Category Archives: Society

Banking, Britain, Business, Economic, Financial Markets, Government, Society

Banking practices of the Royal Bank of Scotland referred to City regulators…

DAMNING REPORTS

The latest accusations being levelled at the Royal Bank of Scotland are as incriminating as any in its recent chequered history.

Small and Medium Sized Enterprises (SMEs) have long complained that they cannot get the loans they need, despite protestations by the banks to the contrary. A newly released report from Sir Andrew Large, a former deputy governor of the Bank of England, on the bank’s small-business-lending, confirms that much of the criticism levied at the bank in recent times is justified and the taxpayer-rescued institution must explain why it has not been doing all it could to assist Britain’s economic recovery. In normal circumstances, such practices would be worrying enough for the newly installed chief executive of the bank, Ross McEwan.

But these are not normal circumstances; Mr McEwan is also faced with a more troubling contention. According to another published document from Lawrence Tomlinson – deemed a successful businessman and ‘entrepreneur in residence’ at the Department of Business – RBS may have sunk to even greater depths in its condescending and haughty treatment of Britain’s SMEs. Contemptuous, because not only has the bank been transferring perfectly legitimate and profitable companies into its high-risk Global Restructuring Group (GRG), but the West Register (the bank’s property division), has reportedly been acquiring their assets on the cheap after imposing deliberate and exorbitantly high fees on them. Many companies in this high-risk category, deemed perfectly viable, have been unable to pay these fees imposed and as such have found themselves having their assets taken over by the bank at heavily discounted prices.

Both these reports must be put into context. Prior to 2008, RBS had been reckless over a number of years in its dealings, over-extending loans to many small firms that did not justify such levels of confidence. As the bank now struggles to repair its balance sheet, bad debts are continually being written off and lending practices have been tightened.

The findings contained within these reports have left many feeling aghast, not least Mr Tomlinson himself. His inquiries and formal deliberations suggest something altogether more serious. Vince Cable, the Business Secretary, has acted quickly and sent the evidence to City regulators. For his part, Mr McEwan has called in the law firm Clifford Chance to conduct an internal review of the bank’s practices. Such deviant and acute methods would be inexcusable from any bank, but from one that is largely owned and controlled by the state makes matters even worse.

COMMENT & ANALYSIS

The claims made in Lawrence Tomlinson’s report into the way the Global Restructuring Group at the Royal Bank of Scotland has dealt with struggling enterprises are truly dire.

It rightly is a matter that needs to be examined by the regulators the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).

Forcing struggling firms into insolvency when there may have been a chance of survival is bad enough. Ruthlessly seizing property and assets for its own gain is immoral and much worse.

Yet, should we be surprised? RBS had a hand in almost all the post-crisis scandals, including Libor fixing, interest rate swaps and the sale of payment protection insurance. The bank is also being sued by investors for failing fully to disclose the parlous state of its finances ahead of the £12bn rights issue to shareholders in 2008.

Tomlinson and the Department of Business also have some questions to answer. The in-situ ‘entrepreneur in residence’, for example, is a little mysterious. How was he chosen for this appointment, what is the scope of his role and how much did he tell civil servants and the Secretary of State, Vince Cable, about his own business affairs before he took on this rather curious role?

What also of the poor judgement by Tomlinson not to disclose that NatWest, RBS’s main operating offshoot, had granted him an overdraft and that in the last couple of years he was engaged in a major refinancing operation? Financial analysts will find it extraordinary that this was not considered a relevant factor either by Tomlinson or the Department for Business, and that it was not disclosed in the report. Making a strong case against the predatory behaviour of RBS is one thing, the dealings and judgments of Mr Tomlinson are clearly and significantly related.

The published accounts of Tomlinson’s business LNT Group are, even by the standards of many private empires, on the opaque side. They show a group that is indebted and making losses, with a host of intercompany relationships that are difficult to untangle.

The main product of Tomlinson’s dealings looks to be the design and building of new care homes, something the UK badly needs. But this is a notoriously difficult sector in which to operate – as was seen from the fate of Southern Cross – and management often has to choose between keeping costs under control and maintaining high standards of care.

Before giving Mr Tomlinson a government imprimatur one should trust that Vince Cable and his Department looked carefully at all his dealings before approving the appointment.

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Arts, Government, History, Politics, Society, United States

John F. Kennedy and his legacy 50-years on…

PRESIDENT JOHN F. KENNEDY

The reputations of presidents’ are based on a number of factors, but luck plays a significant part – not just in terms of what happens while they are in office, but also the luck of who writes their biographies once they have gone. Wars, for example, give presidents a boost, whilst, conversely, any financial crises will have the reverse effect.

The pre-eminent political biographer, Robert Caro, delivered a monumental multivolume labour of love that has, in many respects, redeemed the reputation of Lyndon B. Johnson. Some may deduce that LBJ emerges as the luckiest president of the past century.

Robert Caro’s LBJ depicts and portrays an ultimate fixer, a politician who knew better than anyone how to get his way in the challenging and demanding burrow and nest of Washington. Because of how Caro has written, it’s Johnson’s guile that people look to when they ask how President Obama could do better in his dealings with Congress.

But, as the established stock of LBJ has risen, John F. Kennedy has become the man who merely talked about the transformative legislative programme that Johnson himself turned into reality. In the long shadow cast by LBJ, Kennedy is perceived as a glamorous but slight figure, a crowd-pleasing president who was brave, attractive and ambitious, yet ultimately ineffectual. On the 50th anniversary of Kennedy’s assassination, many of his admirers are trying to reverse this image. For example, Caro focuses on foreign policy, which was Kennedy’s strength and Johnson’s weakness. LBJ’s achievements were undoubtedly domestic; Caro, as yet, has failed to explain the terrible mess Johnson made of Vietnam. Caro’s ‘unfinished’ biography will surely have to tell in some future volume the tragic coda of this calamitous episode.

The presidency of John F. Kennedy ended just as he was finding ways to move beyond the stagnant and terrifying philosophical logic of cold war confrontation that had taken the world to the brink of catastrophe in the Cuban missile crisis. In 1963, it looked as though Kennedy had stumbled on the path to a more peaceful future. Johnson was the man who departed from it.

During the last year of his life Kennedy’s quest for safer relations with the Russians is evidenced from the speeches Kennedy gave in the summer of 1963 about war, peace and the means of moving from one to the other. The Limited Test Ban Treaty (LTBT), a nuclear arms control agreement that Kennedy signed into law in October 1963, was probably his proudest achievement of his presidency up to that point.

Some commentators may suggest this was a sure indicator of things to come, the first step towards a stable and secure coexistence between the superpowers. Others, like economists, may treat Kennedy as a moral visionary, but economists are not historians. A man, they say, who possessed the gifts of oratory and character that was able to change to change the course of history at this perilous juncture is based on two questionable assumptions.

The first is that treaties matters. The LTBT was only what it said it was: limited. It specifically prohibited further nuclear testing in space or underwater but clearly permitted it underground. The treaty had been watered down from something more comprehensive, first by Russian qualms about international oversight and then by the misgivings of the US joint chiefs about the government of Nikita Khrushchev. Charles de Gaulle refused to sign it.

Arguing, though, that it was a landmark moment (as opposed to changing the course of history) is probably better placed. The treaty certainly signalled that the US and the Soviets could agree on something substantial. It also showed that a US president could get such an agreement passed the Senate, which had a tendency of shooting down plans for peace. We should look no further than from all of that which followed-on from the failure of Woodrow Wilson to get the Senate to ratify the League of Nations in 1919, a deficiency that continually haunted Kennedy. Kennedy did, however, secure ratification of the LTBT by an impressive margin of 80 votes to 19. This subsequently opened the door to the creation and ratification of the Nuclear Non-Proliferation Treaty (NPT), which was approved by the Senate in 1969 and has been vital in limiting the spread of nuclear weapons around the world.

The contention that speeches actually matter is highly dubious. In his book, ‘To Move the World: JFK’s Quest for Peace’, by Jeffrey Sachs, the author believes that Kennedy’s oratory in 1963 – above all the ‘peace speech’ he delivered in Washington, DC, on 10 June that year – was crucial in persuading Russia’s leaders, US politicians and people all over the world that the time was right for a sea change in international affairs. Whilst Sachs talks up Kennedy’s logic with beauty and how it had the power to move, he provides no evidence that such rhetoric made the vital difference. Are we to conclude that just because Kennedy said it was time for peace the Soviets quickly signed a peace treaty? Sachs does infer that such a treaty came into being because they had been persuaded by what Kennedy had said.

The near calamity of the Cuban missile crisis is recognised as persuading both sides to look for alternatives. However, we should not take for granted that this took the form of turning away from war to peace. It wasn’t so much the risk of Armageddon, but the temporary loss of control that terrorised both sides. The LTBT and NPT were ways of reasserting control as the two superpowers had struggled for something to cling onto as they moved wearily about in the dark without direction. The treaties may have limited the ability of others to get nuclear weapons but it didn’t stop the superpowers from ramping up their own arsenals or persistently pursuing proxy wars around the globe.

Kennedy’s decision to focus on foreign affairs in 1963 was not without cost. It came at the expense of doing other, equally urgent things. The last 100 days in office encompassed both sides of Kennedy; the statesman and chancer on the one hand, the moralist and opportunist on the other.

Other commentators like Thurston Clarke in his book, ‘An Intimate Portrait of a Great President’, also celebrate Kennedy’s great achievement in getting the LTBT passed the Senate but suggests it was done by calling in political favours that could not then get cashed in elsewhere. Forcing the treaty through, for example, came at the expense of a concerted push on civil rights legislation. Clarke says that was a choice between ‘ethics and history’ with Kennedy, a vain, and when he needed to be, a cold-hearted man, choosing history. He was known to weigh himself after every swim, terrified that he was turning into a jowly, middle-aged man. Kennedy’s charm could be turned on and off like a light switch.

Nevertheless, like most commentators Clarke is convinced that this was a great man cut down at the moment of his greatest potential. He insists that Kennedy would have enacted his own comprehensive civil rights legislation in his second term, and argues that Kennedy had seen the folly of his Vietnam escapade and was determined to get out. He was just waiting for the right moment, which would come with his re-election.

The plausibility of this must be questioned. Presidents invariably think they will achieve in their second term what they failed to do in their first but it rarely happens like that. Kennedy’s mantra in 1963 was talked up as being what he was going to do ‘after 1964’ but he was also a well-established ditherer who made sure there was always a get-out clause. There is no evidence, for instance, that he knew how to get round the openly racist Southern bloc in the Senate. In 1963, he sounded more like someone who had parked comprehensive civil rights legislation than a politician who knew how to accomplish it. The day after his peace speech, he gave a powerful talk on civil rights – but he also told black civil rights leaders that they should learn to be more like the Jews and focus on education as the path to improvement.

Clarke cites as evidence of how much Kennedy meant to people and how much his passing mattered. In an unsentimental age, when it was unusual to shed tears in public (and unthinkable for many men), so many cried when they heard of the president’s assassination. According to a Gallup survey 53 per cent of Americans had wept in the days following his death. They shed tears because ordinary people felt a connection and shared a feeling that his death represented the loss of some unspoken promise.

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Aid, Government, Society, United Nations

Self-serving aid agencies often make things worse…

INTERNATIONAL AID AND RELIEF

As the harrowing television footage from the Philippines has shown, the world is once again faced with another gigantic humanitarian catastrophe. Helplessly, we wonder if there is anything we can do, or contribute, to aid the rescue operation that is now in full swing.

For all our economic difficulties in recent years, we should reflect how fortunate we are to live in a prosperous country that suffers no more than relatively benign weather. Adverse climate conditions in the UK are nothing compared with those in Asia, where almost 70 per cent of the 1.3 million people killed by natural disasters in the first decade of this century lived.

The instant reaction for many people is to send and donate money to one of the many charities working in difficult and harrowing circumstances to help bring relief to the injured, homeless and starving. The courageous work of aid agencies is admired by most people.

But as the multi-billion pound aid industry continues to appeal for more money – so keen to display their logos in front of the television cameras – we often ignore an under-implied caveat, where sometimes they can do more harm than good.

Some commentators have witnessed at first hand the operational problems aid agencies can cause rather than solve. In the wake of the cataclysmic earthquake that hit Haiti in 2010, for example, the enraged mayor of the country’s capital described the relief agencies as a ‘second earthquake’ after being swamped by international aid organisations.

In Haiti, as in many other disaster zones, the world responded in sympathy – sending billions of pounds in donations. But, sadly, as has become the norm, we were given a demonstration of the arrogance and deficiencies of an ever-expanding global relief industry. This tends to lead to chaos on the ground caused by the needs of so many competing agencies, which often leads to extortionate sums of money being blown on ill-conceived and vainglorious projects.

We should hope that we don’t see a similar experience in the Philippines. But, unfortunately, the omens are not good. Despite undoubted dedication in often difficult and extreme conditions, good intentions backfiring have become commonplace. Even at this early stage, we have already seen examples of the charities exaggerating the gravity of the disaster while raising money. A cavalier approach to the facts was laid bare last week when the chief executive of the Disasters Emergency Committee (DEC) indicated that the disaster could be as bad as the 2004 tsunami, which claimed the lives of 250,000 people in several countries. After being challenged as to whether the storm had really been that deadly, the DEC accepted that the comparison was misleading and promptly corrected the number of dead at about 2,500. 24 hours later, DEC’s appeal website was still claiming 10,000 fatalities.

One may say that this was a minor quibble and administrative blip, given the grievous circumstances. But, it brings into question the approach of the aid industry, where the big players increasingly resemble corporate giants: senior executives pocket six-figure salaries with their organisations presiding over slick publicity machines. Relief agency work has become such a highly competitive sector that one may ask why aid charities are so desperate to be first on the scene by getting their names into news and media reports? The realisation here concerns vast sums of money that are raised following natural disasters. Consider, for example, the still £310 million of unspent cash held by the Red Cross at the end of last year, following its Haiti earthquake appeal. This is a staggering sum of money.

The number of aid groups, too, has soared to such a level as evidenced by the ballooning numbers that are ever-present at various international crises – particularly so in recent decades. In 1980, there were 40 non-governmental organisations (NGOs) on the Thai border helping Cambodian refugees after the fall of the brutal Pol Pot regime. Just a decade later, there were 250 active NGOs during the Yugoslavian war. By 2004, some 500 were helping tsunami victims in Sri Lanka alone, and another 2,500 were registered as providing aid relief in war-torn Afghanistan.

Questions of operational logistics are also noteworthy. Some relief groups have been known to send entirely inappropriate items. For instance, in Cambodia, people were offered food that had previously been declared unfit for animals in a Western zoo. During the Balkan wars in the Nineties, Bosnians fighting in the former Yugoslavia were gifted anti-depressants well past their sell-by dates. During the famine in Somali, laxatives were sent to the starving. And, with so many aid groups jostling to be part of the relief effort, the inevitable logistical bottlenecks at key entry points is always a factor – hampering the smooth running and operational effectiveness of relief work. It has even been reported that locals – who tend to know what’s best on the ground – frequently get elbowed aside by the big global organisations.

Other instances of how aid organisations vie for dominance can be seen in their actions. In the Sumatran city of Banda Aceh following the tsunami, there were reports of children developing symptoms of measles after being vaccinated three times by competing agencies.

In the aftermath of the Haiti earthquake, dozens of meetings each week were required to co-ordinate the sprawling array of aid groups – invariably held in English rather than the French or Creole that is spoken locally. During the election of a steering committee, 60 international bodies voted without any Haitian agencies or representatives present.

Perhaps this is why, that £5.6 billion has been spent on Haiti, a nation of just ten million people. However, at least 200,000 people remain homeless with no more than 7,500 permanent new homes having been built (against 300,000 destroyed or badly damaged after the quake). There is still no running water or reliable electricity even in the capital. Sanitation facilities are well below the expected standards with families being forced to bathe babies in sewer-contaminated water. Cholera was imported – almost certainly by United Nations troops – to a country that had, until then, been free and clean of the disease. Around 8,300 people were killed, and more than half-a-million contracted the disease, with the life threatening condition having now spread to neighbouring countries.

Chaos and confusion often stems from publicity campaigns that are promoted by aid groups. As the confusion gathers pace the unaccountable aid machine simply moves on to the next high profile disaster. Even the well-respected medical journal The Lancet has warned of the troublesome publicity given out by aid organisations.

What is more, few in the relief sector admit how little money trickles down to those most in need; one expert suggested ten pence in every pound donated, while Haiti’s prime minister has inferred that 40 per cent of aid went on supporting those handing out the donations.

Of Concern, too, is that some of the money has even ended up in the hands of terrorists: in Somalia, aid groups paid substantial ‘taxes’ to al-Shabaab, the group behind the recent Kenyan shopping mall attack, while rebel Tamil Tigers imposed levies on post-tsunami reconstruction work in Sri Lanka.

People are broadly more supportive of campaigns that help specific disaster victims than of governments blowing billions on flawed and outdated theories of international aid development. Just 4.3 per cent of the British government’s very generous £10.8 billion aid budget goes on direct emergency relief.

What may be done, then, to make sure those in need, get proper help? Giving money to any organisation whose core activity is emergency work should be a necessary prerequisite. This includes organisations which don’t spend huge sums on fund-raising, which doesn’t overpay its executives, but which is open and transparent about the difficulties of delivery. Medecins Sans Frontieres is one such body that typifies professional excellence along with its work ethic. It even limits fund-raising when it has raised enough after specific disasters.

Local organisations should also be encouraged to take the lead if they clearly have the right expertise. Donating directly to them via the internet, or to regional branches, is a possible route.

Exercising careful caution is also important. Fake charities are sometimes set up after disasters to dupe foreigners, and projects that seem authentically attractive can prove utterly counter-productive. Eschewing false prophets who bedevil the aid industry is easily done with a little research. Giving money to those who will genuinely pass it on to the victims (like those poor and embattled people of the Philippines who have suffered so much) will make the best possible impact. This is the least we owe such people.

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