RBS and Lloyds must increase profits, but are crucified when they pay bonuses to the very bankers who bring in those profits. The banks must also be ethical, so stop the profitable practice of ripping off their clients. Also, Lloyds and RBS must focus on Britain, even though it is almost impossible for a bank to make profits in an economy that is flatlining (HSBC lost money in its UK and US operations, but was saved by its activities in emerging markets).
To boot, the British government intends to increase competition between banks on the high street — a move that ought to decrease margins.
In short, Lloyds and RBS are told to increase profits so they can be privatized as soon as possible, while at the same time being told to stop doing many of the things that traditionally brought in those very profits.
It almost felt as if the chief executives’ job was to maintain the illusion that this could be done, while providing a lightning rod to all those who do not want to look beyond bonuses and the question of whether taxpayers get their money back.
What if bonuses and privatization are diversions, and the real issue is “too big to fail” in combination with too big to manage?
If you believe that the chief executives knew nothing about the scandals taking place under their watch, what reason is there to believe they are on top of things now?
Over the past 18 months, I have interviewed more than 150 people working in finance in London, most of them in junior functions. Many of them believe that the top of their organization has no idea what is really going on. They are equally scathing about the regulators.
This is the debate Britain refuses to have. The timing and conditions of the privatization of Lloyds and RBS are vital to the British government’s financial health, and it makes for powerful and simple-to-produce stories, especially if these banks continue to pay high salaries and bonuses, but Lloyds’ and RBS’ return to private ownership is ultimately a question of secondary importance when both banks effectively remain a public liability.
While this idea persists, Britain remains hostage to the health of banks over which it has very limited influence. Knowing your vital interests are affected by factors beyond your control has become the new normal.
The big issue today is not whether British taxpayers get their money back. It is whether British citizens get their sovereignty back.