Political Ploy

Unsurprisingly the government is finally waking up to the fact that its 50% rate of tax will not reap the revenues that it had hoped for.

Lord Myners, the City Minister, said that the Treasury had "significantly reduced" its estimate of the revenue (originally set at £1.1BN for 2012 and £2.5BN).

Rather lamely he belated that:

"We still believe it will be beneficial."

Hardly inspiring is it?

Why do it then?

Politics!

It has nothing to do with economics, but is a political ploy.

The only surprise is that the government has taken this long to wake up to the fact that people are not prepared to pay it.

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The Plans of Bankers and Men

The world's finance ministers from the G7 are meeting in Downing Street today, to discuss how best to avoid a repeat of the 2008 financial crisis.

The meeting has been given added impetus by President Obama's proposals last week to rein in the power and size of the banks.

Lord Myners, the UK's City Minister, wants banks to cover any future bailout costs and favours an insurance levy. A global bank transaction tax is also being considered.

Doubtless every effort will be made to prepare plans against possible future contingencies. However, markets will always rise/fall and economic crises will return no matter what rules and safeguards are in place.

Goldman Sachs, sensing that the political tide is currently not in their favour, have announced that they will cap the pay of their top 100 executives in London to £1M.

That of course leaves their non "top 100" executives free to be paid more than £1M.

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Myners Lambasted

The hapless and hopeless Lord Myners was on the receiving end of another public humiliation yesterday, as the Treasury Select Committee gave him a well deserved public kicking.

Reviewing the shambles of Sir Fred "The Shred" Goodwin's £16.9M pension payoff, the committee stated that Myners was too much of a City insider to properly police payments and failed to provide "adequate oversight".

The Committee stated that Myners should have sacked Sir Fred, and that Myners should not have allowed the RBS board to handle negotiations with Sir Fred.

The Committee heaped further humiliation upon Myners' shoulders by calling him "naive".

Why does this man still have an official role in government?

Oh, how naive of me, because he is a friend of Brown!

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A Serving of Pork Pie

Could it be that the Treasury Select Committee, investigating Sir Fred's RBS pension, were served a slice of pork pie the other day by Myners?

"The Times has learnt that Sir Tom McKillop, the bank's former chairman, has written to the chairman of the Commons Treasury Select Committee, offering to provide fresh evidence after hearing Lord Myners's testimony last Tuesday.

Sir Tom is understood to dispute what Lord Myners told the committee when he said that he was not informed about the size of Sir Fred’s pension pot during negotiations last October over the Government’s rescue package for the bank.

In fact, according to Sir Tom, Lord Myners was told exactly how much the pension was worth...."

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Myners - A Lesson in Failure

Lord Myners attempted a bravura performance yesterday in front of the Treasury Select Committee, wrt their investigation into Sir Fred "The Shred's" RBS pension.

Unfortunately for Myners, he wasn't terribly convincing as he sought to deflect people's attention and pass the buck by saying (in a tone of "disgust") that the RBS Board had "bent over backwards" to reward Goodwin.

Other "playing to the gallery" quotes from Myners included gems such as:

-"beyond my comprehension"

-"extraordinary"

-"outrageous"

On listening to Myners one would be forgiven for thinking that he played no part in the affair whatsoever. Unfortunately for the hapless and hopeless peer of the realm, Myners had a very large role in the affair.

Myners admitted that he had been warned by Bob Scott ex head of RBS's remuneration committee that "The pension will be enormous, you know that".

Did Myners then, on being warned of this, ask how much the pension would be?

Can you guess the answer?

Yes that's right, Myners claims he didn't ask!

"I sought no information."

Either the man is lying, or else he is surely one of the most incompetent fools ever appointed to represent the taxpayer.

As Michael Fallon MP put it:

"Either you were party to very expensive back-scratching, or you neglected your duty to the taxpayer."

The bottom line is that Myners failed in his role, over such an obvious and easy target.

The question now is, given that the government failed in this relatively simple matter, what other horrors are lurking in the details of the bailouts that they have agreed to on our behalf?

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Lord Myners Grilled

Lord Myners is currently being grilled by the Treasury select Committee, wrt his role in the Sir Fred "The Shred" Pension issue.

A live feed of the session is available via The Times.

It is worth remembering that the details and timing of the leaks about Sir Fred's pension were highly convenient for the government, as it diverted people's attention away from Brown's role in creating the lax tripartite regulatory system that has undoubtedly contributed to this financial shambles.

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Pandora's Box

Gordon Brown and Alistair Darling have discovered that by taking shares in Britain's bust banks, they have opened something akin to a Pandora's Box.

The row over Fred "The Shred" Goodwin's (ex CEO of the Royal Bank of Scotland) £650K per annum pension, that his fellow directors generously awarded him for his "services" to the bank has ratcheted up a notch.

Despite pleas from Lord Myners to Sir Fred to give it up, Sir Fred is unmoved and has noted that Lord Myners was aware of the deal and authorised it. Lord Myners is having none of this, and counterclaimed that he was under the impression that it was a contractual obligation; implying that certain members of the board of RBS (when this matter was discussed) must have given him a misleading impression of the situation.

All of this comes against a background of public anger over the waste of money and destruction of value by certain "leading" banks, and the fact that the taxpayer now has to come riding to the rescue.

The public would be forgiven for thinking that as they now own a large slice of some of Britain's leading banks, they may have some say over "trifling" matters such as pension, and bonuses. Indeed, the recent harrumphing by Brown over "rewarding failure" would have stiffened the public's resolve to see "justice" done.

However, what the government daren't let on, but is becoming increasingly apparent from comments made by leading City figures (such as Mervyn King) is that they were complicit in allowing the banks to get away with too much during the "boom" years, by insisting on a light regulatory touch from the FSA and Bank of England.

Now that we have hit lean years the cry has gone up for nationalisation. This, whilst satisfying the public's and certain politicians' blood lust for revenge, will not resolve the problem. As Brown and Darling know, were one bank in the UK to be nationalised (ie 100% taken over) every other bank share in the UK would fall to zero as investors would rationalise that their bank was next. The result would be a complete collapse in the banking systems in this country.

That is why Brown and Darling talk tough, but carry a very small stick; they know that in effect the banks have them over a barrel.

In the meantime, whilst the arguments rage, the wheels are falling off the tripartite regulatory system created by Brown. He would be advised to come up with a new regulatory system soon, lest we face even worse problems in the future.

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RBS Breaks a Record

Congratulations to the Royal Bank of Scotland (RBS) for posting the largest loss in British corporate history (£24.1BN in 2008). Given the appalling state of its finances, RBS is to receive a further £25BN capital injection from the overworked British taxpayer, and will place £325BN of toxic "assets" in the government insurance programme.

Clearly RBS is following the old banking maxim that if you owe a small amount, the lender has you by the balls; whereas if you owe a large amount, you have the lender by the balls.

Needless to say the dire situation which RBS has placed itself in threatens many of the jobs of its employees. However, one man who seems to be doing OK is its ex CEO Sir Fred "The Shred" Goodwin, who is currently receiving a pension of £650K per annum (despite being only 50).

Unsurprisingly Alistair Darling is a tad peeved at RBS for treating Goodwin so generously, and even more peeved at Goodwin for taking the money. In fact Darling was so peeved, that he sent Lord Myners to have a word with Goodwin about the wisdom of taking the money.

Darling is still waiting for an answer.

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Treasury Neglect and Incompetence

In a worrying sign of Treasury incompetence and neglect, that bodes ill for its handling of the economy, it seems that the Treasury has allowed the contracts for three Bank of England Governors to expire.

John McFall, chairman of the Treasury Select Committee, is none too impressed with the slack attitude of the Treasury. He used the polite phrase "surprise and concern" to express his displeasure on hearing the news.

The three year directorships of Arun Sarin, Paul Myners and Geoffrey Wilkinson expired last week, leaving the members of the Bank's court in limbo.

At the eleventh hour the Treasury called each executive to assure them that their contracts would be renewed in due course.

Pretty pathetic, by even this government's standards of incompetence!

To add to the list of Treasury failings, wrt their handling of the Bank of England, they have yet to find a replacement for outgoing deputy governor Rachel Lomax, who leaves at the end of June.

John McFall is quoted in The Telegraph:

"The court is a key part of the Bank. It is the body which provides invaluable advice to the Governor and scrutinises the Monetary Policy Committee.

It is hugely important - and it is essential its members get adequate advance notice of their future and their positions.

This is a cause for surprise and concern, given that the Treasury has said it would be focused in the future on making timely appointments to the Bank."

One Treasury insider told The Telegraph:

"What is particularly worrying is everyone assumed the problem in previous years had just been that Gordon Brown tended to take a long time taking his decisions, and that things would get better under a new Chancellor.

If anything, things are now worse. There is an element of neglect here."

This ongoing neglect and incompetence by the Treasury does not bode well for the economic stability/prosperity of the UK.

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