The hidden bank bailout

This blog has been consistent in its criticism of Brown’s bank bailouts.

But at least most were open. We now learn that taxpayers’ money was used to bail out, secretly, the HBOS and Lloyds merger, deceiving shareholders.

Concealment is ok where it is reasonable and outweighs the alternative – the greater of two evils.

But deception is wrong and, like Bliar’s Iraq lies, it is becoming a hallmark of this disgusting Government. Time to call it a day, Mr Brown.

The bonus culture – some solutions from John Redwood

George Osborne has rightly criticised excessive bonuses for bankers in state-bailed-out banks and John Redwood has highlighted some excellent solutions to dealing with these:

1. Many of us find it unacceptable that senior executives working in loss making state controlled business are being paid mega bucks out of our money. Why is Stephen Hester being offered a £9 million package, when there would be someone good out there who would do it for one tenth of that sum and still be well paid?

2. I also agree with George Osborne that someone senior working for a bank not controlled by the government could be offered mega bucks for taking extreme risks, only for the bank to seek a government guarantee or other assistance if they get it wrong. That too must of us find unacceptable.

…

The easiest way to tackle type One excessive pay is for the government as majority shareholder to refuse to sign contracts containing such payments. They should call in all the top executives of their heavy loss makers, and negotiate a new deal with them, deferring or cancelling bonuses until their banks are genuinely profit making and have provided for or sorted out all the loss making activities these executives have helped build up in recent years. These new contracts should be a condition of taxpayer support. They should be made to pay for what they have done wrong in the past by forgoing the bonuses they think they have earned. They should not be allowed to dump all the unprofitable business on the taxpayer and carry on as if nothing had happened.

Type two excessive bonuses are also best tackled in this way. There should be a general statement of government policy, that if any bank gets into trouble in future and needs taxpayer guarantees or cash, it will automatically trigger a retrospective revision of all senior executive contracts with a view to cost cutting as a contribution to sorting out the bank’s cash and profit problems. The Regulator can go further and say that in cases where they judge that large institutions that could cause damage to the system are offering excessive remuneration for excessive risk, they will require the institutions to carry more capital to undertake such business. Shareholders will then see that their generous remuneration policy imposes a further penalty on them in the form of lower returns on capital and the need to put up more money.

Let’s hope that the Government acts quickly to implement some of these suggestions, rather than continuing with its “bad bonus” rhetoric, without actually doing anything about it. This just proves again that it is Labour that is the “Do Nothing Party”, while the Conservatives would sort out Labour’s city cronies once and for all.

Brown’s new £500b ‘gamble’ … But then it’s not his money

As the real economy collapses around him, Brown is planning to announce another bailout, this time a £500,000,000,000 (enough 0s there?) ‘gamble’, as today’s Telegraph describes it.

Though it’s our money, not his, and the worst sort of gambler is one who takes ‘excessive risks’ with other people’s money.

Which is just what the banks stand accused of doing…

… so what is the difference between Brown and bankers? Very little, let’s be honest.

It’s no wonder he’s doing so badly in the opinion polls.