RBS ‘nationalisation’: a perfect weapon of mass distraction

How Osborne fired a shot across the banks’ bows, stuffed Cable, and took everyone’s eye off the balls-up at RBS

The Chancellor…everything up his sleeve

There have been some severely misleading statements in the media about Royal Bank of Scotland (RBS) over the last few days – on both sides of the Pond. Some of this is down to the usual hack idleness and gullibility; but rather more of it was a campaign of carefully assembled spin and distraction. Most of these have emanated from George Osborne.

The ‘Cabinet discussion about Nationalisation’ chatter

This was simply far too convenient to be a coincidence. With a decidedly dodgey set of results due in three days time, the N word was leaked. But note also in the leaks: “George Osborne is thought to be against the idea”. The Chancellor was the source of the leak: it was his less than subtle way of suggesting he’s The One True Tory left…and capable of getting tough with banks when needs be.

Partly too, this is a struggle for supremacy between LibDem Business SecretaryVince Cable, and Tory Chancellor George Osborne. By setting these imaginary hares running,  Osborne has quite specifically distanced himself from a daft idea like nationalising the rest of the bank: but knowing that people are acquainted with Cable’s desire to do just that, most observers assume it’s Vince’s idea.

Further, Osborne’s loan guarantee scheme has been a flop. Bankers still aren’t lending to small and medium-sized business: given the way the economy is flatlining, Osborne needs a success. He needs to get banks lending again: hence all the guff about “exasperation” with bank lending policies: what better way to scare banks into lending than threaten to start nationalising them?

All well and good, but Draper Osborne is a long way from stupid, and one of the better chess-players at Westminster. Barclays is pinned down by a major scandal, and the wobbly nature of Lloyds/HBOS is gaining broader dissemination. Tough times are ahead on toxic debt, and by far the most exposed British Bank is the one the Treasury owns four fifths of: RBS.

OK, it wasn’t 80% acquired on the Chancellor’s watch. But that’s not the way it works in politics – and since the Conservatives came to power, things have got worse there, not better.

Distraction to support the ‘RBS in recovery’ myth.

RBS CEO Stephen Hester indicates that the taxpayer-backed lender is still “being hit by toxic assets” (as if they’d flown in through the window rather than having been acquired by the bank itself) yet has “achieved an important milestone” by repaying all the Government loans given to it during the credit crisis.

But all that bears little relation to reality. The trend data on losses are catastrophic: £399m in 2010, £766m in 2011, and now £1.5bn in the first half of 2012 alone. Some recovery. And the bank still owes the British taxpayer £46.6bn in relation to the price of buying its shares. The software ‘glitch’ is also being put forward by slippery Hester as causing the ‘setting aside of £125m’, and thus a major calamity over which RBS had no control. Bollocks: that sum is for customer costs and claims. What we need to grasp is that this cost is minute – under 0.02% of the glitch windfall, which was in the region of £80bn – effectively, a below-the-radar bailout. Regulars at this site will know that I had profound doubts about the reality of ‘the glitch’ from the start.

The sudden introduction of a ‘full nationalisation’ issue just four days before the results announcement was classic Blairite distraction. (And don’t kid yourselves: for all his empty promises of eschewing spin, Camerlot is more addicted to it than New Labour was). A bit of suitable bank-bashing, talk of a crackdown, good background to Osborne’s latest lending wheeze….and any rubbishing of LibDem nationalisation notions plays well with Malcolm Brady’s 1922 troops.

As for the nationalisation threat itself, it is too risible for words. Coalition leakers were claiming earlier in the week that the major motivation for considering full nationalisation was “exasperation at its inability to persuade RBS to lend more money to business”. Please, please can we all wake up? The Government already owns 82% of the bank, a stonking voting majority. WTF difference is buying the other 18% going to make?

And so by Thursday, we were all turning to the Treasury pinstripes for confirmation or denial. The final tick for me was that, by and large, there was much “playing down” of the story…as if those beastly journalists had been at it again, inventing all kinds of nonsense. Yet again, this is standard procedure.

“Osborne is a clever young man,” said a former Treasury grandee to me on the phone this morning, “but he is in love with intrigue for the sake of it.”

Correct. The extraordinary thing about these machinations (and my old Treasury chum is right, wee George revels in them) is that they are doing him no good at all: a poll earlier in the week among Tory activists showed that exactly 0% of those contacted saw him as a viable next Party leader. And ultimately, nothing will be able to distract from the one Big Issue Osborne cannot dodge: structurally, the economy is too lopsided and eurocentric to bounce back….and woefully unsufficient to keep an overcrowded island in work.

We have New Labour social engineers and the Scottish Gold trader to thank for this awful situation. But like I say, politics doesn’t work like that: this is here, Osborne is now, and pretty soon this Coalition is going to be history.


47 thoughts on “RBS ‘nationalisation’: a perfect weapon of mass distraction

  1. Cameron (and his cronies) were, are and always will be totally useless. They really did believe this was just the “bog-standard” recession which would be over in a couple of years, they’d get the credit and be re-elected by a grateful nation.
    Err-no! This is a major depression (as in the once every few decades type) and these people have no idea what to do.


  2. Nationalization is a red herring.
    Socializing the losses yet again.
    All the major banks everywhere need to be split into their
    component parts.The casino operations ,and the taxpayer
    backstopped financial money intermediary parts.
    The casino’s can go their own way and the ‘lenders’
    need to be regulated like utility companies.
    Let the derivatives blow up in the casino’s, and their
    shareholders and employees take the hit..


  3. ‘Pretty soon this Coalition is going to be history.’
    Oh, I live in hope. I would also hope that Scumron and Tushburn would be history. He might be a ‘clever young man’ but, he not using intellectual attributes to the UK’s best advantage, is he? As usual they are feathering their future nests.


  4. Came across this, sort of off topic?
    ‘More than any time in history mankind faces a crossroads. One path leads to despair and utter hopelessness, the other to total extinction. Let us pray that we have the wisdom to choose correctly.
    Woody Allen’


  5. The “glitch” is being placed at the door of outsourcing (to India) by IT people (mostly ex RBS) many with an axe to grind.

    There was another black swan this week – the grid failure in some half of India. There has been scant comment on the risks to outsourced IT and Help Desk function of another major failure in the Indian electricity supply.

    There haven’t been any reports of loss of IT functionality not Help Desk. This may be because the “wrong” areas were affected or because there was adequate emergency power to maintain functionality (how many days on-site fuel supplies do they carry?) and the communication path wasn’t/isn’t to power outages.


  6. O/T.A Friday afternoon announcement on the Ulaanbaator SE ,Mongolia,confirming the tie up between the once defunct UK government owned oil company,BNOC,now reborn as the British National Olympic Cheats,and the fast growing China Drugs Internationa(CDI)l,whose new undetectable stimulant is destined to put Valium and Librium in their place.Under the heads of agreement between the two companies,BNOC has agreed to give CDI ‘priority rights’ in swimming events at the London Zil Olympics,and BNOC has recieved ‘priority’ in rowing and certain track events,thus ensuring the host nation appears to be capable of knocking a despondent France and a flagging Germany down a peg or two,in the run up to the conference season….


  7. Absolutely not. I hate all of them equally, I make no exception. But, I accept that my post does seem as though I would expect the Three Stooges to do better. That is not the case. Apologies for my error.


  8. @ William. I have also heard that this year’s Nobel Prize for Chemistry is to be announced immediately after the Olympics. :-)


  9. I’m not expecting any improvement from the other side, but given Camerlot’s contemptuous duplicity on the NHS the near death experience they had under Wee Willie Warmonger Hague’s leadership will be converted into a complete death experience.
    That at least would leave one half of the field open for some newer party with perhaps less baggage and sufficient cojones to do something other than kowtow to high finance and big business.


  10. @AJC: “The “glitch” is being placed at the door of outsourcing (to India) by IT people …

    I certainly heard that explanation at the time, but here’s a cut/paste piece from an e-mail I received from Natwest Bank on 13th July:

    “What went wrong?
    The problem was caused when maintenance on IT systems in Edinburgh disrupted the regular processing of overnight transactions. It took time to resolve this problem, which in turn created a backlog, so many customers’ account balances were incorrect between 19 June and 6 July.”

    I guess it’s pick ‘n mix time.


  11. “Government already owns 82% of the bank, a stonking voting majority. WTF difference is buying the other 18% going to make?”

    Oh but it could make a difference to a few!

    “Modus Operandi” pay the other 18% in readies then allow the few to siphon it out before promptly closing it down. A nice little earner for those few that have a bob or two in there with connections to make it happen. As for the small saver, investor, taxpayer etc. tough luck you are the one that loses your shirt.

    Feel so cynical sometimes nothing would surprise me on the economic fiasco anymore even worse they ain’t that stupid it is planned.


  12. Sir,

    As I mentioned in an earlier post, I am new to the ‘Compost Business’.
    If you or any of your readers have a subject under discussion – I come along quietly and tip my 5 tonne trailer of ordures over it for your sensory pleasure and intense interest.
    Fortunately there is no charge for my services as all expenses are met by the EEC social funding mechanism whose grants cover this activity and also publishing fictitious and second rate troll imaginations to the internet
    note: We do not accept any criticisms whatsoever concerning the bad odours of all of our products.


  13. Sir,
    As I mentioned in an earlier post, I am new to the ‘Compost Business’.
    If you or any of your readers have a subject under discussion – I come along quietly and tip my 5 tonne trailer of ordures over it for your sensory pleasure and intense interest.
    Fortunately there is no charge for my services as all expenses are met by the EEC social funding mechanism whose grants cover this activity and also publishing fictitious and second rate troll imaginations to the internet
    note: We do not accept any criticisms whatsoever concerning the bad odours of all of our products.


  14. Draper Osborne is a politician,with a Machiavellian bent. He prefers to play childish political point scoring than doing the job of a real Chancellor. That is improving the functioning of the economy to benefit the citizens. We need a real Statesman,who has the courage and integrity to go against the established corrupt troughers in the City , Treasury and BoE.
    Vince Cable receives a bad press from the MSM, because he advocates the only real workable solution to our economic problems. That is a state sponsored Industrial Investment bank. He is the only professional Economist in the cabinet and understands the imbalances of our economic structure, caused by the over reliance on the Finance sector.
    The City establishment is horrified, that a competitor to their monopoly of the money system should be introduced and naturally their briefing against this radical idea is intense.
    The present banking cabal is insolvent,dysfunctional and of proven criminality. They are not fit for purpose in a modern industrial society. They generate inflationary puff money in the Finance,Insurance and property sectors. They do not create wealth or employment despite having £2 trillion issued to them in bail-outs and QE. They are plunderers of the real wealth in our society.
    The City has no interest in a long term risk investment in Industrial development. They deride engineering manufacturers as ‘widget makers’.
    We have our priorities in the UK about face. Productive industry creates real wealth and jobs. Finance is a parasitic service industry,which has opted out of financing the real wealth creating industrial sector. This has resulted in a downward spiral of unemployment and economic recession.
    This downward trajectory will continue unabated until the Finance sector is brought under control. They have suborned the Political, Judicial and regulatory processes and consider themselves untouchable.
    The fight is now on. Our democracy verses the Financiers, the citizen is way behind on points at this stage. Our elected political repesentatives ( of all parties) have failed miserably to protect us, so they can ignored in any future confrontation. I despair at times of any salvation from this seemingly constant fraud perpetrated by the bankers on the citizen.


  15. But, but, but…. why have they stopped lending?

    Because of the toxic levels of debt that will never be repaid that lurk on all their balance sheets.

    There will be no recovery until that boil is lanced or bursts of its own volition – as it will eventually.


  16. A pedant writes: still not entirely correct, I’m afraid.

    The last deflationary depression was in the 1930s. And there has never been one this big.


  17. A good take on this, JW – I must confess I had forgotten entirely the UK plc owned fully 82% already – making purchase of the other 18% fairly moot, I guess.

    They wouldn’t have to report results any more if they delisted ;)


  18. Pingback: John Ward – RBS Nationalisation : A Perfect Weapon Of Mass Distraction – 4 August 2012 | Lucas 2012 Infos

  19. As a saturday morning quip, I must say, as a banker myself,……and a rather wealthy one at that…ahemm..
    that nothing amuses our retail army of staff more, than quivering timid customers going home to launch scathing attacks on the bankers via the internet and reading same in the newspapers that they pay for……
    heh heh haa haa haha guffaw….


  20. Troll #35

    I come along quietly and tip my 5 tonne trailer of ordures over it for your sensory pleasure

    That is what a Troll is for, isn’t it? Mind you, someone else has to do it for you – you are kept in a cage after all. Somewhere in Delaware, not that you would know that from the strip lighting in the corridors you are herded down.

    PS If your compost is smelling, you have done something wrong – either that or a Troll has been at it (and you know what that means!).


  21. I must apologise.
    Rupert and I were at a cocktail party until very late last night, well actually til about 4 this morning.
    He did have one or two more gin and tonics than he should have,.
    I have put him to bed now.


  22. Rupes! sorry, Herr Blankenstein

    You didn’t tell me you were a real banker. I thought you only imagined that sort of thing in your coffee breaks at the factory.


  23. Rosie

    don’t you mean the Crown and Sceptre on the Balsall Heath road. I have no doubt that you were only let out of the police cells at 4am, the noise people make there.


  24. Clearly RBS will continue to be a bottomless money pit into which tax payers will fork out for until the idiots wake up that there will never be a return on their money. This will not happen any day soon. The political/financial establishment has a vast vested interest in pouring our money down the drain and making an illusion of profits for the big five, ha bloody ha, through QE and Zirps together with more straight forward bailouts.

    This is the US line also so it fits with the international ideas to counter act the ever looming depression, but where pray did these idea put into practice and there you have to look at lowly Japan. Two decades into stagnation and we are following the people who cannot shack themselves from doldrums, but this suits the political/financial elites as so what if ordinary folk loss their mind numbing little jobs or their dreary suburban homes as the bonuses will continue to roll and the bank rolling of a certain political party carries on.


  25. @BT: “The problem was caused when maintenance on IT systems in Edinburgh disrupted the regular processing of overnight transactions.”

    The systems (hardware) might well be in Edinburgh – there is a giant data center there – but the operation (and software maintenance) could well be outsourced and initiated far away
    (hence my remark about the communications path).

    As with all official statements, particularly any a*se covering ones, you can never take PR speak at its face value.

    As Paxman once said – “Why is this lying bastard lying to me?”.

    Perhaps “Why would this lying bastard be lying to us?” would be more apposite in this context.


  26. And why is it that any ATM I go to tells me that £200 is my daily limit for cash withdrawals? It’s my money in my account, so surely I should be able to have as much as I want. And I am sure it was the case previously that you could get at least £400 out in one go…….


  27. @David: I’m sure you know, but daily cash w/d limits from ATMs have been in existence for a very long time. Ostensibly to prevent fraud and theft but also to ensure the ATMs don’t run out of cash for others. The actual maximum w/d per day varies between banks.


  28. Pingback: BORIS FOR KING: Charles Moore makes a rare error in the Telegraph | A diary of deception and distortion

  29. @SALFORD LAD: Agree mostly with your rant.

    When it comes to an “Industrial Investment bank” this is not a new idea. What really concerns me is who will set it up?, who will run it?, who will take lending decisions? who will be its backstop to cover bad loans? etc etc etc. If Labour have anything to do with any of this, it’ll be a corrupt way of feeding money to like-minded socialist comrades at taxpayers’s expense.


  30. No, the last thing we need is a State sponsored Investment Bank, the end result would be a load of politically motivated bad investments that the tax payer has to carry the can for, such as :-


    If a business idea has legs and the right people then private investment will be forthcoming. The reason why banks won’t lend to businesses at what the business sees as a sensible rate is because the banks can see the inherent riskiness in the plans.

    The ordinary public cannot function in the modern world without a bank account, the debit card/direct fund transfer has taken the place of cash, what we need is a simple National Public Bank.

    It should have an account which allows instant verified transactions, when I buy something the money is transferred immediately and I no longer have access to that money, vice versa when someone pays me.

    It should not offer overdrafts, mortgages or any other form of lending.

    It would be the modern equivalent of cash and should have the full balance guaranteed by the Bank of England.
    It should also have a savings account, your deposits would buy index linked bonds and again the full amount should be guaranteed.

    All other investments/loans should be handled by private institutions and these should not be guaranteed.

    More importantly, keep the state out of the money lending business, they don’t know what they are doing.


  31. @AJC: If the RBS/NWB data centre is in Edinburgh that is probably (or should be) where testing of new release s/w happens even though it might have been coded in India. I don’t discount India being involved, but methinks Edinburgh is responsible. But the truth is we simply don’t know the details of what happened. I find it all very odd because NWB used to be a very well run IT operation in years gone by.


  32. They might come under the FOI if they are wholly owned, as it currently stands they are held at arms length via UKFI so they don’t have to tell us how much a transaction costs. (with regard to charges they levy)


  33. David, once you put the money into the account it isn’t your money any more.
    When you make a deposit you loan your money to the bank, when you make a withdrawal it is a request that some of that loan is repaid, you are simply an unsecured creditor and you have no more right to that money than the guy who supplies the photocopier paper.

    Your money is guaranteed by the FSCS to the tune of £85000, this is supported by the rest of the banking licence holders and is ultimately backstopped by the taxpayer.


  34. I just don’t know why any small business could possibly WANT a loan from the now totally overpriced, greedy, corrupt-as-hell, inept, pathetically useless banksharks. I’d rather have a large hole in my head than ask a BANK for a loan.
    Where have all the mutuals and co-ops gone?


  35. The SNAFU is blamed on the installation of an updated version of the batch processing software (CA-7) which subsequently screwed the routine overnight batch processing run.

    The installation of the update could well be done remotely as could the initiation and monitoring of the standard overnight run.

    It took RBS some time to noticed the problem and they attempted to unwind it the next evening. Clearly in the case of Ulster Bank customers there was some additional corruption and no viable roll-back available.


  36. That ‘Unt is a ringer for Kenneth Williams, as he said at the time his bell end fell off…

    ‘Oh my goodness me’


  37. @ Gemma

    You have chosen to highlight your coarse ignorant breeding with comments like this,or do you need medical help for your sickness.
    You must be very lonely.


  38. RB

    It was your claims to have been out on the town and getting drunk, not me. Perhaps you need some of the medicine you are prescribing for me? Alcoholism is a known disease after all.


  39. Is there anyone inside RBS Private Banking / Global Transaction Services who has capability to obtain evidence regarding major fraudulent activity underway there? This will be the next shoe to fall after the LIBOR scandal.

    skype: damarrealestate


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