Marcus Wood

How the mighty are fallen....

The chart at the top of this post is the last years share price movement for the owner of NatWest and Direct Line Insurance, RBS group. In a few months this bank has gone from being worth £60bn to virtually nothing - and the main invester in RBS is... you and me.

The Government has lost £13,000,000,000.00 so far on it's investment in RBS - Thirteen thousand, million pounds. To give you some idea of how much money that is it's enough to build a brand-new secondary school in every major town in Britain; or replace every single piece of miltary hardware in the British Army, and it's five times as much as the treasury lost on 'black Wednesday' when Britain was ejected from the ERM in 1992 - an event that Gordon Brown has used against the Conservatives time and again since.

And that is on top of the unlimited cash guarantee given to the bank by the Government to underpin it's daily borrowing and now to underwrite its lending. The authorities allowed RBS, a small and previously virtually unknown Scottish bank to buy out Natwest (a company three times it's size) in 2001 and at the time I and others said this would turn out to be a huge mistake.

Banks used to boast about their probity, their safety and their security; their names used words like Trustee, Provident, Guarantee, Security, Prudential. Banks were boring, safe and cautious because their customers wouldn't leave their money with a bank seen to be flash, reckless or insecure.

But nowadays it doesn't matter - the Government will bale you out if you deposit your life savings with Fred's Bank ("Your money is safe -top left pocket, my grey suit") so the only thing that matters is the interest rate. Any flaky foreign or upstart 'financial services company' was just as safe as the most prudent of old-style banks so as a result people poured their money into the bank offereing a few pence extra interest and the prudent, the cautious and the safe havens missed out.

"the main investor

in RBS is you and me"

Even now that it's all gone pear-shaped the banks who steadfastly refused to take stupid risks with their customers money (Standard Chartered, HSBC and Abbey National to name three) have missed out again because their reckless rivals have recieved billions in cash aid and near nationalisation, so now they are having to compete with Government ('gilt edged') debt as a secure home for savings.

It's a nightmare that is of the Governments own making - because lets us never forget that it was the creation of the FSA in 1997 that re-wrote the centuries old tradition that the banks, like most businesses were regulated and supervised by their own lender - the Bank of England.