01/11/2013 Newsnight


With Gavin Esler. Can RBS be fixed by splitting into good and bad bits? Are cameras in your clothes the last straw for privacy? Should prisoners have to earn their perks?

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The bank you own, RBS, decides not to break up, but put all its toxic


assets in an internal Bad Bank. Here is George Osborne's explanation. The


bad bits will be managed by a different team, who will wind them


down or sell them off. Allowing it lend more to British businesses.


What do the Treasury's cartoons tell us about when British tax-payers


will get their money back. We have asked the man who wrote the book on


RBS, Ian Martin, to explain. Keep your eye on this, the tiny cameras


we could all use a high-tech breakthrough of possiblities, or Big


Brother's nosier little brother. Newly convicted prisoners will be


forced to earn proof links, starting from the bottom. We ask the man who


wrote the speech Hug a Hoodie, how it could shake up jails in England


and Wales. And this... I can assure you this is my kind of town.


Good evening, the rise and fall and near utter collapse of the Royal


Bank of Scotland is one of the most extra ordinary stories of the


banking crisis. Today there were signs of new life. Over the years


some assumed the way to save RBS would be to dump its most toxic


assets in a new separate Bad Bank, then try to get back the tax-payers'


money from selling our stake in what remained. Now RBS has decided to


keep the toxic acid dustbin within its own structure, fencing it off


from other parts of the organisation. If banks in the past


were too big to fail, would it be a good idea if banks were broadly


forced to downsize. We asked the journalist Ian Martin, who recently


published a book on the RBS story, to give his acements on what might


end up best for the banks, the taxpayer and the country.


A draft report commissioned by the Government... Including a


conversation recommendation to split the bank in two... I recommending


breaking up Royal Bank of Scotland. That was then, today we learned they


are not going to split RBS into a good bank and bad bank afterall.


Following a year of turmoil and the removal of the chief executive that


led the bank since the epic bail out in 2008. The Government have decided


that RBS, for better or worse will hang on to its toxic debt. It flies


in the face of advice from Mervyn King and Nigel Lawson. Both say that


the stuff should be dumped. What are we talking about? What is toxic


debt? Toxic debt is the very worst stuff on a bank's balance sheet.


Loans and other assets gone bad. We're talking about mortgages for


homes, the owners struggle to repay, and borrowing by customers and


companies that went bust. These were reckless loans made in the long boom


and during the financial crisis of to 2008 they collapsed in value,


leaving banks such as RBS exposed to losses. Pretty grim stuff. Is there


way to get rid of it? Well there is no easy answer. One idea was to put


all of the toxic stuff inside a separate RBS Bad Bank. But that


raises another question, what exactly is a Bad Bank? It is where


you dump your toxic debt. The idea is to park the bad loans weighing


the bank down and put it in a different bank, your Badger, to be


owned by the -- your Bad Bank to be owned by the tax-payers. They can


sell off the risky assets to investors who think they might make


a profit. That leaves the managers at the good bank free to focus on


being bank. Lending money and making money and restoring themselves to


rude financial health. Restored in this manner the good RBS could then


have been sold off before the election, with garlands and mutual


back slaps all round. But after a four-month look at the nuts and


bolts the Government and RBS have decided that this option is


potentially too complicated and messy. Instead they will create a


Bad Bank inside RBS. It is a tweaking of the existing structure.


So the option of a proper good bank and bad bank is effectively dead. So


are George Osborne's hopes of a pre-election sell-off. I think it is


frankly unlikely that we will be able to sell RBS before the general


election. Just because there is a lot of work to be done to make sure


that RBS cleans up the mistakes of the past, gets out of its big


American operations and focuses on Britain. Supports small business,


that is all going to take a bit of time. The Treasury hailed today's


announcement as a brave, bold new start, for an institution that is


still more than 80% owned by the taxpayer. The markets however were


sceptical. Shares in RBS fell 7. 5%. The bottom line is RBS has a long


road ahead, as its new boss tries to make it a healthy, profitable bank.


Until he does that the prospect of the taxpayer getting any of the ?45


billion we sunk into RBS remains a distant prospect.


Ian Martin is with us, along with the banking commentator, Frances


Coppola. Firstly the banking story we talked about last night,


allegations of fixing foreign exchange rates has taken a new twist


today. We have the details. What has been happening? Very interesting day


of further developments on this story. Tonight Citigroup and JP


Morgan have confirmed that US regulators have approached them


about foreign exchange dealings. Earlier it emerged that Barclays had


suspended six traders, coming after news I reported last night that RBS


has suspended two of its traders and various other banks had sent


executives off on "leave. At this stage there is no evidence of any


wrongdoing, the investigation is at an early stage. I get a sense in the


City that there is a real sense this is an international issue now. It


has been taken extremely seriously at the major banks. There is a worry


I think in some sources that it has the potential, potential I stress,


possibly to get to the scale of another LIBOR scandal. If it did


that would be disastrous for the reputation of banks in the City


trying to rebuild after a all that emerged last year. We will be


following that. On the wider story that you covered today for us.


George Osborne has said this new RBS will be out batting for Britain. Is


that the way you see it that we should actually cheer that A Bigger


Splash bank will remain? What he means there is he means that the


Government wants RBS to become quite boring, it wants it to be much more


like Lloyd's, to focus on the domestic market and to sell off some


of its operation, or pretty much all its operations in America and become


something not exciting. They feel the taxpayer has probably had quite


enough excitement with RBS. Enough to last a while. There has been a


change of tone, hasn't there, by the Bank of England and the new Governor


of the Bank of England, he has been suggesting there are reasons to be


very cheerful about big banks, that is not quite the same tone that


Mervyn King was adopting in charge? It is as if Nauth, mark carne knee


-- Mark Carney made a speech for the 150th anniversary of the FT, I would


classify it as one of the most important speeches on public policy


in the last couple of decades. He essentially acknowledged that the UK


banking system is enormous, and it had become 450% of GDP on total


assets by the time of the crisis. He was saying we shouldn't be too


worried about that and the banking system, still about 350% of GDP, we


can envisage that as esently being nine-times GDd -- eventually being


nine-times GDP, why, because the systems introduced make it safer and


we have learned lessons from the crisis. It sounds familiar. That is


the problem isn't it, people all over Britain listening to, that they


didn't have much coverage at the time, but listening to think about


that and say banks too big to fail, we have heard that before? They


might very well. I want to put it in a bit of context though I was


looking at the history of this earlier and realised in the whole


history of the banking in the UK we have almost never had a big bank


failure, RBS was a real revelation. People need to be not quite as


worried as they are about big banks. Do you think the culture has really


changed within these banks? I wouldn't like to say that. Culture


change is a long and slow process. The I AW member writing in the FT


made that point forcefully recently. It is a long haul to change the


culture in banks. I have no doubt there will be further problems


resulting from what we call bad behaviour. It doesn't mean another


failure. In that sense then should we be quite happy or relaxed about


the idea that big banks will continue. TSB has been hived off


from Lloyd's, so banks can lose bits here and there? Yes. Without any


particular problems. So should we as citizens be fairly happy that the


big beasts remain? I think so. I think they serve a useful purpose.


Large universal banks have been a feature of the European banking


landscape for a long time and really rather successfully. The subtitle of


your book was the men who blew the British economy and they did nearly?


I think we should be really concerned about it. Writing a book


about the subject, I'm not a financial journalist by trade, I'm a


political journalist, but the jaw-dropping moment for me came when


you look at the graph of how fast British banking grew it used to be


73% of GDP and by the time of the crisis it was 450% of GDP. The


lesson is there is no end of boom and bust, banks will always go bust,


there will always be a downturn in the economy. But the difference is


that if you have small manageable banks, lots of them competing, and


they are not bigger than the economy or excessively large, when they blow


up they won't blow up the rest of the economy and won't do the damage


on the scale that was done. The worst economic damage in this


country for seven decades. You are more of a fan of the, small is


beautiful and all that kind of thing. You think smaller banks maybe


would be better for all of us? I'm a fatalist about it, I think banks


will continue throughout human history to blow up and people will


become prone to mania and hubris and madness during a boom. In those


circumstances, if you accept that, it is sensible to have banking


system I think that is more manageable proportions so that when


banks blow up or go bust that they don't cause the absolute carnage


that RBS caused. RBS, by the time you hit the crisis, RBS has a


balance sheet that's bigger than the UK economy. It is a timebomb by


2007/08. The culture you said, it is difficult to say whether cultures


have changed, but the regulations have changed and the oversight has


changed enough to prevent this happening again? And continuing to


do so. We haven't finished with the regulatory change by any means yet.


We have got layer upon layer of regulation being added. I have


concerns that we may be slightly overdoing it and pinning them down


so tightly that they actually can't move. Which also makes it pretty


useless, to be honest. In a moment: The sound of disco


music was in the air, I wandered over to see what gives. It was an


over-40s competition and incredible. Now, imagine a world in which


instead of spies, security companies and Government agencies being able


to film any detail of your lives, you could do that for yourself. The


technology is already here, cameras small enough to be mounted on any of


us, capable of recording pretty much anything we want. We asked the


former Government high-tech adviser and entre pen -- entrepenur Rohan


Silva to give us an idea of what might be in our future. We are on


the cusp of a new era, where computers and cameras have become so


small they can be worn on our wrists, faces and even embedded in


our clothing. These wearable computers will


provide us with new service, but they mean that our entire lives can


soon be recorded and analyses forever.


If everything in If everything in our lives can be recorded the


privacy implications are vast. How might we change our behaviour if we


know the person we are talking to is recording the conversation. How will


the new technologies alter our perception of what is public and


private. The first wave of wearable computers and cameras are now coming


on to the market. These devices are powerful enough to record our


movement, conversations and physical health, and permanently store all of


this personal information. Innovative entrepeneurs and


campaigners have been experimenting for several years. Their work can


help reveal how these technologies might affect our lives. The guy here


is a base commander and responsible for a lot of kidnappings, murders,


rape. He don't know that he's being filmed. This man is cofounder of a


charity that uses wearable cameras to uncover human rights abuses in


oppressive regimes. This is their first television interview. Because


it is not safe in this area to work with regular cameras or phones, so


we are distributing hidden cameras. Do you have any of these cameras


that we might look at? I can show you the proto-type, we are not using


it at the moment, but for example in some places we wanted to create a


cross that is a camera. So the camera is hidden inside. It is a


protest Poe type. This was worn by? People going to church and others.


What we are doing is talking the technology from inside the cameras


that we are buying in China, breaking it apart and building


cameras suitable for the environment. To protect their


sources they operate using a cell structure much like an underground


resistance. The footage they capture is used to bring attention to these


abuses through the world's media. In this country we have a lot of


footage of intimidation done by perpetrators who were sure because


they are working in the rural areas there is impunity and nobody could


see them. This was ahead of an election? This specific project was


coming to the elections in this country. The footage was broadcast


mostly in the local channels. The perpetrators see someone is seeing


them. It is an immediate deterrent, suddenly they are not alone,


suddenly somebody is watching them. Here in the west many people are


concerned about privacy, how do you think about those kinds of issues


when you are filming in Africa and across the world? The problem is


rape, torture, abuses in these countries, less the privacy. These


technologies could have a significant political impact around


the world. But closer to home, what might be the consequences for our


social and personal lives? James is an artist whose work examples our


relationship with technology. He has created art using wearable cameras


that explore what will happen when this technology will start to be


used by more and more people. When you are filming constantly, that is


overwhelming, as one person I can't even possibly review the amount of


data I have Kambin rated as an individual. What that -- generated


as an individual. What this says to me is how this is a computer's way


of seeing. We need smarter and smarter computers in order to


process all the information that the other computers are generating. The


more cameras there are, the smarter et systems become and the less human


they become essentially. Although he's excited about the creative


opportunities, James believes we need a debate about the vast amounts


about the personal information that these new wearable computers will be


collecting? Despite corporations and Governments are gathering


information about us, most people seem unbothered, even after the


Snowden deck backle. I think it will taken a information crash for us to


realise how much information we are giving up. How will we strike the


right balance between privacy and innovation. Microsoft researchers


Gordon Bell has spent years wearing computers to record everything he


does and who he needs. Meets. He understands better than anyone else


how the technology will develop. By 2020 we will be recording everything


we hear and see. So this device like this gets us everything we see


whether it will be socially acceptable to record everything you


ever heard is unclear. Did the recordings replace your memory? Now


I don't even think of it as back up to my memory. I think it is my true


memory. So the computer is the e-memory, my biomemory is really


just a URL to the e-memory. So, here is my true memory is here. Some


people are concerned though about the privacy issues raised by the


data capture. What is your view on that? I share very little


information about myself, where I have been, what I'm doing and


thinking and all that. Now that's totally in contrast to generation Y


wanting to say everything about their lives. Facebook, and Twitter


kind of have broken that mould of the idea of privacy that at least I


had. The age of wearable computers that can record our entire lives is


not science fiction, it is the world we are starting to live in today.


But it might take years for the full social and political implications to


be understood. These new wearable technologies are sure to deepen the


debate about personal privacy. That is understandable. These devices are


also being used to tackle human rights abuse, create new works of


art and deepen our understanding of the world around us. I hope we are


able to take stock of those opportunities as well as the risks.


Because in the end it is not the technology that matters, it is what


we choose to do with it that counts. Our guests are here. Are you as


enthusiastic about the fairly endless possibilities of this as


Rohan is? There are endless possibilities but the critical


system is people need to trust the systems to use them. If people are


sceptical we won't have the uptake we need to see the benefits. That is


why regulation is very important. You need to protect people's privacy


so they trust using the systems won't mean their insurance company


or lawyer suddenly ends up with reams of data about their lives.


Isn't one of the implications of this is privacy is dead, we have


just not noticed? Privacy is different than 50 years ago. The


need for privacy to deal with medical issues or voting, privacy is


still very important. So we do need to find way to preserve it, if for


no other reason than that is how we understand who we are is in private.


Not broadcasting everything to determine things like our health and


sexuality. There is obviously huge interest in this and advantages to


it and so on. But there are people right now with today's technology


who do some pretty weird and inappropriate things, filming things


they shouldn't, filming women in situations they shouldn't, even


perhaps children. So this could be a tool that would be used by people


who are basically perverts? It is incredibly important there is robust


regulation. There already S my concern -- is, my concern is the


reason the technological devices are all coming from America and Asia is


that European regulators every time there is a new technology develop


new regulation to keep pace. All it is doing is leaving Europe at a big


disadvantage. If we are so afraid of the down sides we lose sight of the


upside possibilities. Regulation very, very important. What I'm


excited about are the technological responses to the issues. Device that


is can monitor and tell you when you are recorded, you are starting to


see apps emerging telling you which companies are using your data. That


is a better response. Do you see a generational divide, the Facebook


generation don't care about some of the issues you care a lot about,


privacy not so much? The pace of change is so fast, some young people


were going through school when Facebook launched a decade ago who


are now trying to get jobs and are seeing the impact of the data they


shared coming back to haunt them. I think you are now being people


seeing more aware and thinking about what they share in a different way.


When you talk about technological possiblities that is great, but the


idea of being able to regulate something that I don't know you are


wearing, and you are filming things that I don't want you to film. Do I


have no rights, or does Nick have no rights in this. Regulating that may


be essential but not possible? It is great question, in truth this is all


emerging so quickly it will take time for us to develop new social


norms, new technological responses, and maybe over time some regulatory


responses too. My question to Nick would be, a lot of these concerns


raised are about companies being able to access our data, and I would


say that we consent to share our data with company in exchange for


services. I'm much more afraid of what the Government is going to do.


They can lock you up using your data and deprive of your freedom. Isn't


that something to be more concerned about? I think that is absolutely


right, Government can get data from the companies. It isn't just


information the gets directly we know last year that Britain got more


data from Skype than any other Government in the world. Governments


go after the private data, both through legal channels and as we


have learned in the past few day, not always legal channels. I think


you do need to remember the best way to protect privacy is to control the


information at source. That means giving people a legitimate informed


choice about just what data you are collecting in the first place. We


will leave it there, thank you very much.


In Gilbert and Sullivan's opera The Mikado, it was talk of a short,


sharp shock to teach the town a lesson. The phrase was given a new


lease of life by Margaret Thatcher's Home Secretary, Willie Whitelaw, to


advertise the tough treatment for young criminal, the phrase has


disappeared, but the idea to make a prisoner's first experience in jail


less comfortable, has been brought against incentive schemes for good


behaviour. I'm going to take action, tough action and I shall spell out


that action. There is nothing new in policy makers talking about making


prison tough. Prison works. It ensures that we are protected from


murders, muggers and rapist, it makes many tempted to commit crime


think twice. Traditionally they were once places


of hard labour and toil. Today some feel prisons have got a bit soft and


prisoners have it easy. The Government's response is to insist


that new prisoners will have to earn many of the privileges that up until


now they could take for granted. New prisoners will not be able to see


adult movies, more Bambi than Rambo. Prison uniforms will be the first


dress code rather than the privilege of being able to wear your own


clothes. Behind the new regime is a simple principle, you are in jail


now and if you want to make doing time easier, conform to the rules,


otherwise the privileges once earned can easily be striped away. Danny


Kruger who famously wrote David Cameron's Hug a Hoodie speech, and


now runs the prisons rehabilitation service, Only Connect, do you think


the Government is on the right track, starting in jail you start at


the bottom and earn a better life? I think the principle is right. In


practice this is probably not a huge change to the status quo. There is


already lots of ways in which prisons manage their prisoners by


giving and withdrawing proof limbings. I think it makes sense to


-- proof limbs, I think it makes sense to start at the bottom and


work your way up. This is different from the main thrust of what the


Government is trying to do. It is a revolution in the way prisons are


managed and the way prisoners are expected to behave. The real problem


with prisoners is not to my mind how hard or soft the regime is, and what


television stations they are allowed to watch, but the fact that they


spend most of their time lying on their backs doing very little at


all. Most people think prison is a violent and dangerous place, in fact


they are pretty sleepy, very safe places where nothing much happens.


What the Government is trying to do is turn them into places of industry


and hard work. That is the main emphasis of the reforms. Ben do you


buy into that, that this is part of a picture but it is important to set


the tone right at the start when you enter prison? I think having the


gates shut behind you sets the tone. You don't have to wear a stripy


shirt to rub your nose in it. It is pointless and petty politicking. I


can see a broad thrust in transforming rehabilitation and


making prisons places of industry, and purposeful activity, not just


mindless repetitive work, but genuine skilled work. But this has


got nothing to do with it. Could you see that the reason this kind of


idea keeps coming back and back is that it is very popular. People do,


as Danny accepts, sitting at home think prisoners have an easy life,


they get to choose to watch TV, there is no human right to watch a


particular video, this is ridiculous? It also illustrates the


ridiculousness of the counter policy. So you ban prisoners from


buying 18-rated DVDs, what do they do, they rent their reel television


from the prison for a pound a week and turn on late night film rated


18. It is pointless, it is literally petty politicking and ministers


interfering with the my New Yorkway of -- minute New Yorkia of prisons


will get bitten. You seem to agree with changing the regime in terms of


education and making stuff improving more prisoner, this sends the wrong


signal, it is populist politics that we have seen many times before and


it fails. As you said minutes Triaz get bitten when they do this kind of


thing? They might do, that is for the politicians to decide for


themselves. Ben has a good point. There is politics being played here.


And what I worry about, I guess, is it feeds into the idea that it is


possible to deter crime by having really regime, I do think we need to


have what the minister describes as spartan regimes, it is appropriate


that prisoners don't have better lifestyles on the inside than people


have on the outside. Nevertheless it is not possible to deter or stop


crime by making prisons more and more tough. Unless we are prepared


to be not just spartan but medieval, unless we are prepared to brutalise


prisons completely, we will never make prisons so unpleasant that the


ones we need to worry about, the criminals, are deterred from going


there. The fact is their home lives, their lives on the streets are so


dangerous and so unpleasant that any form of prison in a civilised


country will be safer than that. Deterrents through regime, tougher


regime is not the answer to the real problem of prolific and violent


crime. What we need to do with the criminals we are all so worried


about is give them proper network, proper relationship, enable them to


build supportive community that will be there for them both before and


after they come out. That is the real emphasis. There is a difficulty


with that, part of the proposal, the practice as it comes in today from


Mr Greyling, is prisoner's contact with families is restricted. They


are only allowed to spent X amount of money in their first two week,


the main contact is by phone. Prisoners won't be able to phone


home and maintain family contacts. You are playing the same game you


are accusing Grayling of doing which is playing into the money issue. The


overall thrust is to improve relationships through the gate


before and after release to ensure prisoners spend the end of the


sentence near their families where they will be released to. Allow


charities like mine to work inside the prison and build the contacts


before they go out. We have run out of time. That's all for this week,


we leave you with news that New York Magazine is advising readers to give


London a miss and instead recommends Birmingham as a better place for


tourists. It happened before in 1981 the actor Telly Savalas told the


world how wonderful Birmingham was. He never set foot in the place,


recording his glowing travelogue in London's Soho. I can assure you this


is my kind of town. The sound of disco music was in the


air so I wandered over to see what gives? It was an over-40s


competition and, incredible. Riding the express elevator to the top of


one of the city's highest buildings, this is the view that nearly took my


breath away. Yes, it is my kind of town, so,


Hello, another blustery weekend across the UK, the wind dying down


overnight means we will start off with a touch of frost across parts


of eastern Scotland, fog in north-east England, the rain


arriving in Northern Ireland, spiralling across northern England


and much of Scotland through the day. By the afternoon we are left


with sunny spells and showers from Northern Ireland. The wet weather


moving north through the central belt and across the Grampians over


500ms heavy snow through the afternoon. The rain lingering in


Aberdeen through the night on Saturday night. After some heavy


showers it turns brighter perhaps across eastern counties of England.


Sunny spells here, a few showers whizzing through on the brisk


breeze, when the sun is out we could get temperatures into the teens.


Further west freak showers -- frequent showers, in Wales the winds


will strengthen throughout the afternoon and evening and it is


potentially causing a few issues, getting to 40-50 miles an hour,


maybe more around the coast. With high tides that means big waves. The


blustery continues will last through much of the night with England and


Wales with further showers. Paris also looks fairly wet and windy on


Saturday. Cooler but brighter on Sunday. Greece is a good bet at the


moment. Working sou towards Lisbon arriving on Saturday night. As for


the UK, Sunday is another breezy affair, rain in the north-east of


In-depth investigation and analysis of the stories behind the day's headlines with Gavin Esler.

Can RBS be fixed by splitting into good and bad bits?

Are cameras in your clothes the last straw for privacy?

Should prisoners have to earn their perks?

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