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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