Anger or Normal Business to be Accepted?
I’m sure I wasn’t the only one who went beyond the feeling of anger, an emotion that is a waste of energy anyway, when I read that despite having losses in the past year of £8.2 billion they have “rewarded” their top managers with bonuses of £576 million.
Let me explain.
That’s losses of £8,200 million being rewarded by hand-outs of £576 million which effectively means losses and money taken out of the trough totalling over £8.7 billion or to put it another way a bonus of £1 million for every £14.24 million of losses?
Putting aside if you can that this is one of the biggest losses in corporate history how can it happen.
I have never nor would I ever pretend to be an expert in high finance but even I can’t see how that makes economic sense.
When I was young my dad, yes he was always giving me advice some of which I have and some which I now wish I had taken but Ho Hum, told me to be wary of two issues, they were ‘Debt’ and ‘Mortgage’.
His advice was I believe a result of having been brought up during the depression of the 20’s and 30’s where poverty in the industrial and rural communities was rife.
It was a generation who would be aghast at today’s apparent indifference to running up debt on credit cards or loans.
Debt was associated with poverty an experience that they would do everything they could to avoid which is why they saved and paid cash and avoided credit cards.
Mortgage of course was more difficult because even though my parents lived for all their married lives in either Army married quarters and then a Council House they were determined that all of the kids worked to own their own homes.
He was adamant however that when taking out a Mortgage it should always be considered as a long-term debt and that the level should be what we could pay back from our normal wage.
It was advice that has stood me in good stead and I remember the impact of the huge interest rate increases in the 80’s when friends of mine who chased bigger and bigger houses with bigger and bigger mortgages suddenly found themselves trapped in negative equity.
Some sadly lost their homes and had to start again which wasn’t easy for them having been declared a bad risk.
This is where the difference really shows because people were declared a bad risk for sums sometimes as little as £10,000, banks has lost not hundreds but thousands of millions of pounds.
Of course the argument by the giant corporations and especially the banks is that mere mortals such as me and millions of others up and down the land are ignorant and just don’t understand that there is a major difference between private and corporate/public finance.
It was perhaps perfectly summed up by the noted economist Maynard Keynes when asked to explain the difference he said,
“If you owe the Bank of England £100 and skip the country, they will track you down and put you in prison. If you owe them £1m they’ll put you on the Board of Directors,”
Fast forward to today when it may well now read,
“If you bankrupt the Country banks will continue to employ you to put it right and even if you continue to make massive losses pay you enormous bonuses and the Bank of England will bail you out. You will not only avoid prison but also get a seat of the Board of Directors.”
Banks are running at losses that other companies would find unsustainable and lead to bankruptcy and closure.
In fact how many major companies and businesses have been told that they are no longer economically viable and have been refused help from the Government and banks?
A quick trawl through my memory bank brings up the names of British Steel, National Coal Board, British Leyland, British Rail, British Telecom, Swan Hunters Shipbuilders a list that isn’t exhaustive but all of which have been allowed to go to the wall.
Banks of course have been protected by the Conservative -Liberal Democrat Coalition Government against the impacts of their failure to support businesses and losses whilst paying themselves huge bonuses through the provision of credit which are being paid for by the taxpayer.
Which brings me back to the ‘pay as you go and only what you can afford’ generation, who I can’t help but think if they had applied for credit they would have been refused because they didn’t have a record of debt.
Why is it that people who insist on paying cash are regarded as suspicious but greedy bankers are seen by the Government as upright and above suspicion?
I don’t claim to speak on behalf of others but the latest revelation of losses and bonuses being incurred and paid by the Banks raise the question in my mind.
“How many of the current Members of Parliament who were former bankers still have a personal stake and interest in the banks and how many of their family are still reaping in the unjustified reward of bonuses for failure”?
The other question of course is should we be angry or is it that because of political and corporate self-interest something that we will now have to accept as normal business?