Iain Banks, the acclaimed Scottish sf and thriller writer, has joined with an illustrious list of prominent Scots in calling on the British government to reform the Royal Bank of Scotland. RBS received a titanic tax-funded bailout (much of which was diverted into a stupendous pension for Fred Goodwin, the bank's erstwhile CEO, who led it to ruin), which means that the taxpayer is now a major shareholder in the bank. But the bank is still refusing to lend to Britons who need mortgages, preferring instead to make dirty investments in climate-wrecking tar-sands in Alberta, as well as taking the astonishing step of loaning money to Kraft, an American firm, which is trying to buy Cadbury's a British firm -- if Kraft succeeds, then RBS will have funnelled British workers' pay into a loan that resulted in the shut-down of British factories and sent British jobs to America.
More than 30 signatories, including Gordon Roddick, who founded the Body Shop with his late wife Anita, leading green campaigner Tony Juniper and Rev Ian Galloway, convenor of the Church of Scotland, take the government to task for failing to push RBS and the other bailed-out banks into supporting socially useful investments.Celebrities, MPs and clergy urge government to rein in RBSIn their letter, written to mark the first anniversary of the British taxpayer becoming its largest shareholder, they call on Darling to transform RBS into the "Royal Bank of Sustainability".
The strongly-worded communication criticises the Treasury for standing on the sidelines while RBS took a controversial decision to support US foods group Kraft in its bid for chocolate maker Cadbury, despite the fact the bid will put jobs at risk and therefore work against the interests of the UK taxpayer. The bank's conduct has also raised eyebrows in the City because it breached protocol by neglecting to inform Cadbury of its planned defection to the Kraft camp, despite having a decades-long relationship with the confectioner.
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The bailout of RBS cost the UK taxpayer £37 Billion. Fred Goodwin's pension pot was £16m, and the only reason he got away with that was because of the inept way the government handled his "sacking" (asking him to take early retirement with a massive payoff).
Is there an objective reason why a bank should invest in local businesses instead of being free to search out the best investments around the world? Locally grown food and locally built products are sometimes environmentally friendlier due to reduced transportation costs. But money has no transportation costs. My question is whether locality (independent of all other factors) is worth a reduced rate of return when investing. Or is this just a form of selfish nationalism?
People decry banks lending to foreigners, but then praise Kiva for doing the same.
Neil: Are you arguing that if workers are compelled through tax to invest in a bank that the bank in which they are a major shareholder should be free to use *their* capital to put them out of a job?
hey!! but we (America) need that money to repay China (err..OUR CEO's) in order to re-stabilize the world economy!! See it's all for the greater good!! ;p
I'm confused - you're criticising this bank because they invested in a project where Canada managed to figure out a way to extract usable fuel from shale? Why? It's a money maker and the land is completely reclaimed.
A bank's obligation is to its shareholders, fair enough. But its shareholders now being the taxpayers widens the definition of profit and obligation. As long as it doesn't operate at a loss, which would be self-defeating, the bank's new shareholders might be happy to find better things for it to do than enrich future Fred the Shreds.
Oh, right, the City's best banking talent fleeing to more welcoming financial climates, blah-de-blah. Of course, there must be a few economies out there waiting to be ruined. Like Dubai. Oops, I guess not.
Better move on it before Mandy comes along to scold the bank's nominal owners for being "unrealistic."
Happy St Andrew's Day.
Vote with your feet. Close your accounts. Join the co-op bank with every shop a branch. The govt. will not act they fear British Leyland and nationalised companies run by populism.
Lets get that tax money back and close these banks.
Their time had come, they should have shut.
New better opportunities will spring up.
Cory, "much of which was diverted" is just silly. The pension is
"Failing to push RBS and the other bailed-out banks into"... anything, really.
Taxpayer-owned banks are exactly as out of control now as they were before the bailouts, in the US like in the UK. These supposedly "socialdemocratic" governments (Brown and Obama alike) had the best chance in a century of transforming turbo-capitalism into something really useful and they've done... nothing.
Labour lost my vote around 2005, and it's doing nothing to win it back.
Squeeeeeee..... !!!! Iain Banks !!
Sorry, I will go away now.
"the best investments around the world"?
As much as people like to delude themselves that they know what's going on in places that are 3,000kms away, they really don't. Some stuff gets lost in translation, doesn't apply because of local customs/mores/habits, or are influenced by regional political winds.
In any case, I'm more worried about the uber-cool Scottish money. Make sure that they don't switch over to the Pound Sterling. Cory, I'll be holding you personally responsible if they do.
Cadbury is not some small local business, it is a multinational very similar to Kraft. And the chances of a UK Cadbury factory being shut down and production moved to the US has to be close to zero.
"refusing to lend to Britons who need mortgages"
Wasn't one of the causes of the current financial crisis banks lending out too many high-risk mortgages? (I don't know anything about RBS policies or how that applies; it's just something to keep in mind.)
If it makes you feel better, our government-bailed-out banks in the States are selling us out to China, India, and the mideast in the same way.
Neil @2: I would submit that it is, in fact, a case of sacrificing long term sustainability for short term profits. Locals of community A deposit funds in the bank- if the bank invests those funds in community B to the detriment of community A, then A will no longer have the funds to deposit- thereby reducing the amount of capital the bank has to draw upon. (as most of the profits would have been paid out to shareholders)
Of course, the bank can then relocate to B and invest in C... And I'm pretty sure we can figure out where this goes from there.
AAArgh - this is exactly why the Government shouldn't invest in banks. Everyone single person in Britain has about £250 of their money tied up in RBS shares. This isn't money an awful lot of people can afford to lose - hence the need to sell the UK's shares when the market returns to some sense.
That will only be do-able if we don't knacker the company in the meantime. So making it miss out on profitable lending for ideological reasons is wrong - whether that be because some thinks that the company in question wrong for climate crimes or wrong for allowing abortions, to illustrate that state intervention cuts both ways.
What would be even worse, what would be absolutely bat-sh1t screaming insance, would be to insist that the bank makes loans to people who can't pay them back. Not only is that how we got here to begin with, it will permanently cut the value of the bank on sale.
This is exactly why state-run companies don't do as well as others - all sorts of other considerations keep them from realising shareholder value. In this particular case, the extremely precarious state of the UK economy allows no messing about. Make no mistake - not selling this bank on in the medium term would have catastrophic effects.
As Iain Banks says (in his "M" incarnation), "Money is a sign of poverty."
tell that to Larry Ellison and the other 99% of humanity that like stuff for stuff's sake
What other possibility but disaster was there, with these kinds of policies?
Either the spends government bails out banks, and makes shrewd and difficult decisions to save the banks, and thereby alienating anti-market populists...
Or, it indulges the anti-market populists, and thereby the bailed out fails because it is pursuing vague emotional pop-culture concepts like "sustainability" along with nationalistic protectionism... and essentially wastes billions in taxpayer money.
Or, maybe the government decides not to bail out the banks... then they get accused of being market-zealots when the banks fail and people get hurt... or they bail out the banks, and get accused of being market-zealots for bailing out capitalist institutions... or they bail out the banks, spending most of the money on trite populist measures, and end up having to bail out the bank again, and again, because Ian Banks knows how to write sci-fi stories, not run a freakin' business.
It is basically an un-winnable situation. It is one of those times where you wish your political opponents where in power... because a disaster is pretty much inevitable.
Shouldn't that be "the road to serfdom?" Capitalism includes strong property rights, as in the owner of a property can do whatever it wants with it, right? Or does that only apply to bankers and not silly, naive taxpayers who've saved their bacon and even their bonuses?
The beef here is banks like RBOS refusing mortgages even for customers who can pay, but greenlighting mergers like Kraft/Cadbury, which could be gratuitous and maybe harmful to the local economy. Mergers *always* result in consolidation and cutting redundant staff to improve efficiency. That's one of their selling points.
A whisper of maybe changing the rules a little, ona bank the taxpayers now own, gets greeted with cries of "Sockialism!" Where's the fainting couch? Those moochers and second-handers are just battering down the gate, aren't they?
And thanks for the reminder that the US not only isn't "super capitalist," but is barely capitalist at all. 20 years works out to the end of the Reagan Revolution, no doubt stabbed in the back by George Bush I. Therefore capitalism remains pure. It can't fail; it can only be failed.
Sustainability = Get out of Dubai World?
Yes, they should put more money into Dubai World...
I'd think a state run bank is needed for any major economy to act as interface between the government policy and the markets, and to act as a lender of last resort. banks acting in their own self interest wouldn't necessarily be in the best interests of the people in the country, or have the resources needed to contain local financial problems.
People decry banks lending to foreigners, but then praise Kiva for doing the same.
That you assume such a false equivalence would escape notice says a lot about the honesty of your first question, and your opinion of the community here. Try harder, no more canards.
So Prentiz, they should have let RBS et al go to the wall? If that is the case, do say so. Otherwise, your argument against the State having a say in what nationalised banks should be allowed to do sounds suspiciously like "privatise the profit, nationalise the risk".
Anonymous #5-This is the reason we are facing global warming. Fools like you who think 'making money' is more important than the planet. Look, from what I've heard, this is going to have a disastrous effect on the environment in
Alberta. Plus, we get more oil to burn & stick more CO2 into the atmosphere. If this project didn't happen, the trees, grass etc. at the site would be doing its job of taking carbon out of the atmosphere, cleaning the water, & feeding the elk etc.
'But he's not a man. He is a mushroom.'
Well, I can see, Anonymous #19, you're a free market fundamentalist. But the free market failed, dude. The speculation bubble collapsed. The government had to step in to save the City/Wall St. Trying to pretend that the financiers know better than anyone else on how to run banks is ludicrous. Everyone sees the failure.
UK voters can fill in this petition to show it is the general public that want this too.
http://petitions.number10.gov.uk/ResponsibleRBS/