BGC’s Buik: “Folks, get over it! Let’s move on!”
January 16th, 2011 (edited September 16th, 2012)
I have long seen BGC Partners’ David Buik as the “Sir Bufton Tufton” of the City: old-fashioned, possibly bigoted and out-of-touch with modern realities. These impressions were reinforced when I read Buik’s contribution to the bonuses debate, published by the Independent on Monday.
Buik opened by shedding a few crocodile tears for the UK’s non-banker population, reminding us that many of our lives have been or will be ruined by the austerity programme embarked on by the coalition government. Then (presumably with his tongue firmly in his cheek?) Buik said:-
Yet despite the hardship likely to be felt by most decent working people, investment bankers have the effrontery to benefit from another monster bonus payout (even though it is likely to be down by 30 per cent) without the slightest bit of remorse or contrition. You can hear the cry in every home, coffee shop, pub, union meeting: Outrageous! Heartless! Disgusting! Parasites!
He then continued:-
Life is not fair. It is hard to argue against the outrage. But the fact that the world’s economy was brought to its knees was not just down to the irresponsible behaviour of a few reckless bankers. Banks were easy prey for the politicians to blame and they remain so. The previous government was profligate and negligent in its running of the economy – Labour simply did not understand the workings of banks. These financial bastions were allowed to build up their balance sheets by gargantuan and idiotic proportions, without proper controls.
Remember: the banks contributed £80bn to the revenue during the decade prior to 2008. And, contrary to public opinion, the “bad guys” have gone. The fresh and existing management have said sorry with rather more contrition than Gordon Brown. The bonus structure has changed to one-third cash, two-thirds share incentive schemes, with claw-back if targets are not met.
If the Government hammers the bankers on emotive views on bonuses and penal taxation, they won’t leave in their droves, but the business will be focused elsewhere. It is cheap to move capital and a few hundred people. I would like to see the taxpayer repaid as soon as possible. For that to happen, banks need several income streams. I would also like the dole queue to be cut. If the price to achieve that goal is a few billion pounds, so be it. Folks, get over it! Let’s move on!
I’m afraid that David just doesn’t get it.
Indeed, he’s about as out-of-touch than Barclays chief executive Bob Diamond, whose defiance before the Treasury select committee on Tuesday was something to behold. People such as Buik and Diamond don’t seem to realise that the bonuses they were able to pay themselves in recent years were an aberration legitimized by “phantom” profits, attributable to:-
- A blindness to risk among financial institutions, fueled by dependence on flawed mathematical modeling.
- Lax monetary policy from the Bank of England and the Federal Reserve
- A near regulatory vacuum, especially in the “shadow” banking system, which allowed banks to stuff their balance sheets with worthless junk on the thinnest of capital ratios in order to boost profits and bonuses.
- A flawed IFRS accounting system (mark-to-market accounting) which was a highly distorting prism, making loss-making and barely profitable institutions appear immensely profitable.
- Comatose, short-termist institutional shareholders who didn’t bat an eyelid while their managements of banks and financial institutions rent gouged and plundered at will.
- Last, but not least, the willingness of the UK government to hand over £1.5 trillion to rescue failed bankers from the consequences of their own folly.
The likes of Buik and Diamond also seem to be 100% oblivious to the way in which the world is shifting under their feet. The old certainties on which they based their assumptions — including points 1-6 — are changing fast (or have already changed) as the G20, governments and central banks wrestle with the urgent need to rein in the financial system and attempt to give it at least the semblance of sustainability.
Bankers and intermediaries including Diamond and Buik would rather cling to old certainties than acknowledge any of this. They believe it would be best if the rest of the world would just turn a blind eye, so they can attempt to crank up the self-interested, sociopathic and unsustainable business model that served them so well — and us so ill — ahead of the crisis.
One might have thought that the likes of Diamond would be intelligent enough to recognise that this simply is not going to happen. The UK cannot afford another banking bust (I say this having just read Emma Rowley’s Telegraph article to get a picture of the true extent of the fiscal carnage wrought by Gordon Brown’s flawed decision to bail out HBOS and RBS).
Diamond might also care to open his ears to the signals that have been coming out of the Bank of England in recent months (especially from Mervyn King, Andrew Haldane and Andrew Bailey), as well as to the fairly audible signals emanating from members of Sir John Vickers’ Independent Banking Commission.
When David Buik’s firm BGC Partners acquired the smaller inter-dealer broker Mint Partners last August, it displayed a marked lack of transparency. BGC’s press release about the acquisition failed to disclose that the deal was a prepack (in which the Mint Partners’ creditors got shafted) (see Is BGC Partners being entirely honest about its Mint deal?)
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