Lloyds Kept Up, While Portsmouth Allowed to Fall
Two companies in the news illustrate how arbitrary the government's decisions are over what is too important to fail and how lucky banks are to have been viewed as such.
Lloyds Banking group has just announced it lost £24bn on bad debts in 2009, heaping much of the blame on subsidiary Halifax Bank of Scotland's commercial property lending arm for much of this.
CEO Eric Daniels had already announced he would forgo an annual bonus of £2.3m -- a prudent move in the circumstances. Surely he must be breathing a sigh of relief that similar moves from Barclays, HSBC and RBS meant he didn't have to do so in isolation.
Lloyds doesn't have as big an investment arm as Barclays and so will probably be able to escape a huge bonus budget and the accompanying ire from customers. Even so, the UK taxpayer is still being asked to stomach a £200m bonus bill for Lloyds staff.
On the same day Portsmouth Football Club has announced it is going into administration over a debt of a mere £60m. Far from anyone swooping in to save the company, it is being penalised with a nine-point deduction which will almost certainly see the team relegated from the Premiership to the lower tier Championship League. This is through no fault of the company's star performers, the players who have actually suffered delays in pay as a result of the club's financial strife.
Considering the talent for which these player are paid for is evident on the pitch, it's ironic that they are being penalised while star bankers, whose talent is debatable are given huge payoffs.
You might argue that there is a great deal of difference between a huge national bank and a -- it must be said -- football club of middle standing, in terms of significance. But, the citizens of Portsmouth, for whom the club is a big cultural icon, might disagree. For them it is just as much of a blow.
Lloyds, like other banks were bailed out not only to save them, but also to save the reputation of the UK banking system as a whole. By the same token isn't the reputation of the UK Premier League, which is a sizeable export to the rest of the world, also damaged if one of its clubs is allowed to sink into financial ruin?
Compared to Lloyds which still relies on the cushion of taxpayer support to survive, Portsmouth will have its opportunities to make the money needed to get back on its feet taken away, by being moved into a less lucrative league. It's already had to sell off star players to recoup losses.
Perhaps Lloyds should take a similar line with its star performers, instead of rewarding them.