Today, Barclays issued its first quarter management statement. This statement caught my eye:
Adjusted profit before tax of £2,445m, up 22%, driven by strong performances in both Retail and Business Banking and Corporate and Investment Banking with the non-Investment Bank businesses showing significant growth in adjusted profits.
This PR gold nugget came just two days after the UK Office of National Statistics published first quarter GDP data showing that the economy had fallen into the second recession in four years. Banking sector profits are up 22 percent, while the economy is tanking. How do those financial geniuses in Barclays do it?
Not without massive help from the British state. Barclays are able to borrow from the Bank of England at near zero rates. It then lends this free money to the private sector at much higher interest rates. The differences between its funding rate and lending rate - its spread - is huge. With this kind of state support, any imbecile could make £2.5 billion in profits.
Barclays are not inclined to show any gratitude for this extraordinary generousity. Lacking the merest shred of decency and discretion, it decided to pay massive bonuses to their senior management.
As soon as the bank announced another round of megabuck bonuses a media firestorm broke out. Despite the massive negative publicity and near universal condemnation of the remuneration polices, Barclays were undeterred. Marcus Agius, the chairman of Barclays, explained the issue in the following manner:
"Evidently, we have not done a good enough job in articulating our case: on some matters we should have communicated earlier and more clearly. For this I apologise and I assure you that in the future we will be engaging differently and more purposefully with shareholders in order to ensure that we obtain a broader level of support on remuneration policy and practice."
I have always thought that the PR departments of UK banks lived in a netherworld where the understanding of the real world was, at best, vague and hazy. However, this statement suggests that Mr. Argius lives on a demented fifth dimension. He thinks with a slicker communications strategy that Barclays can obtain a "broader level of support on remuneration policy"
There are some misguided souls who think that the reprehensible misbehavior of Barclays is an indictment of capitalism. I share your anger but not your diagnosis. What we are witnessing here is not capitalism but corporate welfare; a cynical inversion of the socialist ideal, where the state protects and nurtures rich bankers rather than the poor and vulnerable.
I doubt that Mr. Argius or Mr. Diamond really care how this bonus scam looks to the rest of us. The money is in their accounts and not ours. That is all that matters.
Nevertheless, an ominious nightfall is now shrouding this country. The economy is wrecked, and the guilty men remain in control. They think they can conjure up forgetfulness and confusion with a better communications strategy. But you can't spin away five years of economic stagnation. Press releases can not paper over our desperate predicament. It was Banks like Barclays that laid waste to this great country. We all know it, and we will not forget.