Counting the cost

The Independent is getting over-excited about the RBS:

British taxpayers are set to pay $800m (£500m) in fines as a result of Royal Bank of Scotland traders’ involvement in the Libor interest rate fixing scandal - with nearly all of the money going to the United States.

American watchdogs are set to hit RBS with as much as four-fifths of the total penalty as it becomes the third bank to settle over its traders’ role in the scandal.

...

RBS is 81 per cent-owned by the Government, which means the taxpayer will effectively foot the bill for its fine, although the bank is expected to attempt to head off protests by cutting its investment bankers’ bonus pool. 

Well yes, in a way.  The taxpayer will in theory have to meet four-fifths of four-fifths of the fine.  But only if you regard a loss on every transaction made by the bank as falling to be met by the taxpayer, while ignoring every element of transactional profit which might equally be said to fall to the benefit of the taxpayer.

Furthermore, as the value of the taxpayer's shares has risen by about 75% in the last six months (from about 200 pence per share to about 350 pence per share), it might be considered that the taxpayer is not doing too badly, even if the current value of the shares remains below the original cost of their acquisition.

So although the £500 million fine involves a lot of money (as well as substantial wrong-doing on the part of the Bank's traders), it is arguably misleading to consider it in isolation as a charge to be met by taxpayers.