By Philip Stephens
Published: January 19 2009 19:40 | Last updated: January 19 2009 19:40
For once, Gordon Brown is guilty of understatement. The other day the prime minister remarked on the rising public anger <http://www.ft.com/cms/s/0/15d92b20-e5b5-11dd-afe4-0000779fd2ac.html>at the behaviour of Britain's banks. Unbridled rage would have been a more accurate description of the national mood.
On a recent visit to Washington I heard several people say that when the reckoning is finally made some big Wall Street figures are going to end up in jail. My impression is that many on this side of the Atlantic would like to see one or two British bankers join them.
Monday's announcement by *Royal Bank of Scotland<http://markets.ft.com/tearsheets/performance.asp?s=uk:RBS> * that it racked up losses <http://www.ft.com/cms/s/0/4fd3e4e2-e5b9-11dd-afe4-0000779fd2ac.html>of upwards of £20bn last year could scarcely have offered more eloquent testimony to the hubris that has brought the financial system to its knees. Banker friends (I still have a few) say that RBS was uniquely reckless in its bid for ABN Amro. But unless my memory deceives me, Barclays was almost as eager to stump up countless billions for the now-broken Dutch bank. As for the toxic loans on the banks' balance sheets, every week throws up another horror story.
There was political calculation, of course, in Mr Brown's comments. He has had to throw another couple of hundred billion pounds of taxpayers' money at the banks in the hope of averting an economic slump. Mr Brown needed to protect his flank: bailing out the banks again does not win points in the popularity stakes.
The prime minister's ire was directed specifically at the banks' reluctance, even after last autumn's costly rescue, to own up fully to the extent of their dodgy assets.
That is bad enough. But what most angers those running businesses, and indeed those simply trying to keep their personal finances afloat, is the mix of insouciance and venality that often describes the banks' response to the crisis. We are told it was an act of God; or it was all the fault of the Americans; or we should blame the regulators. As for nationalisation, heaven forfend. Bankers must all be allowed to run their businesses without interference, even as they suck up public money.
The banks insist, of course, they are still lending to good businesses and solvent households. The fatal snag is that their assurances defy the daily experience of customers. Credit lines everywhere are being cut.
I caught a small glimpse of the tactics the other day in a letter from *Lloyds TSB <http://markets.ft.com/tearsheets/performance.asp?s=uk:LLOY>*. My decade-old (and momentarily unused) overdraft facility, it informed me, was to be halved forthwith. Had the bank fessed up that it was reining in its lending commitments, I would have shrugged. Instead, I was enraged by the transparently ludicrous guff promising me "a planned overdraft to meet your needs". Perhaps I am supposed to send a thank-you note.
Dissembling, I have concluded, is hard-wired into the banks' DNA. Mr Brown seems to have encountered the same lack of candour in his discussions about rather larger sums than my now-reduced overdraft.
The prime minister has no option but to pay up. To say that taxpayers are appalled is not to conclude that the banks could be left to tighten the noose on the nation's economy.
In so far as it goes, the latest rescue package seems well judged, although the devil will be in the detail. By insuring the worst of the banks' loans, the government has removed a big excuse for credit drought. Giving big companies access to additional funding by guaranteeing corporate bonds won Mr Brown the applause of the CBI. It also hands the Bank of England an important weapon in the fight against deflation, through so-called quantitative easing. State guarantees for mortgage-backed securities might help to reopen the markets in those instruments.
Mr Brown is at pains to say that all this does not amount to a blank cheque for the banks. Alistair Darling, the chancellor, insists that the price of the insurance scheme will be a "lending responsibility agreement" with precise targets for new credit for individuals and small businesses.
Now it has gone this far I cannot understand why the government did not take the next logical step of assuming majority stakes in all those institutions now dependent on public money.
It would be a lot simpler. The banking system has already been in effect nationalised and the Treasury controls RBS and holds a large chunk of the newly merged Lloyds Banking Group. Banks, such as Barclays, that remain hostile to any state interference could retain their independence by abjuring public assistance in all its forms.
Whitehall officials tell me there are all sorts of technical reasons why outright nationalisation is not the right answer – while adding that it may yet happen. Perhaps Mr Brown is holding back because he knows that when the reckoning is made, bankers will not be alone against the wall. They will plead that they merely exploited the rules set by the politicians and policymakers.
For the moment, though, I cannot think of a more popular policy than shooting the bankers and nationalising the banks. It might even win Mr Brown an election. Come to think of it, it could also be the way to get us out of this mess.