Bonkers bankers’ bonuses

[Steve Gardner]

What great, if disturbing, piece of commentary this is.

Source: BBC - Robert Preston's blog

You may think it’s all been doom and gloom at investment banks over the past few months: horrendous losses on sub-prime and holdings of poisonous securities; declining share prices.

But, except for the unfortunate few who’ve had the heave-ho for doing particularly stupid deals, it’s actually been another golden year for the employees of the great Wall Street banks.

According to research by Breaking Views, the online comment and analysis service, total compensation at the five largest US investment banks was just under $66bn last year, almost 9% higher than in the previous year.

But here’s the shocking comparator: that $66bn of remuneration delivered a $50bn reduction in their aggregated stock-market value over the course of 2007.

Or to put it another way, the bankers at Goldman, Morgan Stanley, Lehman Bros, Merrill Lynch and Bear Stearns were each paid $350,000 on average, for diminishing the value of their businesses by $274,000 each.

That’s not a terribly brilliant demonstration that markets are efficient at pricing capital, whether physical, financial or human.

And how marvellous that it should be the very archangels of global capitalism that should manifest this utter contempt for the owners of their businesses.

This disconnect between their remuneration and their productivity is a microcosm of one of the resonant trends of our age: that bankers were massively rewarded over the past few years for doing deals that turn out to be toxic for the global economy; and even though many of them have trousered massive rewards and can afford to sit on a beach forever, the rest of us are paying for their misguided financial engineering in the form of slower economic growth.

My old friend Hugo Dixon, the founder and chairman of Breaking Views, puts it rather brilliantly: “Marxism is a bankrupt philosophy. But its critique of capitalism – that profits are privatised but risks are socialised – always had an element of truth.”

And what do the bankers themselves think of their bumper payments for failure?

In a poll conducted by Breaking Views, just 54% think they’re worth it – which presumably means that the other 46% can’t believe their luck.

[Steve Gardner]

And it sems the gluttony Preston describes isn't just going on stateside.

Clearly, things are not sustainable right now. The question is not whether we're going to have some sort of economic drama but just how severe and long-lasting it's going to be.

One thing we do know for sure, it doesn't matter to the bankers - they get richer whatever happens.

Source: Socialist Worker

Barclays bank tried to claim that it was being hit by the global economic credit crunch when it announced this week that its annual profits had fallen.

But they had merely dropped from £7.13 billion in 2006 to £7.08 billion last year—hardly pitching the bank into dire financial straits.

Despite fears for the economy, City bankers are also to get £7 billion in bonuses, it was announced last week. A third of City bonuses are up on 2007 figures, even though records were set for bankers’ gluttony last year.

The greed is such that even chancellor Alistair Darling was moved to criticise it, though he will not do anything to stop it.

While the bosses continue to live it up in Gordon Brown’s Britain, millions of workers face an uncertain future due to the credit crunch.

Thousands of workers at the crisis-hit Northern Rock faced losing their jobs this week, despite the government “temporarily” nationalising the company.

Banks and building societies repossessed 27,000 homes last year, 21 percent more than in 2006.

The number of repossessions is expected to hit 45,000 this year as many people struggle to pay their mortgages. Millions are living on debt and any economic crisis will devastate their lives.

The National Institute of Economic and Social Research has found that the ratio of household debt to national income is 1.62 in Britain, the highest for a major economy. British people are saving the smallest amount of their wages since 1960.

New Labour is helping to create a society that means unparalleled riches for a minority and continuing crisis for the majority.

It backs the system that is leading to economic turmoil for millions around the world and in Britain. The bosses will try to make us pay for their crisis – and we have to make sure they don’t succeed.