According to the Guardian today:
"The chief executive of Lloyds TSB, one of the banks participating in the £37bn bank bail-out, has promised staff they will receive bonuses this year despite Gordon Brown's promise of a crackdown on bankers' pay following the investment by taxpayers."
There is something quite amusing about the taxpayers putting in £5.5 billion to keep Lloyds afloat, only to see it disappear a few weeks later in bonuses. However, I am beyond outrage. The world has gone mad and there isn't much we can do about it other than sit back, relax and watch the show.
Today's announcement confirmed one thing. Whatever Lloyds might call their Christmas giveaway, these payments are not performance bonuses. How could they be? Lloyds, like virtually every bank in this country, is on the verge of insolvency. The share price has gone through the floor, asset quality is deteriorating rapidly, and growth prospects are extremely dim. These are failed businesses, and if it wasn't for their essential role in the payments system, should now be in receivership.
These ridiculous bonuses conceal a deeper truth. Banks are not actually profit maximising firms run to maximise shareholder value; they are workers co-operatives. The employees have taken control of the business and rather than pay out profits as dividends, the employees conspired to suck out all the value added as bonus payments.
This credit crisis is just the terminal point in this scam. Shareholders have been the losers all along. Bank share prices have fallen, and now shareholders will see the equity further diluted as the government injects new capital. In some cases - NRK, the Bradford and Bingley, Lehmans, Freddie, Fannie and Washington Mutual - shareholders lost everything.
We shouldn't feel too sorry for these shareholders. They allowed bank employees to take over. When they handed over control, it was inevitable that banks would be run primarily in the interests of the employees, and that means paying out huge unmerited bonuses.