Bankers and bonuses

There's been a lot of anger today - and rightly so - that Stephen Hester, the boss of the Royal Bank of Scotland, is to receive a bonus of £963,000 on top of his annual salary of £1.2 million. As the Government owns 83% of the shares in RBS after it bailed it out in 2008 with taxpayers' money, it was its decision to award the top up on his already high salary.

The justifications given for paying someone who is effectively a public official such a massive salary and bonuses, as opposed to the much lower but still generous wages paid to senior civil servants, are usually as follows:

1. we need to attract the best people.
2. it was a contractual entitlement we inherited.
3. if we don't pay them this money, the bankers will leave RBS and probably the country as well.

To which I would answer:

1. a lot of the people who steered RBS onto the rocks were also supposedly "the best people" who had to be paid equally high salaries. I'm sure there are lots of people with a working knowledge of economics who would take the job for a fraction of the salary and no bonus.
2. either "Sue us" or pay it weekly by order book at the post office, in pound coins.
3. Goodbye!

 

Bankers doing God’s work?

I just watched the programme When Bankers Were Good, presented by Private Eye editor Ian Hislop.

Hislop's argument is that in the eighteenth and nineteenth centuries bankers were sober Quaker types like the Barclays who only loaned to respectable businesses and were generous philanthropists who made charitable donations to feed and house the poor, in contrast to the bankers who work in the deregulated, risk-tasking City of today.  It's a similar argument to Ed Miliband's about "predatory" and "productive" capitalism.

The problem with all this is that as a result of all kinds of complicated financial devices like credit default swaps and bundles of sub-prime mortgages, "predatory" and "productive" capitalism has become inextricably intertwined to the extent that even the banks themselves are unaware of their liabilities to each other.

Just as banks and joint-stock companies characterised the early development of capitalism, so the international finance system that has grown up since World War II characterises its current stage.  Attempts to turn the clock back and retreat behind national borders are neither possible nor desirable.  The answer is to bring international finance under democratic control.

Hislop also concedes at the end of the programme that the philanthropy of the Victorian bankers only had a marginal impact on poverty and that it was progressive taxation and the welfare state that began to narrow the gap between rich and poor in the twentieth century.

What's a Greek earn?

To misquote another Mancunian, last night the only thing I saw on Channel 4 was a Dispatches programme about the economic crisis in Greece.

It was a lot like one of those tabloid stories that consists of a bold claim in the headline that soon unravels when you read the story. While there was some mention of tax evasion by the rich and the siphoning off of public money by corrupt officials, the main thrust was that it was Greek workers who were to blame for the crisis.

Outrageous examples of the feather bedding our Greek brothers and sisters enjoy highlighted by the programme included retiring on a decent pension at a young enough age to enjoy it, earlier retirement for those doing heavy or dangerous work and being paid for working overtime. With crazy practices like that, no wonder Greece is in a mess.

There was also a sleight of hand in proclaiming loudly at the top of the programme that as a Greek bus driver earns about twice the average wage, that's the equivalent of £40,000. Near the end, it was quickly mentioned that as average wages in Greece are lower the difference - if there even is one - is much smaller than first suggested.

There was a quick mention of the collapse of the international banking system having something to do with Greece's sovereign debt crisis as banks hiked the interest rates on bonds they had issued but it was clearly a side issue compared to Greek workers receiving a living wage, decent pensions and overtime pay.

Roman governors?

According to today's Guardian, the Catholic Church is calling for a "world authority" to regulate the financial markets.

In a document snappily titled Towards Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority, Vatican official Bishop Mario Toso argues that a "central world bank" would lead to "the primacy of the spiritual and of ethics" in international banking.

Who might be qualified to run this central bank, maintaining the strictest secrecy given its crucial but highly sensitive role in overseeing the world economy? Given the rivalry between the world's economic superpowers, where would its headquarters be sited? How to stop politicians interfering in its affairs for their own ends? If only there was a group of unelected politicians in a highly centralised State outside international institutions with centuries of experience in handling vast sums of money in complete secrecy...