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Tuesday, 10 November 2009

No Surprise about Barclay's

Barclays has surprised nobody with the huge profits that have been announced today. This company cleverly stayed out of the tighter government 'safety net', while benefitting from effectively-unlimited almost-free credit that the government and the Bank of England made available to maintain the whole banking sector.
They bought the US operations of Lehmans for a  token sum, without having to accept any of the embedded liabilities.
Their management is tough and intelligent.They have done absolutely nothing wrong; but they are widely reported as having somehow abused their resources and opportunities. That nonsense doesn't hurt the company, or reduce the principals' pay.
Attention will now focus on bonuses to be awarded to the people who do the clever stuff in 'casino banking'. They have a huge turnover, doing things that make no contribution at all to the material economy; but which are intellectually demanding and institutionally stressful. Their pay comes from the profits that are made on 'retail' - real world - banking, and from the corporate banking area that manages corporate mergers, acquisitions, share issues and bond sales; these also require intelligence, attention to detail and huge investment in contacts.

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