Who’ll call Christmas bluff?

In spite of our common humanity and the shared pressures of globalisation, we still tend to live in separate worlds – silos is the cool word. Even public humiliation isn’t always enough to shake people out of them. Think politicians, think bankers. It’s a fact of life, although maybe not an immutable one, that if you deal in money, you take home more of it than you would if you dealt in spuds. In spite of everything, bankers at RBS believe they need millions not just to live, but as a mark of esteem compared to other bankers. This is called the market. Another mantra of our time is “appointing the best man (sic) for the job”. Sometimes, the choice is inevitable; but most of the time, there’s any number of “best people” for the job, even at the top where the choice tapers. How indispensable are the bankers we’ve got? We’re told just a few thousand of them are credited with earning 27% of the UK’s wealth in 2007. So how badly do we need bankers to get out of the bankers’ crisis? On these questions, Peston says crunch time has come. Odds are that in spite of the sabre rattling, the UK government will bottle out, with Mandy as the weather-vane.

The scene is therefore set for brinkmanship of a potentially devastating sort for both Royal Bank and the government. The stakes are so high because of the sheer amount that Royal Bank – currently 70% owned by taxpayers – feels it needs to pay in bonuses to maintain the competitiveness of its investment bank.

The bankers case is quick in coming from Chris Blackhurst in the Evening Standard

It’s the system that is at fault, not RBS. Before Alistair Darling and his colleagues rush to condemn the RBS board, they should understand something: by rescuing RBS as they did, they invited the bank to continue operating in an industry where the payment of hefty bonuses is considered normal practice. If they don’t like such payouts they should get together with other world leaders and force their cessation – just cracking down on the one bank the British government owns is not going to solve anything, except damage RBS.

In the FT blogs, just a glimmer of a real world approach – but not for this year

What is the solution? In part, make the banks less profitable. Lots of solutions exist here, but the best would be a big rise in the cost of capital – something governments have so far only tinkered with. But it is also about removing the expectation that a 30-year-old with a good degree, doing nothing particularly special, can take home £1m a year, or far more.

  • bollix

    i’m a lawyer, pretty smart and work hard. i don’t earn a 6 figure salary. if i screw up, people may suffer and my income will stop. my wife’s a doctor, very smart, works very hard and doesn’t earn a 6 figure salary. if she screws up, people may die and she will be out of a job. this is all as it should be.

    why is it that certain bankers earn obscene amounts of money? i can’t think that they are that much smarter than me, or work that much harder. plus, as a profession the (investment) bankers have screwed up royally – yet they continue to get paid royally? what am i missing here?

  • Jud

    They have it well and truly stitched up B – and they know the first time they blink there will be no going back. Expect brass neck behavior of the breathtaking variety.

    There is a real opportunity to fix things now that may never come again. The US, British and Irish governments seem to have allowed themselves to become beholden to these guys (for guys they most certainly are).

    I don’t see anyone losing too many votes for digging in on bankers’ bonuses.
    How about a 90% tax on such bonuses with guarantees the money would go directly to infrastructure/development projects?

    Places like Canada seem to have a better balance – too big to fail is too big to exist – and regulations are enforced to keep things under more control in the financial sector.

    Now is the time to take charge again.

  • OC

    Eliminate banker’s bonuses. If they quit, where will they go? And good riddance if they do.

    “too big to fail is too big to exist”

    Another paradox of effiency. Once, there were many US carmakers. Allowing just a few giants to emerge set us up for the destruction of our industrial base.

  • Greenflag

    “too big to fail is too big to exist”

    Bank of America is having difficulty finding a successor to it’s Mr Lewis . Apparently the Bank because of the new Government restrictions is finding it difficult to recruit the right kind of thief to manage it’s vast enterprise 🙁

    But there’s always a way out eh ? Now that said BOA has gouged 40 billion out of it’s customers in fees over the past year, it can afford to pay back the ‘taxpayers’ loan to government and will soon be ‘non beholden’to the USA Government and will tell the same Government to f**k off , and it will pay whatever huge ‘bonuses’are necessary to recruit the ‘top ‘ financial services thief still as yet unjailed /non convicted in the USA.

    Methinks a return to the medieval code of punishment for usurious money lending is the only way to bring these ‘gangsters’ to boot . That plus the guillotine will be what it will take -sooner or later !

    And yes Governments are scared to act . Noe of them had a clue before the crisis and it seems that none have a clue about the next impending crisis either 🙁

  • Scrotum

    Bollix: Why do you get paid less than a third world corrupt lawyer? Why does your wife get more than a Pinay doctor, who will probably retrain as a nurse to get a high paying nursing job in Ireland, occupied or otherwise?

    Pay relativities. Maybe retrain, you as a banker, your wife as the proverbial plumber.

    Doctor to plumber: You charge an obscene amount. What were you before you were a plumber.

    Pl: A doctor.

    Stop picking on RBS. Pick on Catholics instead.

  • As I understand it, RBS wanted to pay £1.5B bonuses to its investment bankers on a profit of £6B: in effect, a 25% tip.

    Yesterday, the RBS board were resigning if they didn’t get away with it. Today, the threat does not exist.

    Yesterday the argument was “in the shareholders’ interest”. Today someone has woken up to the fact that we, the British tax-payers, are 70% of the shareholders, rising to 84% after the next tranche.

    The Treasury does not have to approve/deny the bonuses until next month.

    Why the fuss this week?

    Hey! Did you see the story about the banker who wants the history teacher at his son’s school sacked because of her “leftist invective”? She had said “all investment bankers were ‘sleazeballs’ and dishonest”. This caused the banker’s “11th-grade son” [16/17 yr old?] and “quarterback in the school’s American football team”, “with tears in his eyes … to defend his father”, who had been “working around the clock trying to save 11,000 jobs”.

    Looks like we can now recycle all those lawyer jokes:

    — What do you call ten thousand lawyers at the bottom of the ocean?
    — A good start.

  • Fabianus


    She had said “all investment bankers were ‘sleazeballs’”.

    I have difficulty with that too. It’s an insult to decent, hard-working testicles.

  • Fabianus

    Before I forget, can somebody please explain to me what a “bonus” actually is?

    Is it performance related? If so, how have those would-be bonus receivers merited a bonus? Is there something I’m missing?

    So they’re threatening to resign. Excellent. What’s stopping them? May I watch them clearing their desks?

  • OC

    “Pick on Catholics instead.”

    Tsk tsk tsk!