£2bn profit RBS keeps on sacking

Bailed-out bank Royal Bank of Scotland is back in the black and lending again - but still continues to sack their own workers.

The 83 per cent state-owned bank posted third-quarter pre-tax profits of £2 billion today, following a £678 million loss earlier this year and a £1.6bn loss in 2010.

The bank reported £8.1bn in lending to small and medium-sized enterprises (SMEs) - just shy of the £8.2bn target set out under the government's controversial Project Merlin deal last year.

The news came within a week of government figures which showed that Britain's banks are turning down more than one in three applications for small business loans - ignoring a key part of the deal.

The Office for National Statistics reported just 65 per cent of small business loans were approved in 2010, compared with 90 per cent in 2007.

But it revealed that RBS was still the biggest fish in the small business pond, providing 40 per cent of SME loans in Britain compared with 35 per cent in 2010.

The report brought RBS small business lending to £23.6bn so far this year - around 5 per cent short of the Project Merlin target.

But economists savaged the bank today for persisting with mass lay-offs despite its multibillion bounce-back.

The bank announced plans to axe more than 20,000 jobs in the wake of the 2008 bailout.

And RBS chief executive Stephen Hester said yesterday the cuts would continue "to reduce the impact on customers and shareholders of the regulatory and market developments."

Left Economics Advisory Panel co-ordinator Andrew Fisher blasted the banker's comments, saying that they showed the bailout had failed to change City culture.

"It is sacking workers to generate dividends for shareholders on the back of taxpayer pounds, while continuing to make risky and bad investments through its Global Banking and Markets arm.

"This is further evidence that the bailout was the privatisation of public money, not the public ownership of private banks.

"What we need is the full public ownership and control of UK banking to end the culture that has led our economy to the precipice and to direct investment where it is socially useful," he said.

This article appeared in the Morning Star on Saturday 5 November

The cheek of RBS

Last year the Royal Bank of Scotland would have gone to the wall if it was not for the Government bailout it received. None of the directors would now have jobs with the firm, let alone the potential for a bonus payout.

Given that it was the ingenuity, entrepreneurial guile, and business acumen of these directors that led the bank to the brink of oblivion some might suggest they have a bit of a cheek to demand £m bonuses - especially at a time when the Government bailout for those who have lost their jobs (due to the bank-led recession) is a paltry £64 per week.

Nevertheless I was pleased when I heard on the BBC News last night, City Minister Lord Paul Myners appear to rebuff the bankers, telling them "to come back into the real world".

The bankers are now threatening to resign if they don't get their bonuses. I hope Lord Myners' next quote will be "Goodbye".

However, as is often the case, I seem destined to be disappointed by New Labour. Lord Peter Mandelson immediately pulled rank on his junior colleague, saying:

"I understand the point that RBS directors are expressing - they say they have to remain competitive in the market in recruiting senior executives, and this is why it's important that all the banks are equally restrained, and RBS is not singled out."

The Morning Star covers the story excellently in today's paper.

Labour MP "staggered" at secret funding for banks

The Governor of the Bank of England, Mervyn King, has today admitted that he lent Royal Bank of Scotland and HBOS £61.6bn in secret emergency funding in autumn 2008. Labour MP, and LEAP Chair, John McDonnell said he was “staggered” at the revelation.

John McDonnell MP, LEAP Chair, said:

"I am staggered at the affrontery of the Governor of the Bank of England to risk £61bn of public money covertly, and without any accountability to Parliament.

"At that time I expressed the concerns about the instability of a number of financial institutions and called on the Government to nationalise to stabilise, in order to plan the long-term rebalancing of our economy. This view was derided by the Chancellor and opposition parties but we now know the Government had pumped into these banks enormous sums of taxpayers’ money, seemingly without any enforceable conditions.

"This is no way to run a finance sector, an economy or a government."

Also see Paul Mason's report on BBC Newsnight on 24/11

The mother of all bail-outs

In the run-up to the 2012 London Olympics, the New Labour government has put in a credible bid for victory in the financial events with the sums spent on bailing out the banks. The increasing size of the bail-outs shows one thing – the crisis is getting worse rather than better.

The Royal Bank of Scotland has so far received a world-record £53.5 billion since the onset of the crisis in 2007. That accounts for most of the total of £74 billion of taxpayers’ money the government has put into the banks, including Lloyds and HBOS, over the last two years.

The latest £25.5 billion for the RBS announced by Chancellor Darling yesterday is part of a second bank bail-out which adds up to nearly £40 billion, which is more than the amount handed over in 2008. The government is hoping this will keep the banks afloat whilst they tear themselves apart under direction from the EU’s competition commission.

The dismemberment of systemically important “too-big-too-fail”’ banks is a hot topic for the world’s financial community, but there is no agreement on a co-ordinated package of regulation and reform. Some want to return to the regime established in the wake of the 1929 crash which separated high-risk investment – gambling – from the relatively safer, but less profitable business of balancing deposits and lending.

Others, like the IMF, are busy trying to work out how to reduce the grossly unsustainable government deficits resulting from attempts to prevent global meltdown. All of the schemes under discussion concentrate their attention on repairs to the financial system. None of these can work however.

Martin Wolf, the Financial Times’ leading commentator puts it starkly: “It is idiotic to discuss the reduction of the huge fiscal deficits, without considering the nature of the offsetting adjustments in the private and external sectors.” What he implies is that the financial system can’t be fixed without an “extremely perilous” return to credit-led growth.

Yesterday the Indian government gave its verdict on the health of the global economy. It swapped $6.7 billion of its US paper dollars for 200 tonnes of gold bullion put up for sale by the IMF. This is the latest and strongest indication that the Asian countries are moving away from a reliance on the declining dollar. India’s finance minister couldn’t have put his reasons clearer. He said the economies of the US and Europe have collapsed.

The contradictory movement of the tectonic plates of the capitalist financial and economic system is producing seismic shocks throughout the world. Even its most ardent defenders are losing faith in the possibility of a “solution” that is anything but an attempt to repeat the past.

Warren Buffet, the capitalist system’s most long-standing and successful investor of other people’s money has just bought a US railroad, in his biggest ever deal, describing it as “an all-in wager on the future of the American economy”. Burlington Northern Santa Fe is a freight company. Its biggest cargo is coal for power stations. So much for concern about global warming.

Profit-motivated growth has brought us to an historical crossroads. The capitalist road leads to economic destruction, warfare and the collapse of life-support systems. If the historical process could speak to us directly, it would surely urge humanity to move forward to a co-operative social set-up where a financial system that serves only shareholders and speculators is put out of its misery and corporations that plunder the planet become the property of the people as a whole.

Gerry Gold
Economics editor
reposted from A World to Win
http://www.aworldtowin.net

Banking sector greed continues

Yesterday it was announced that the new Chief Exective of the Royal Bank of Scotland, Stephen Hester, is in line for a £9.6 million pay package this year.

It's worth bearing in mind that RBS would have gone to the wall without the state bailout last year. We warned at the time that owning the banks without controlling the banks would lead to a return to the same greedy practices which caused the UK banking collapse.

Since being saved with taxpayers' money, RBS has announced over 10,000 job cuts. Our 70% stake in RBS has not saved jobs, but is now being used to pay one individual nearly 3000 times what ex-RBS staff will be receiving on the dole.

LEAP Chair, John McDonnell MP has tabled EDM 1721 'Banking Sector' calling on the Government to "intervene to control the banks in which it has a public stake and legislate to ensure the interests of bank workers and customers are prioritised by the banks rather than the bonuses, pay and dividends of executives and shareholders who caused the UK banking crisis."

The issue is well covered in today's Morning Star.

No more bailouts, nationalise now!

Today the Government announced a further 'bank rescue plan' - yet there are pigeon steps towards a more interventionist role: 'nationalised' Northern Rock to expand lending, rather than winding down and repaying its loans. The Government has also now taken a 70% stake in RBS.

These are however minor moves, and the bailout will again risk public money without adequate controls, and there is still no intention to restructure the banking system. LEAP put out the following press release in response:

No more bailouts, nationalise now!

As the Government announces yet another rescue plan for the banking sector, LEAP makes one simple demand: nationalise the banks now and use them to help resolve the crisis, rather than continue exacerbating it.

John McDonnell MP, LEAP Chair, said:

"Again we see the Government pouring public money down the bottomless drain of the banks.

"Anger is mounting about the dithering and delays as the Government skirts around the only solution: to nationalise the banks in order to develop and impose a new banking strategy in the long-term interests of the country - rather than restoring the opportunity for another round of speculation and profiteering."

Andrew Fisher, LEAP Co-ordinator, said:

"The Government cannot continue to bailout the banks, while the banks continue to turf people out of their homes and out of their jobs. Restoring people to their jobs and housing is a more urgent priority than restoring bank profitability."

"The only solution is nationalisation of the banks and the Government seems only to be edging at a snail's pace towards this realisation."

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