Saturday, 28 April 2012

Unequal Shares

Thomas Jefferson, third president of the US, once said, “I believe that banking institutions are more dangerous to our liberties than standing armies. If [we] ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations that grow up around [the banks] will deprive the people of all property until their children wake up homeless.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs,”  and if the 8,500 mortgage litigation cases against them are anything to go by, HBOS and Barclays are about to prove Jefferson’s words of warning  are correct.

A recent report warns banking giants Barclays and HBOS may well have to reimburse their customers for charges amounting to hundreds of millions. This is because HBOS’s and Barclays' shared appreciation mortgages, which offer an interest free capital sum in exchange for seventy-five percentage of the borrower’s equity, have harvested vast rewards for the bank at wholly excessive expense to the mortgagees. Some homes have appreciated by £300,000 in the 10 years since the loans were made meaning homeowners have had to pay more than £200,000 on loans as little as £25,000. These products were designed and targeted at low income customers who were quite often elderly and have proved doubly lucrative for the lenders because properties values were in the doldrums when many of these products were sold. This gave the banks the perfect window of opportunity to acquire a  substantial slice of an often vulnerable individual’s future equity for a minimal outlay throughout the depressed years of property growth during the 1990’s.

Hilary Messer of RWP solicitors is waiting for more people to come forward before she brings this proposed class action formally to the attention of HBOS, Barclays and the courts but it cannot have made it any easier for those Barclays shareholders aware of this pending lawsuit to know there could be a demand for a further 850 million pounds on top of the ongoing costs of the PPI claims and the impact of the government bailouts. Neither can it help to be made aware that less than half of Barclay’s chief executive Bob Diamond’s pay packet is to be growth related. Little wonder so many shareholders were vocal in their discontent to discover Bob Diamond is to enjoy a 2.7 million bonus on top of his 1.35 million salary in addition to the 5.7 million he has already received to cover his tax bill. However, it must have been nothing short of incendiary to find Barclays staff bonuses of 2.25 billion pounds in 2011 were triple the 730 million pounds paid out in dividends to share holders.

While David Cameron says the lack of economic recovery is, “very, very, disappointing” and Ed Milliband blames the present governments “catastrophic”  polices and lack of meaningful banking reform, it is clear from the actions of Barclays and HBOS they remain blissfully detached from the effect the first double dip recession we’ve had since the 1970’s and the impact it is having on the rest of us. Instead their executives continue to feather their own nests and, in the case of the Bank of Scotland, attempt to paper over the cracks with an advert created  by London-based advertising agency RKCR/Y&R and developed “to reassert traditional values”. It tells us, “You never know what is going to be round the corner, or what twists and turns life is going to take.” I beg to differ. I have always found past performance to be a reasonable indicator of what’s on the cards for the future and in the case of HBOS and Barclays it is clearly going to be more of the same. It is because of this my personal battle with LLoyds and HBOS is destined to be a long one as is, I suspect, any hope of economic recovery.
Thomas Jefferson also said, “It is error alone which needs the support of the government while truth can stand by itself” and sadly for us, it seems he’s right again.


  1. Excellent blog, lad. The spivvery and charlatanism in the banking sector knows no bounds. The fact RBS effectively robbed its owns investors (and a few neophytes) of £12bn in April-June 2008, with the FSA continuing the charade that nothing untoward occurred, is another example of the same sort of thing. What appalls me about the RBS heist is that many of the intermediaries (asset management companies) who recklessly piled pensioners' and savers' cash into what was clearly a wholly misleading and possibly fraudulent rights issue, are much more preoccupied with covering their own backs than seeking justice and compensation for the people whose billions they lost.

  2. Great blog post.
    I do wonder if we don't take another slant on what Jefferson wrote? He was arguing against having private banks and particularly private institutions like the Fed that control the printing of money.
    Maybe banking should just become a public service? Abolish private banks. The government need not then have any national debt, as it would be free to print whatever money it required for public services.
    You may think this sounds pretty radical, but worth thinking about. There doesn't appear to be much advantage for having private banks at the moment.
    Pete (the monkey)

  3. I'm no history expert but I believe that Thomas Jefferson said something to the effect of "the people should not fear their Government, the Government should fear the people" With this banking issue coupled with the latest mis selling scandal to small businesses, lets hope Jefferson's quote might apply to banks !

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