The UK banking system is telling two very different stories at the moment. On the one hand, Barclays and HSBC started to report a return to profitability. By Christmas big bonuses will be flooding into the bank accounts of the chosen few who work in the city. The good old bad old days are making a comeback.
Then there is Northern Rock. Unfortunately for the taxpaper, there is no recovery here. Instead, losses are up; £724 million in the first six months of 2009. The arrears rate has hit has hit 2.4 percent. Around 40 percent of their customers are living houses that are worth less than when they bought them.
UK banking is now dangerously compartmentalized. The "bad banks" now belong to the state, and the taxpayer will be paying for this mess for at least a decade. For banks that have survived the crisis, things could not be better. The competition has been thinned out, and interest rate spreads are huge.
These wonderfully large spreads have been created directly by the Bank of England, with its zero interest rate policies and quantitative easing. Is it really that hard for a bank to make money when the state has done everything in its power to reduce your funding costs to zero?
This compartmentalization tells us again that we have witnessed over the last two years an unprecedented transfer of wealth from ordinary people to speculators and financiers. At every stage of this crisis, the taxpayer and the saver have been shafted. It was our government that organized this disgraceful redistribution.