Comments on: “A scandal of mammoth proportions” – Vince Cable on Barclays Bank

By: Aaron

Aaron — Wed, 12 Nov 2008 10:36:50 +0000

Those of you who think Vince is wrong are viewing this debate from a flawed perspective. Barclays didn’t ask for government funding but was offered it because the government can’t allow it to fail for to do so would be more expensive to the tax payer. Barclays has stated it will go it alone so that it may continue to pursue high risk banking with any adverse effects being placed upon the taxpayer and it will obtain third party funding with assistance from the taxpayer to do this. If the UK government have a problem with Barclays-OPEC then simply stop the loan subsidy and encourage UK bankers to move to one of its own government controlled banks.

By: Peter Bancroft

Peter Bancroft — Sat, 01 Nov 2008 21:29:09 +0000

Clearly not having the govt as a major shareholder is worth a decent amount to a bank. It allows them to pay what the Board feels is fair value and ensures that dividends won’t be capped.

Objectively, an assessment of what a deal is “worth” to a publicly listed company needs to take total shareholder returns into account, not just % ownership.

I think Vince got this wrong. The less banks that absolutely have to take advantage of the public purse the better.

By: Neil Craig

Neil Craig — Sat, 01 Nov 2008 14:26:26 +0000

If the shareholders don’t like it then will not vote for it. The implication is that they will decide that the freedom they would lose in being government controlled will be more damaging than any financial disparity between the deals.

Either way for Vince to say that banks are wrong to seek any future that does not involve them being state controlled is clearly incompatible with any claim to being a liberal.

So is the inability to see any difference between not paying extra tax & getting a state subsidy.

By: boldkevin

boldkevin — Sat, 01 Nov 2008 13:17:46 +0000

Robin Young – a plague on all their houses. Move to a mutual, the coop bank or a building society offering retail banking.

By: Tim Leunig

Tim Leunig — Sat, 01 Nov 2008 11:43:54 +0000

Vince has pointed out that Barclays management have chosen one deal over another. Vince thinks that they have done this because it allows them to pay themselves more, and that the deal is worse for shareholders. Supporters will argue that management does not want Alastair D micromanaging the bank for the next 5 years.

Part of the answer will be in the share price. If B’s shareholders are being treated badly, then we would expect the share price to fall. If they are satisfied, it would not.

But Darling should ask how he came to structure the deal he offered so that the payments were not tax deductible, if the usual thing is that they would be tax deductible.

My own take is that if 14% tax deductible is less costly to shareholders than 12% non-tax deductible then Barclays have struck a deal that is good for their shareholders. That is what management is supposed to do: find the best deal for shareholders.

By: Robin Young

Robin Young — Sat, 01 Nov 2008 11:28:01 +0000

Wake up, people! Vince is NEVER wrong. What he is pointing out is that Barclays have done this deal – hugely over-generous to the Arab investors – wo that they can go on paying themselves lubbly-jubbly bonuses while continuing to pursue their chosen high risk strategies in the investment banking market (where there star man, appropriately named Diamond, manages to trouser more than £20 million a year!) If it works, the Arabs and co profit hugely. If it doesn’t, guess who still picks up the bill (because Barclays is too big to be allowed to fail). A Barclays customer for more than fifty years, I am now moving my account to HSBC (the one bank still strong enough to tread its own path without proffering the begging bowl to anyone).

By: David Heigham

David Heigham — Fri, 31 Oct 2008 18:29:00 +0000

A scandal, yes; but where is the mammoth?

If I was a Barclay’s shareholder, I would be pretty cross about the deal. As a simple British taxpayer, I am happy that we have not acquired shares in a bank whose Board behaves like that. As a citzen watching the craziness of a financial crisis, it is nice to see that there is a price – however low – at which those who have the money will buy into a bank like Barclays.

By: David Allen

David Allen — Fri, 31 Oct 2008 17:39:36 +0000

Read what Peston says, he is an objective reporter. Barclays are doing down their own shareholders, and favouring instead the payment of bonuses to their executives. Barclays are also getting a tax break out of it, i.e. you and I are subsidising what they have chosen to do.

I don’t hear the Tories racing to condemn Vince as a left-wing ideologue for his response to this. It seems that only Lib Dem commentators, these days, take such an extreme view!

By: James King

James King — Fri, 31 Oct 2008 17:25:19 +0000

To be fair, I think Vince is offended by the fact that Barclays were willing to accept a loan as a stand-by credit to prevent them from collapsing, but then welched on the deal.

That said, is that such a bad thing?

By: Danny

Danny — Fri, 31 Oct 2008 17:18:48 +0000

Vince has called this one wrong – why in the world would it be preferable that the taxpayer fund Barclays rather than private investors? In this case the answer seems to be that the latter option wouldn’t allow the government to intervene and control what Barclays does, which is a worryingly left-wing and interventionist idea. I was always under the impression that Vince was one of the more economically liberal members of the parliamentary party but now I’m not so sure…

By: Neil Craig

Neil Craig — Fri, 31 Oct 2008 17:06:05 +0000

Scandalous. To think that a bank might find itself able to raise capital & continue to do business without getting it from the government. What times we live in when government doesn’t control the entire economy.

And what times we live in when politicians miscalling themselves liberals are so afronted at the state not running everything.

In fact this is very good news since it confirms that it is likely that the investments made in other banks will be repaid.

By: Hywel Morgan

Hywel Morgan — Fri, 31 Oct 2008 16:51:12 +0000

I thought Barclay’s hadn’t taken any taxpayer’s money?