The Royal Bank “of Scotland”

Scotland and the Banks of Nowhere

By Gwydion M. Williams

It’s pretty likely now [2008] that Scotland will soon be quitting the United Kingdom. Most English voters are reacting to the global financial crisis by switching over to the Tories. In Scotland the Tories are almost extinct and the Scottish National Party are the natural opposition. A Tory government would have every reason to pick a quarrel that would let the Union be dissolved in a way that would not bring them too much odium.

Scottish First Minister and Scottish Nationalist Party leader Alex Salmond is more than ready for it:

“I will not have this country’s potential traduced by unionist political self interest. People who would sell their country short.

“Their position is that the nation which invented the modern world is incapable of governing itself successfully. It is a ludicrous demeaning proposition – out of date and out of time.

“Delegates, prosperity will come when we make the most of all these national strengths and assets.

“Something the London Government will never do or even allow us to do.

“So, in this age of global uncertainty we know where the correct path for Scotland lies.

“Across Scotland we see a more confident nation – a nation that is ready to face any challenge.

“A nation whose destiny is independence.

“The new age of responsibility will usher in that new Scotland.” (Speech at the SNP conference, 19th October 2009. [])

Obviously the financial crisis is a major issue:

“Delegates, Brown’s Labour bust threatens to break records – and has almost broken our banks.

“Under his watch our greatest company has had to be rescued and saddled with 12 per cent preference shares. And our oldest Bank is threatened with disappearing as an independent force.

“And the Prime Minister thinks this is an advert for the Union?

“I would have thought that the condition of the economy, the fears of our people, the state of the financial sector, are a staggering condemnation of the state of the United Kingdom.

“Delegates during the period of financial chaos over the last few weeks we willingly responded to the call to put political differences aside in a national emergency. We did so because we thought it was the right thing to do.

“And how did the Prime Minister respond? At his very first opportunity last Tuesday he launched an attack on independence and the SNP…

“There was a time when unionists in Scotland concentrated on running down our own country. Now in order to make their case they are forced to run down other countries as well.

“Now we are expected to believe that because of the manifest problems of Iceland that Ireland, Norway, Sweden, Finland and Denmark are all going bust.

“Well delegates I have here the latest growth forecasts of the International Monetary Fund published last week. Ireland is in recession but it is and will remain almost 40 per cent per head more prosperous than the UK.

“And what do Norway, Denmark, Sweden and Finland have in common? They are among the few countries in Europe still forecast to escape recession.

“And as for the UK – the country which had eliminated boom and bust? It is expected to tumble into the economic mire. (Ibid.)

The fate of the Bank of Scotland is a major issue. It merged with the Halifax, formerly a Building Society but one which chose to turn itself into a bank when the regulations were eased. The united entity, HBSO, ran into trouble and needed a rescue by another merged entity, the amalgam of Lloyds Bank and the Trustee Savings Bank:

“Let us start with the TSB Lloyds takeover of HBOS. Four weeks ago it was the only game in town as it was either merger or oblivion and I have not and will not make any criticism of the actions of Lloyds TSB. They have acted perfectly honourably as far as I can see.

“But circumstances have changed and now – right now – there are questions to answer. These questions were placed pointedly this week – fairly and directly by some of Scotland’s major business figures.

“The Bank recapitalisation gives the UK government a share and a big say in the future of the joint company – as much as 40%.

“So let the Prime Minister and the Chancellor answer the questions that have been legitimately put to them.

“Before THEY put OUR money into THIS bailout we want to be sure that it is in the public interest and in the interests of jobs and decision making in Scotland.

“Is the re-capitalisation available to both banks independently? If not, then why not?

“If the future of HBOS has been secured then are we not entitled to ensure that any merger is in the public interest – that the public won’t end up paying for the merger, paying for lost jobs and then paying for the restriction of competition.

“Until these questions are satisfactorily answered then there must be no merger.

“The Bank of Scotland has been around for 300 years. It is hard wired into the social and economic fabric of Scotland. It does not deserve to be just cast aside as a consequence of the AGE OF IRRESPONSIBILITY.” (Ibid.)

Salmond is naturally concentrating on Scottish interests. The fate of the Trustee Savings Bank is not his concern. Trustee Savings Banks were “financial institutions which specialised in accepting savings deposits from the poor. They did not trade their shares on the stock market and, unlike mutually held building societies, depositors had no voting rights nor the ability to direct the financial and managerial goals of the organisation. Directors were appointed as trustees (hence the name) on a voluntary basis.”(Wikipedia) They used to be a lot of them, 75 in 1970. They were first amalgamated, and then in the 1980s were floated as a regular bank. In 1985 the TSB merged with Lloyds.

Another interesting merger was the aggressive take-over of the National Westminster Bank by the Royal Bank of Scotland, which was smaller but which persuaded shareholders it could serve their interests better. This merger in itself has happened without disaster – they got rid of 18,000 jobs, but from a shareholder viewpoint that was pure profit. But the enlarged Royal Bank of Scotland Group got overstretched after paying too much for the giant Dutch bank ABN AMRO, and now need government cash to stay alive. Salmond remains supportive of them – they are based in Scotland, and he worked for them as an economist from 1980 to 1987. He sounds good in the present climate, but there must be limits to how far he will challenge the system he has risen within.

Thatcher attacked many of the institutions of British economic and social life, in the belief that anything that did not meet the rules of textbook capitalism should not exist. That she was undermining the basis of British middle-class existence did not occur to her: I don’t suppose the Thatcherites would accept it even now. Britain was supposed to flourish on the basis of deregulated finance. It was assumed that middle-class ‘respectability’ would regenerate once nasty state interference was removed.

What’s actually happened is that middle-class respectability has gone on declining. Bank mergers meant that loyal employees lost jobs that they had seen as lifetime careers. The cleverest managers realised that there was no safety in being loyal, but quite a lot that could be gained by working the new system. Without doing anything illegal, it was possible to generate paper profits and secure large bonuses, sums running into millions, tens of millions and even hundreds of millions. In the USA, Richard Fuld walked off with 60 million dollars in cash and another 250 million in shares after leading Lehman Brothers into a bankruptcy that nearly brought down the global financial system. (The Guardian, October 7 2008.) Wall Street is planning to pay out seventy billion in bonuses, despite needing government money just to stay alive. (Ibid., October 18 2008.) London is not quite as bad, but London too has hollowed out the value of its banks.

If you realise that you’re working for the “Bank of Nowhere”, why show any loyalty? Why not just work the system for whatever it will give you? That’s the position in both London and New York, no functional ethics in the big financial institutions.

Salmond concentrates on putting a distance between Scotland and London’s errors. Maybe an exaggerated distance, but the point is sound:

“Of course the Age of Irresponsibility is the Prime Minister’s own phrase – produced as if he had nothing whatsoever to do with it!

“Calgacus said of the Romans. They create a desert and call it peace. Gordon Brown has co-authored a calamity and called it a triumph.

“Where did this age of irresponsibility come from? Who broke down the barriers in the financial sector? Who presided over the inflation of asset values? Who allowed the spivs and speculators of the £40 TRILLION derivatives markets – the financial weapons of mass destruction – to be totally unregulated? It might just have had something to do with the occupant of 10 and 11 Downing Street over these last eleven years.

“And in a wider sense of the age of irresponsibility?

“I believe the age of irresponsibility is the proposal to spend £40 billion on building new weapons of mass destruction in Scotland.

“I believe the age of irresponsibility is the off balance sheet, credit card finance of the PFI.

“I believe the age of irresponsibility is financing and keeping troops in an illegal war in Iraq even after the Iraqi government asks us to leave.

“Let the message ring out from this conference. We should have an end to the age of irresponsibility – not just in the financial sector but also in the governance of the country.

“Sub prime? More like sub Prime Minister.

“Delegates, what we need is a new age – an age of responsibility.

“A new time for our nation – when we reap our own harvest and ring our own till.” (Speech at the SNP conference, Op. Cit.)

That’s Scotland’s plan. A separation would push the rest of Britain rightwards in the short run. But if Scotland succeeds on something like Old Labour methods, then both New Labour and Thatcherism might be seen as historic errors.

There were also reasons for those errors. In the 1970s, the consensus of the 1950s and early 1960s had broken down. The working class had too much power for their traditional role. The obvious step forward was Workers Control, workers taking partial control of their own work. It was too big a leap at the time, especially with much of the Hard Left believing that a break-down in the system would rebound to their advantage. The system did indeed break down, but it was Reagan and Thatcher who restructures it, on a general philosophy of less regulation. Given the greater desire for individual freedom by ordinary people, the break-down in the traditional rules of sex and marriage, it was an attractive package at the time.

People were persuaded that deregulation was the answer. Let individuals choose without state interference, and all would be well. Obviously no one likes regulations that limit their freedom. It’s when you see the consequences of not having regulation that a thoughtful person will accept regulations as the lesser evil.

Just imagine what the roads would be like if anyone could drive where they pleased at whatever speed they liked. You could try it with computer-generated cars in a virtual world. See if people could get into a rational pattern of mutual self-interest, or whether you got total chaos.

If we applied the famous principles of John Stuart Mill, we would legalise heroine, cocaine, LSD and other drugs that have been found in practice to be killers and mind-destroyers. We would also legalist knife-fights or gun duels where both parties were adult and wanted to settle it that way. We would set up suicide booths where any adult who’d had enough of life could end it conveniently and painlessly. All of these ideas used to be found in the imagined worlds of Science Fiction, along with a lot of things that have been realised but would have seemed much less likely at the time. Duels used to be legal under English law, and unofficial duels under ‘rules of honour’ continued into the 19th century in Britain, longer elsewhere. Suicide that was not an escape from social obligations was respected in a lot of societies – I personally would favour both a ‘right to die’ and a ‘right to a dignified exist’ once a decent quality of life has been lost. But any limits at all are a breach of Mill’s principles, the most coherent ad respected ideas on the subject.

Rhetoric about freedom is just that, rhetoric. People have different ideas about which freedoms should be allowed.

The immediate task is to create a new system of financial regulation. Something will undoubtedly be cooked up in the final months of Bush’s rule. The election is early November, but even if Obama wins by a landslide, Bush will stay in charge till 20th January. It is almost certain to be a few cosmetic changes.

My recommendation would be to uproot all of the hedge-funds, create a ‘Tobin Tax’ on each transaction that would be a light burden on someone doing real business, but would make it vastly harder to make a profit from gigantic high-speed speculative trades. Of course this would be an interference with freedom. It is likewise very arbitrary that all motor vehicles are compelled to drive on the left in the UK, while being compelled to drive on the right in the rest of Europe. But we can easily work out how the roads would be without enforceable traffic rules. We have seen in the present crisis the costs of deregulation.

It is worth quoting some remarks made by a hedge-fund manager, a man who sneers at bankers and praises cannabis. A man who is happy to say what he thinks now that he has enough money to quit:

“I am writing to say goodbye.

“Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was also closing up shop (a $300 million fund), was quoted as saying, “What I have learned about the hedge fund business is that I hate it.” I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America…

“Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile, their lives suck….

“I truly do not have a strong opinion about any market right now, other than to say that things will continue to get worse for some time, probably years. I am content sitting on the sidelines and waiting. After all, sitting and waiting is how we made money from the subprime debacle…

“On the issue of the U.S. Government, I would like to make a modest proposal. First, I point out the obvious flaws, whereby legislation was repeatedly brought forth to Congress over the past eight years, which would have reigned in the predatory lending practices of now mostly defunct institutions. These institutions regularly filled the coffers of both parties in return for voting down all of this legislation designed to protect the common citizen. This is an outrage, yet no one seems to know or care about it…

“The evil female plant – marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country.” (Letter from Andrew Lahde, [,s01=1.html])

He’s probably right about the financial mess. Naive about the US government, which was created by an oligarchy of rich men. Foolish about marijuana, which may cause harmless euphoria in a lot of users, but is much more likely than alcohol to cause major mental disturbance from mild use. Drugs are the unacceptable side of 1960s freedoms: we can live with sexual diversity. We cannot live with a free-for-all in dangerous drugs. We cannot live with a financial free-for-all.

Someone said recently that to regulate finance is “like asking water to flow uphill”. True – and just what do you think happens when you turn on a tap in an upstairs room? Or a tap in almost any room, since most the water mains are deep underground. Roman aqueducts did rely mostly on water flowing downhill, meaning that they were expensive and also very unhealthy, in part because pipes were made of lead. Britain gave itself clean water in Victorian times, water that does indeed ‘flow uphill’ because it is pressurised. It was a long and hard process but well worth it.

Banks need to be re-regulated. The drift away from mutualisation was a mistake and the possibility of reversing it should be considered. There should be a concerted attack on tax havens and niches for dubious ownership. The world’s big economies should simply refuse to do business with places like Lichtenstein and the Cayman Islands until they have proper financial rules. It’s worth thinking even about freezing out Switzerland, force them to abolish those damn numbered bank accounts and generally stop being a place for doubtful secret transactions.

Obviously this isn’t going to happen soon, if at all. But it is worth demanding, on the basis that the private financial sector is now utterly dependent on state funding. A system that has shown an astonishing ability to waste money on ‘financial products’ that are nothing but glorified gambling.

Meantime, get used to the idea of a shrunken UK with Scotland detached, and who knows what next?


First published in Labour & Trade Union Review, 2008. Published using the pen-name Walter Cobb.

For a more up-to-date view of Scottish nationalism, see editorials (not by me) for March and April 2015.

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