Darling ‘gets tough’ with bankers
December 7th, 2009
Has Alistair Darling succumbed to pressure from Gordon Brown and agreed to impose a “super tax” on individual bankers who receive bonuses over and above a certain level in his pre-Budget report on Wednesday? Well, this is what BBC business editor Robert Peston has said on his blog. So it’s got to be true!
Peston wrote at 10.44pm on Sunday night: “it would be a super-tax on bonuses over a certain level paid to British-based investment bankers.”
If this does feature in the pre-Budget report, it would represent a massive u-turn for the Labour government. It might be perceived as a cynical attempt ride the wave of public anger and digust at greedy and sociopathic bankers who see nothing wrong with milking a system which only remains afloat thanks to taxpayer munificence. Or it might conceivably win Labour greater electoral support and give them a greater chance of winning the next general election. We shall have to wait and see.
However, there are shades of grey in the debate about bankers’ bonuses. In an article in the Sunday Times journalists Iain Dey and James Ashton made a good fist of portraying the tightrope that the government is walking.
They described how institutional investors, led by Peter Mortagnon of the Association of British Insurers, gave two of RBS’s non-executive directors (senior independent director Sir Sandy Crombie and remuneration committee chairman Colin Buchan) a right bollocking last Monday.
Mortagnon was apparently livid that the RBS board had caved in to government pressure and allowed Whitehall a ‘right of veto’ over any bonuses the bank proposed to pay. That deal was apparently struck as a quid pro quo for bailout 3.0, which saw a further £25.5bn of taxypayers’ money injected into RBS.
In the Sunday Times article Ashton and Dey encapsulated the dilemma the politicans face:-
If Gordon Brown and Alistair Darling give the green light to bonuses, the electorate will be merciless. But if they veto them, they risk crippling the very institutions in which the electorate has invested so much money.
And here is the question which is at the heart of all this — but never seems to get debated publicly:-
Should the state-controlled banks be run modestly to appease angry voters or aggressively to earn a quick return on their giant, unplanned investment?
The Sunday Times article also quoted City minister Lord Myners as saying:
“I’m not going to be scared into thinking that half of the investment bankers at RBS are sitting with letters from Goldman Sachs promising them new jobs elsewhere, and are ready to leave at the drop of a hat.”
On a similar theme, Will Hutton had a piece in the Observer which pointed out that Britain is too small an economy to afford the luxury of a financial centre that is as bloated, inadequately regulated and downright risky as the City of London was allowed to become by successive governments.
American investment bankers used to call the City ‘Guantanamo Bay’. The reason? The place was so inadequately policed they could get away with mischief that would never have been tolerated back home. That included the astonishing activities of Joseph Cassano, the man of who ran AIG’s London-based financial products group — a.k.a. “the man with the three trillion price on his head”.
Hutton’s view can be summarised as being that politicians such as Tony Blair and Gordon Brown were far too lenient towards the City because they liked the tax revenues it once generated and were so in its thrall, they tolerated astonishing risk-taking and allowed it to crowd out other sectors of the economy including manufacturing. Hutton argues that it is time the City was cut down to size.
This is becoming an increasingly common view — and on all sides of the political spectrum. It has been echoed by, among others, Martin Wolf and Andrew Hill of the Financial Times, Andrew Haldane, executive director of the Bank of England, Mervyn King, governor of the Bank of England, the conservative MP John Redwood and Lord Turner, chairman of the Financial Services Authority.
Short URL: http://www.ianfraser.org/?p=991
Posted by Ian Fraser
on Dec 7 2009. Filed under Blog.
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What a joke … So Alistair Darling is in a ten-round fight with the bankers for another World Heavyweight title over the bankers’ bonuses; it’s reached round five but the bankers have hit him below the belt several times, kicked him in the nuts, headbutted him several times, broken both his arms and both his legs using the FSA rulebook (oh, and by the way, the ref is the FSA, so happy to turn a blind eye to unsporting behaviour). Quick Alistair … throw in the towel in ASAP. But Alistair is no fool. He’s going to wait until they’re celebrating their victory in their local lap-dancing joint … then get them to invite him in for an after-fight drink … then gun the lot of them down … maybe that’ll show the next generation of bankers not to mess with the public again. Apologies I have no Xmas spirit for these scrooges …
I have an old friend who works at Goldman Sachs in London. He telephoned two days ago to tell me he is livid about having his bonus paid in shares not cash. He doesn’t see why he should be accountable for the success or failure of his deals.
“What a joke,” he said. No large cash bonuses paid upfront every year equates to no new car every year and having to keep the same car (a Porsche) longer than two or three years is not going to impress the birds.”
“If I had wanted to work like a horse and be treated like an abandoned dog on the street, I would have worked somewhere else or gone into politics. But I went to private school and Cambridge. I’m off to the States because of this….
When I relayed the story to my two chidren, one a securities stockbroker and the other a teacher, they said “Son’t send him a Xmas Card, Dad. He reminds us of Jack Nicholson in ‘The Shinning’…”
We’ve known this guy for 20 years. But how many more like him exist? What he really needs is a visit from one of the three ghosts in A Christmas Carol … answers on a post card anyone?