BarclaysAll of the banks on the UK’s high streets owe their existence to public financing. According to the Bank of England, the British taxpayer provided more than £1 trillion of public money to rescue the banks from collapse.
Through short-term loans, loan guarantees and quantitative easing (pumping money directly into the economy), the Bank of England helped to bolster bank’s balance sheets. Banks such as Barclays therefore benefit from a promise that taxpayers will never let them fail, because it would be too damaging to the UK economy.
Thus, even though it did not take any direct state help during the financial crisis, former Barclays boss, John Varley, had to acknowledge the crucial role played by the government in rescuing the City as a whole:
‘Even those banks who did not take capital from governments clearly benefited (and continue to benefit) from these actions. We are grateful for them, and our behaviour should acknowledge that benefit.’
Barclays, in particular, took advantage of a stronger banking system. It scooped up assets from the US arm of investment bank Lehman Brothers at bargain rates in the days following its collapse. That business has since proved extremely profitable and what remains of Lehman is suing Barclays for a £3 billion profit it says the British bank made on the deal.
On the foundations of public support, Barclays has thus returned to making billions in annual profits. It is also paying out mega-bonuses to employees - Barclays total bonus pot in 2010 was £2.3 billion - repeating the corporate incentive system which led to the reckless behaviour behind the original crisis.
For example, on becoming the new Barclays boss, Bob Diamond - a champion of casino banking - walked away with a pay packet of £11.5 million. This sum is 1000 times what the average Barclays cashier earns and would pay for the salaries of 542 nurses or 380,000 Education Maintenance Allowances. Diamond now plans to accept a bonus of £9million - one of the largest in the world.
However, under questioning by the treasury select committee, Diamond was unrepentant, saying that the time for ‘remorse and apology’ in the financial sector was over. John Thurso MP then asked Diamond if Britain must ‘accept your bonus culture or not have any banks’, Mr Diamond agreed that that was the ‘nub of it’.
Banks such as Barclays might ‘insist that they are private companies and should be allowed to pay themselves whatever they wish’. But in reality Diamond, Varley and the rest would be in the job centre clutching their P45s had it not been for the extraordinary generosity of the British public.
It’s crazy - we are effectively paying these bankers to hold us to ransom. Isn’t it time we sent Diamond and his like their marching orders before they can do any more damage?
In the press
- Barclays facing investor backlash over bonuses
- Barclays pay £252k bonuses to 23,000
- Bank bonuses 'offensive' says Vince Cable
- Barclays' Diamond Tells U.K. Lawmakers It's Time to End Bonus Apologies
- Barclays investment bankers see average pay rise to £236,000
- 'Unrepentant' Diamond set to bank £9m bonus
- Barclay's John Varley admits banks have 'much to be sorry for'