Stephen Hester's magical misdirection: defending RBS's £5bn losses and £679m bonuses

RBS has announced losses of over £5.1bn and bonuses of £679m, after being bailed out by the taxpayer. Through Stephen Hester's sleight of hand, we are expected to believe that this has been a “chastening year” for the bank.

There is one essential ingredient to almost every magic trick: misdirection. Dangle something with your left hand, while your right pulls all manner of rabbits, bouquets, bonuses and silk handkerchiefs out of a top hat. Stephen Hester used it truly magnificently today, when he announced that RBS had posted losses of over £5.1bn, while doling out bonuses of £679m. This bonus pool is certainly not the “far lower” figure Treasury minister Danny Alexander had in mind, with commentators having predicted last month that it would be in the region of £250m.

Fret not, however. This figure is very modest, indeed the result of a “chastening year”, Hester argues, in an act that would leave Penn and Teller shaking their heads with bafflement. Modest compared to what? At which question, Hester starts pulling a number of shiny coins from behind our ears.

This figure is very modest, we are told, compared to the bonuses Barclays are expected to announce. Hang on, Stephen. Barclays is a privately owned company which has turned profit for the last couple of years. Your bonuses come directly from the money all of us stumped up to bail RBS out. What else have you got?

Oh, sorry, this figure is modest – punitive even – when you take into account that it has been reduced in order to recoup Libor-related fines to the tune of £300m. One momentito, if you please, Stev-o. Is what you are telling us, essentially, that if we compare it to an even higher and totally fictional figure, the actual figure is lower? Anything else?

This figure is modest when you compare it to last year’s figure of £800m. Sorry to interrupt again, but if one adds the £300m Libor fines, by which you claim to have reduced the bonus pool with the very specific purpose of penalising traders for manipulating the rate, then it would have been bigger than last year’s. Add to that the fact that you have engaged in a programme of redundancy of tens of thousands of employees – reducing the staff in the investment arm alone by roughly a quarter – and this must represent a real increase. Or am I missing something?

It seems that I am. The missing piece of the puzzle, as articulated by Hester, is that RBS needs to remain competitive by offering performance-related bonuses, in order to attract the best people. This includes a very competitive £2m paid to Hester himself. This view was fully endorsed by our beloved Prime Minister only today in a European context, in which, disgracefully in my view, he is gearing up to resist a move to cap bankers’ bonuses at EU level to 100 per cent of their salary or 200 per cent of their salary with board approval.

This is where reality and rhetoric disconnect – the latter flying off Hester’s outstretched finger, like a white dove. Which group of people – other than those working in the highest echelons of the financial sector – would view doubling or tripling their annual salary, after performing so exceptionally badly that the company lost over £5bn, as a snub?

This is the fundamental proposition which all this misdirection attempts flamboyantly and flagrantly to hide. At a time when millions are being made redundant all across Europe and unemployment rates hit record highs, at a time when everyone else’s salaries are being frozen or reduced in real terms (including lowly RBS staff), at a time when RBS itself, like most other banks, is laying off thousands of employees specifically from its investment banking arm – we are asked to believe that, at this time, investment banking is the only industry which is not an employer’s market.

And now turn your attention to what the other hand is doing: people being forced to work for nothing in order to maintain their basic benefits. Public servants – including the people who heal you when you are sick, protect you when you are threatened and teach your children – being told to do more with less. Tax credits vanishing for ordinary families. Benefits being capped for those being exploited by landlords. Drawn curtains. Closed blinds. Strivers and shirkers.

Contrast those two attitudes and a further policy assumption emerges. It is at the heart of everything this government is doing. While the poor can only be bullied into productivity by the threat of more poverty, the rich can only be coaxed into it by the promise of more wealth.

Perhaps we might hope for a shareholder revolt, similar to those recently observed in other large companies. Only,the one powerful shareholder in this case is the government and they have made their position clear on many occasions: it is time to stop with this banker-bashing and let the crème de la crème get on with the difficult work of losing billions and leading us into the next phase of this crisis, unfettered by regulation, decency, logic or morality.

Take a bow, Stephen Hester. Next stop, Las Vegas.

Protesters outside Royal Bank of Scotland HQ in London. Photograph: Getty Images

Greek-born, Alex Andreou has a background in law and economics. He runs the Sturdy Beggars Theatre Company and blogs here You can find him on twitter @sturdyalex

Gage Skidmore via Creative Commons
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Donald Trump brings home his dark vision of America at the Republican convention

The Presidential nominee pledged: "Safety must be restored."

Donald Trump brought home the Republican convention Thursday night with a dark vision of contemporary America – a darkness he claimed only his leadership could lift. It was a lengthy, tightly-scripted speech framed around polarities – insiders and outsiders, criminals and victims, the United States and the rest of the world – and infused with righteous anger. And yet against the darkness, he offered not lightness but “greatness” – a bombastic, personalistic vision of how through sheer force of will he could right the American ship before it plunged irretrievably into the depths. “I alone can solve,” he famously tweeted earlier in the campaign. This was the 80-minute version.

Any presidential challenger, of course, has to lay out a set of problems they believe need fixing and a case for why their leadership might make a difference. It was the breathtaking scale and intensity of Trump’s diagnosis, and the lack of optimistic alternative to counterbalance it, that was notable compared to other acceptance speeches. He portrayed the United States as a country riddled with crime and corruption, a “rigged system” in which politicians like Hillary Clinton can evade justice, while police officers trying to protect its citizens become targets; a fearful country, its economy sluggish, its infrastructure crumbling, its security an illusion, and its international stature in freefall

For a candidate who has mocked the soaring rhetoric of President Obama (the “hopey-changey stuff,” as Sarah Palin once called it), it was perhaps not surprising that Trump’s speech would be short on uplift. It was at least more disciplined than his other campaign speeches, if in keeping with their tone and content – the much-maligned teleprompter rolling a script to which he largely stuck. (“He sounds presidential,” a lady behind me remarked, though his press conference Friday morning marked a reversion to free-wheeling form).

It was short on substance too, though acceptance speeches aren’t designed to be policy laundry lists like a State of the Union. Still, there were few specifics, beyond a pledge to revise tax laws which inhibit religious groups from political advocacy, and a newfound concern with student loans. It was daughter Ivanka’s speech that had the greater substantive heft, promising her father would push for new labour laws to help working mothers, and for affordable childcare in the US. Neither are traditional Republican positions, but the crowd seemed on board for anything Trump might offer.

He even had them cheering for LGBTQ rights, after recalling the tragedy in Florida last month, and the need to protect gay Americans from a “hateful foreign ideology” in radical Islam. “It is so nice as a Republican to hear you cheering for what I just said,” he commended the delegates in an unscripted moment. But whether they had really embraced this unexpected message – or if it was the anti-terror chaser that really got them on their feet – remains to be seen. In either case, it was a rare grace note in an otherwise bruising speech.

Presenting himself repeatedly as the candidate of “law and order,” Trump evoked Richard Nixon’s 1968 presidential campaign. At a time when American cities were erupting in race riots and protests over the Vietnam War, Nixon had pitched himself as the face of stability and security. Likewise Trump has reacted to the simmering racial tensions and terrorist attacks this summer with a hard-line stance on “lawlessness.” “Safety must be restored,” Trump said, in one of the eerier lines he delivered. Yet in his convention speech, Nixon had balanced his tough talk with a positive message – speaking of love, courage, and lighting a “lamp of hope” in partnership with the American people. 

Trump channeled another president in his speech, too, when he promised to give voice to “the forgotten men and women of our country” – drawing on the language of Franklin Roosevelt. Roosevelt had promised to aid “the forgotten man at the bottom of the economic pyramid” during the 1932 campaign. But Roosevelt’s solution to the forgotten man’s distress was economic internationalism – tearing down tariff walls and trading freely with the world – which the Republican Party then opposed. Trump’s solution is the protectionist policies Roosevelt had railed against.

Trump’s economic and security philosophy is encapsulated in another, more notorious phrase associated with that era: “America First.” A rallying cry for isolationists seeking to avoid US entanglement in World War II, it acquired an anti-Semitic taint. But Trump has employed it nonetheless, capturing as it does his core argument that America must do more to protect its own citizens against threats from within and without – from illegal immigrants, from radicalized Islamic terrorists, from the downsides of free international trade. Little wonder that former George W.

Bush staffer Nicolle Wallace announced that the Republican party she knew “died in this room tonight.” In embracing elements of isolationism, protectionism, and nativism, however, it is perhaps truer to say that Trump’s Republican party reverted to an earlier form.

Often disconcerting, at times mesmerizing, the question remains how effective this speech will be. The delegates responded enthusiastically to Trump’s fierce rhetoric, but many prominent Republicans had stayed away from the convention altogether. Combined with Senator Ted Cruz’s non-endorsement, Trump goes into the general election campaign without a fully united party behind him. For both partisans and the public, Trump’s speech offered a cast of villains to rally against, but no positive, unifying vision to rally behind – beyond the much-touted yet elusive “greatness,” of course. In a typical election year, that would seem a critical flaw in a campaign – but Trump loves to confound the naysayers. As his convention speech showed, he thinks the formula that got him this far - showcasing his fame and fanning Americans’ fears – can land him in the White House.