Bank bonuses and the Barclays myth

We, the taxpayers, saved Barclays too!

From the BBC:

Banking giant Barclays has seen its full-year profits increase by 92 per cent to £11.6bn ($18.2bn) in 2009.

The news story goes on to add:

The bank, which did not take any direct state help during the financial crisis, said its total bonus payouts for staff had been reined in to £2.7bn.

First, the fact that multibillion-pound bonuses in the midst of a recession are described as having been "reined in" says all you need to know about the excess and greed that has blighted the banking sector in recent years.

Second, notice the key disclaimer slipped in, early on:

The bank, which did not take any direct state help during the financial crisis . . .

I've heard a version of this line again and again, in the context of Barclays, ever since the government's bailout of the banks in late 2008. Last night on LBC, for example, the business reporter went out of her way to remind listeners that Barclays hadn't taken any government money -- in other words, it is less culpable for the crash and less accountable to the public for what it does with its profits now.

What a load of rubbish.

Barclays, as the Beeb's business editor Robert Peston points out later on, in the same story, benefited indirectly:

. . . from a windfall generated by the emergency rescue of the global economy undertaken by governments and central banks, an emergency rescue that was needed in large part because of the havoc wreaked by the excessive risk-taking of banks.

The banking sector, which Barclays is part of, would not exist today were it not for the billions stumped up by British taxpayers in the form of bailout money, short-term loans, loan guarantees and quantitative easing. Even the Barclays boss, John Varley, has acknowledged the crucial role played by the government in rescuing the City as a whole:

There are two ways I would say the system as a whole benefited generically.

One was in the injection of liquidity undertaken by the Bank of England and a new structure put in place in March 2008.

And the other was the making available of guarantees from government for funding undertaken by banks.

It is important to recognise that in each case the banks were encouraged to use these new structures that were put in place and we did.

It is also important to recognise that we were required and we did pay a price for these things but I'm not trivialising the importance of the intervention. It was important.

So Barclays has to behave responsibly. Massive bonuses are unjustified, irresponsible, offensive and dangerous.

Let's not forget either that Barclays only avoided crashing like Royal Bank of Scotland through good fortune: had the former succeeded in buying the debt-ridden ABN Amro in 2007, instead of the latter, Varley might be as reviled and ridiculed today as Fred "the Shred" Goodwin. What a lucky man . . .

 

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

Ellie Foreman-Peck
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Martin Schulz: could this man bring an end to the reign of Angela Merkel?

The German Eurocrat is the biggest threat to the possibility of a fourth term for Merkel. 

At first sight, Martin Schulz looks like an unlikely political saviour. Thin of hair and thick of waist, the 61-year-old was a member of the European Parliament for 23 years and its president for five. In an anti-establishment age, it was predicted that Schulz would struggle when he became the Social Democratic Party’s (SPD) candidate to replace Angela Merkel as the German chancellor in January. Instead, he is spearheading a remarkable revival in his tribe’s fortunes. On 19 February, for the first time in a decade, the SPD polled above Merkel’s Christian Democrats (CDU), attracting 33 per cent to their 32 per cent. The SPD vote share has increased by 12 points in a month. The cause is clear: “Martin mania”.

For months, it was assumed that Merkel would secure a fourth term as chancellor in September’s federal election. The SPD, the grandfather of European social democracy and Germany’s oldest party (it was founded in 1863), had polled as low as 19 per cent. After forming a grand coalition with the CDU in 2013, Schulz’s party was marginalised as Merkel claimed credit for policies such as the country’s first minimum wage. Voters defected to the far-left Die Linke and the far-right Alternative für Deutschland. The SPD’s future looked to be one of managed decline.

Sigmar Gabriel, the party’s leader since 2009, stood little chance of supplanting Merkel as chancellor. As a result, like François Hollande, he reached for the pearl-handled revolver: he announced his intention to step aside on 24 January after internal SPD polling showed that Schulz would perform significantly better against Merkel. “It was not an easy decision but I’m convinced it was the right decision,” Gabriel told reporters. His judgement was vindicated as public polls gave Schulz an 11-point lead over Merkel (49-38).

The German chancellor’s apparent unassailability owed less to her strength than to her opponents’ weakness. Eleven years after she entered office, voters had grown weary of Merkel’s leadership but saw no viable alternative. In Schulz, they have found one. Having been engaged at EU level and held no domestic office since standing down after 11 years as mayor of the north-western market town Würselen in 1998, Schulz has been embraced by voters as a relative outsider.

Unlike his SPD colleagues, Schulz can criticise the CDU’s record without appearing hypocritical or feeble. He has attracted voters with a centre-left emphasis on redistribution and social justice. “When people see that their taxes are used to give their children a future, they buy into it,” Schulz has said in interviews.

The European Parliament has been a useful platform for his pugnacious style. He is best known for being compared to a concentration camp guard by Silvio Berlusconi in 2003 and for his interjection in 2010 after Nigel Farage branded the then EU president, Herman Van Rompuy, a “damp rag”. Schulz retorted: “It’s not right that this man should be able to trample over the dignity of this house!”

Voters have warmed to Schulz’s personal story as well as his political history. He was born on 20 December 1955 in the village of Hehlrath, North-Rhine Westphalia, to a policeman father and a homemaker mother (he is the youngest of five). Rather than going to university, he trained as a bookseller and was a promising footballer. Two severe knee injuries ended his playing career at the age of 18 and he sought refuge in alcohol after falling into depression. Having contemplated suicide, he recovered to open a bookshop in his home town (which he ran until he became an MEP in 1994) and has been teetotal since 1980.

Schulz educated himself by devouring historical fiction (his favourite writers are John Steinbeck and Giuseppe Tomasi di Lampedusa) and retains the restlessness of an autodidact (he often works 18-hour days). His bonhomie and blunt manner appeal to voters who regard Merkel as aloof.

That Schulz has come to the SPD’s rescue is unsurprising. He joined the party at the age of 19 and became the youngest mayor in North-Rhine Westphalia when he was elected in Würselen at 31. After more than two decades serving the EU, the attractions of a return to domestic politics were obvious. “People must look into your eyes and see that you are a bloody streetfighter,” he remarked in 2013, as he presciently dismissed Ed Miliband’s electoral chances.

Schulz has disoriented the Christian Democrats, who failed to anticipate a centre-left renaissance. In a mark of how much he has unsettled them, the German finance minister, Wolfgang Schäuble, has denounced him as a Trump-like populist for his slogan “Make Europe great again”. Were Schulz to replace Merkel and Emmanuel Macron to be elected French president, the pair would unite in seeking to impose punitive Brexit terms on the UK.

For Germany’s Social Democrats, the fear is that Schulz’s surge has come too soon – voters could swing back to Merkel and the CDU before polling day. But after years as an emblem of centre-left malaise, the SPD has momentum. Schulz is determined to prove that there are second acts in political lives. 

George Eaton is political editor of the New Statesman.

This article first appeared in the 24 February 2017 issue of the New Statesman, The world after Brexit