What’s the difference between a banker and a pizza? A pizza can feed a family of four. So ran one of Vince Cable’s jokes when he presented the British Press Awards last week – but there is a crucial flaw. He reckoned without the financiers running an exchange-traded business fund named iShares. It is a subsidiary of Barclays and is 4.5% owned by senior Barclays staff. It has today been sold to CVC Capital, a private equity firm for $4.4bn – most of this money borrowed from, erm, Barclays (no difficulty finding credit there!). Result: payday for the lucky few with equity in iShares – about £1.6 million each – and £10 million for Bob Diamond, president of Barclays (who made £21m in 2007).
All this leaves a rather bad taste in my mouth. I have admired the way Barclays has sought more expensive money from the Arab world rather than take a state bailout. I’ve admired its attempts to stand up to the bullying of the government, whilst even Vince Cable has been suggesting that Barclays somehow has a moral duty to take taxpayers’ cash. I have been lambasted by friends, who believe Barclays’ main reason for its determination to remain independent was so the management can keep awarding themselves mega bucks. Pure greed, they say. Nonsense, I have replied, there are 1001 reasons to want to avoid state ownership.
But seeing this iShares deal, the way it has been financed and the cash collected by the president of Barclays does make me deeply uneasy. One can argue that it’s a matter for Barclays shareholders – who have reason to thank Diamond for keeping Barclays independent. But if a black hole is later found in Barclays’ accounts and this bank ends up being bailed out by the taxpayer (an act which could in itself send Britain to the IMF) then I suspect Bob Diamond will end up having to join Fred the Shred in exile.
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