Peston supports Slog view that 0% rates have blocked banks from repairing balance sheets

Robert Peston’s latest post tells the truly appalling story of the Black Hole that is RBS….and ridicules the Darling fantasy of it turning into an earner for taxpayers.

On his BBC blog tonight, BBC Economics Head Rob Peston declares:

‘The equity of this bank [RBS] has increased by less than £16bn to £80bn…So almost £10bn of the £25.5bn we’ve only just put into RBS has already been wiped out by losses. Which, I think, is probably the best measure of the degree to which RBS is still haemorrhaging.’

There is a very simple reason for this. If you are a bank offering zero rates to savers, you will not attract savers. Savers are vital to any bank wishing to lend profitably to borrowers. So if you can’t attract savers, you must yourself borrow on the wholesale money markets. But if you are broke and people know you are….then wholesale rates become more expensive. And if the Government plonkers are putting pressure on you to lend lots of money to business cheaply and repair your balance sheets…..well, rock & hard place rules apply.

One day, somebody will write about all this hypocritical bollocks; and Brown, Darling and Manglesum will be charged posthumously with something bestial – as indeed they should be.

But we mustn’t feel too sorry for les banquiers. They are, after all, still awarding themselves bonuses. And that must surely be the greatest hypocrisy of all.

“I don’t get what your problem is” said an irate City trader to me last week.

“I know” I replied, “and that’s the problem”.

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SadBut on February 25, 2010 at 9:20 pm

The problem with bankers bonuses is that they are like football player wages. They just go up and up till there comes a time when they burst. Football wages are getting close to that point in time as more and more football teams go into trouble. There is only so much money going into the game. Switching from fans to TV money has helped prolong it for a few years, but the end will still come. Bankers bonuses are similar. They go up because the bank thinks that they need to pay these huge amounts to keep the clever ones. And then the next bank does the same plus a bit more. Etc Etc Etc. Bankers should be glad that the bubble didn't actually burst on them. Its more like a rapid deflation due to the financial crisis. What bankers need to realise is that they aren't that clever in doing all the trades that make the money. Aren't they forgetting all the software that helps them? And they aren't that indispensable either. There will always be more people coming into the industry. Yes, everyone likes a humongous bonus, but if you actually got a large bonus and still had enough to spend on some of life little luxuries then I doubt you would complain. I said little not large like £10m houses, yachts and such like. Bankers are still entitled to bonuses, but the amount should be commiserate with the risk factor. Have bonuses like 10% of salary for someone who does good trades and makes a profit for the bank. Have bonuses like £1m and above for those willing to risk a loss if it doesn't go so well, say a pay cut or job loss. Then see how many are willing to go for these humongous bonuses.

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