As someone who works in the City, even I sometimes think the Occupy Wall St brigade have
a point. When you consider Barclays’ behaviour today, it’s a
surprise that the protests didn’t come earlier. The bank has announced an $11.5 billion loan to junk-rated Kinder Morgan Inc to fund an oil pipeline transaction.
The banks have money to lend; they just choose to gamble it. The reason? Simple. Risky loans and takeover deals can earn enormous fees for investment banking arms. Those fees are paid in advance and bonuses for senior management are drawn from those sums. The loans may also get placed on the commercial bank book — and future losses don’t impact on bonuses, which have been already paid out. The profit from lending to small businesses is accrued over several years, which is no match for a fast buck now. Bloomberg reports that Barclays may earn £152 million in upfront fees from this deal.
Where is the taxpayer interest here? The banks — including Barclays — have received almost £1 trillion in subsidies in the form of cheap Bank of England loans, deposit and debt guarantees to improve lending conditions for UK businesses, but banks seem only interested in creaming off easy profits while continuing to roll the dice. And if things really go wrong, who picks up the bill? The £280 billion of toxic loans that were offloaded onto the taxpayer by RBS via the Asset Protection Scheme contained plenty of this sort of thing.
Meanwhile, lending to small businesses continues to fall by around 7 per cent per year according to the Bank of England:
Bounderby is the pseudonym of a City financier who occasionally despairs at the behaviour of his clients.
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