject of bonuses, in that gripping read "To Big To Fail" (by Sorkin) I find that Lehmann actually had five year earnout periods for bonuses and that employees owned c25% of the business when it was declared bankrupt. In their case it was not so much the structure of the bonus system that was at fault, but the management`s reckless approach to risk - their willingness to live with (a) excessive debt mutliples x capital and (b) excessive dependence on short term finance. These are the issues that I suggest above need clarification re HSBC and RBS. Maybe this is a topic for a future post.

TomTOm

The funny thing about British imperial overreach in banking was that it was all balanced upon £2000 deposit insurance and when people at Northern Rock found out they queued around the block.

Typically British cheapskates - build a global lending empire and shortchange depositors with £2000 deposit insurance.

No wonder they had to nationalise banks and guarantee both sides of the balance sheet. That is the British way... Penny Wise and Pound Foolish

Tom Pride

Bank leverage may have funded Gordon Brown may have funded his spending addiction bank leverage but it was not the only leverage he indulged in which is going to be painful to reverse. Much of his spending was not “one off” but repeat spending, opening commitments year after year ahead, and creating a structural deficit unsustainable without a level of taxes seen in the boom years.

The huge increase in the state payroll is behind the greater part of the structural deficit and is going to have to be reversed to bring government finances under control. This will be particularly painful due to the reversal of the “leverage” that Brown benefited from as he increased the numbers of state employees on the way up. For each employee he took on (who was unemployed or whose employment by the state enabled an immigrant to find employment) the net cost to the state was not the gross remuneration of the employee, but the gross reduced by the NI, income tax and indirect taxes paid by reason of the additional employment.

The leverage works against you as you cut the structural deficit by laying off state employees. For each employee laid off the net saving to the state is the gross remuneration less the NI, income tax, direct taxes on spending no longer made, plus any benefits to be paid. I don’t know what the ratio is but I would guess that three or more employees might have to be laid off to save one employee’s gross pay. The pain will be horrendous.

The costs of the irresponsible creation of a structural deficit out of Brown’s arrogance that he had abolished boom and bust will, as so the cost of the bank bail outs, fall on the innocent. I wish he could be made to suffer as others will.

Tom Pride

Sorry, the garbled first sentence should have read:

Bank leverage may have funded Gordon Brown’s spending addiction but it was not the only leverage he indulged in which is going to be painful to reverse.

Rabyrover

How big were the bonuses given to the bankers who lent money to Dubai?

Moraymint

"... and the “New North Sea Oil” of booming bonus pools was taxed to fund ever growing government spending ..."

Which gives the lie to Gordon Brown's claim that the UK's unprecedented and unmatched level of financial crisis is somehow all down to external events.

Gordon Brown is the architect of the UK's disastrous economic malaise. Brown designed it, engineered it and ensured that it was built to the colossal height that it was; he's also the demolition contractor who has brought the grotesque structure down upon the heads of us poor bloody serfs - who will paying for it for decades to come.

When will the British people realise that the man is a first order traitor who should be put up against a wall at the Tower, and shot ... ideally, by HM The Queen who must have been fuming at this carry on for years on end.

Mark Bathgate

Couple of comments:-

Oldtimer - i don't disagree at all. What the chart shows is the total assets of each bank as reported in their annual accounts. I think the experience the HSBC management gained in navigating the Asian crisis of the late 1990s had great impact in helping them understand the need for prudent management and capital reserves some of their other UK peers so clearly lacked. It's telling they can still raise whatever capital they need from the private sector despite screw ups like their Household Finance adventure.

Snowman - that may be true (and i as a UK taxpayer i certainly hope so). The signs from the losses of RBS in subprime, lyondell, etc are not a good indicator though. My preference is that there is a real audit - in the manner of early 1990s Scandanavia - that gets rid of all the smoke and mirrors, "trust us, we're experts" culture of the past 2 years.

The 4 fold increase in UK bank lending margins should attract capital in droves if there was real trust in our banks accounting.

Naomi Muse

The spotlight of all opposition parties and us should be on Broon, the rise and fall of Broon.

As Moraymint says:
"Gordon Brown is the architect of the UK's disastrous economic malaise. Brown designed it, engineered it and ensured that it was built to the colossal height that it was; he's also the demolition contractor who has brought the grotesque structure down upon the heads of us poor bloody serfs - who will paying for it for decades to come"

It was Broon, Broon and Broon at every turn.

Even Barclays went to the Qataris and Abu Dhabi, largely, I suspect to avoid being in thrall to Broon and his cohorts.

Ever since Broon was fast tracked as a young man of 'promise' he has been set apart and his foibles and judgements allowed to reign despite being simply wrong.

It is time for him to face reality and the realities of the mess he has got us into both as Chancellor and now as PM, and realise he is not king of kings or brilliant, but an ordinary guy who is out of his depth.

That admission would be for the good of the country as it would be as if an alcoholic admitted his problem. We could deal with that.

Mark Bathgate - your comments of 9.22pm. I believe that HSBC was slow to come to market, as was JP Morgan, in getting into CDS and their like and that is why they both have showed a diversity of investments, good capital reserves and prudent management which is keen and on the ball.

As to RBS, it is very sad. The small business lending it has been doing solidly since the spring shows that it is a bank with a good attitude towards SME customers.

If all the banks had the real audit you speak of then we could get on with the aftermath because trust could be re- established, as you say.

Good comments. Thank you, Mark Bathgate.

Yam Yam

Kindly remind us, Mark. Does the Spectator's 'Nation Debt counter' that appears in the corner of the screen include all this potentially dodgy bank lending that UK taxpayers are potentially underwriting?

TomTom

Did HSBC really have a £12.5 billion Rights Issue before Lloyds-HBOS decided to raise £13.5 billion in a Rights Issue ?