The news that the Bank of
England will not increase current Quantitive Easing levels of investment should
be a cause for praise for members on the monetary policy committee who voted against
expanding the £375 billion QE programme but what would have been much news
would be the reduction or freezing of the programme all together.
Ever since the financial crisis
of 2007-2009, banks across the globe have implemented similar programs of
lending cheap money to banks in the hope that it will sink into the real
economy but the results, in Britain at least have been less than successful to
say the least.
The reason behind why the QE
programme has not been a great success is that what is considered success by its
supporters is not really success at all. This is because, contrary to what most
media outlet will tell the public, QE is
just a another word for publicly funded corporate welfare ensuring that the
taxpayer funds banks that do not lend and are still making very large losses.
The news of RBS still making
heavy losses despite the taxpayer being heavily invested in the bank coupled by
the reasons behind those losses and the latest news of a computer crash to add
to growing list similar instances has left many questions as to why the Bank of
England chooses to pump money into banks that are so poorly run to the point
that it would make the average observer think they were doing on purpose.
A recent computer malfunction
(one in a long line of similar instances) inconveniencing its large base of
customer goes to show that RBS are a state as same thing happened less than a year
ago leaving customers unable to “withdraw cash from ATMs or check their
accounts online, customers were also unable to use their card in electronic
transactions”[1]The
whole debacle has left the bank exposed to “compensation claims” running into
millions and has provided another blow to a once proud bank[2].
If the stories do not convince readers
of this article (meaning you whoever ‘you’ is) the number will leave no doubt as
depressingly:
The bank posted an annual loss
of more than £5bn and Stephen Hester, its chief
executive, admitted 2012 had been a "chastening" year after its £390m Libor rigging fine.
Its total losses since the 2008 bailout have now topped £34bn. However, the
bank is still paying out £607m in bonuses in the coming weeks[3]
Seeing that RBS is faltering and looking for a
private buyer, the Bank of England seems
to be coming to its senses as Governor Mervyn King in front of the Banking
Commission supported the idea of “full nationalization” of RBS in order to
split the bank “into two: into a “bad bank” of troublesome loans and “good bank”
that can make fresh loans to cash-strapped businesses”[4].
While this idea not the worst idea and can actually work, The Guardian’s Jill Treanor rightly pointed
out that the idea of full nationalization is “five years too late”[5].
In sum, news of the Monetary
Policy Committee voting against an increase of quantitive easing given to banks
is encouraging but nowhere near how encouraging the actual end of pumping
public money into private institution that are badly run and thanks to lax
regulations and mickey-taking bonuses, are encouraged to continue the bad
work.
[1] J
Thompson and E. Moore, 2013, Computer fault anger RBS customers, http://www.ft.com/cms/s/0/faf97d50-8718-11e2-bde6-00144feabdc0.html#axzz2MsSB2TXl
[2] S.
Read and S. Anderson, 2013, ‘#Naffwest’:
Fresh compensation claims face RBS and Natwest as customers pledge to abandon
bank after SECOND computer glitch lock
them out of their accounts, http://www.independent.co.uk/news/business/news/naffwest-fresh-compensation-claims-face-rbs-and-natwest-as-customers-pledge-to-abandon-bank-after-second-computer-glitch-locks-them-out-of-their-accounts-8523685.html
[3] J.
Treanor, 2013, RBS boss admits ‘chastening’ year as losses breach £5bn, http://www.guardian.co.uk/business/2013/feb/28/rbs-losses-chastening-year-stephen-hester
[4] J.
Treanor, 2013, Mervyn King backs RBSbreakup – five years too late, http://www.guardian.co.uk/business/blog/2013/mar/06/mervyn-king-bank-nationalisation-too-late
[5]
Ibid
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