In a post yesterday, I asked whether the financial sector would have the outrageous cheek to pay its bloated overpaid employees a bonus this year. It did not take long to get an answer. Today, the Times reported:
"American executives of the failed Lehman Brothers bank, parts of which were taken over by Barclays last week, will still receive millions in bonuses. Barclays has pledged to pay $2.5 billion in bonuses and salaries to Lehman staff in New York, whose collapse brought the world’s financial system to the brink of failure.
A group of eight senior executives and 200 key staff will enjoy multi-million-pound rewards for their performance in the past nine months. A further 8,800 staff will share the remainder of the pot, with many having guaranteed jobs as part of the takeover of the US arm of the investment bank."
What does this mean? You work for a company that makes a series of catastrophic investments. These decisions eventually destroys the company and almost bring down the global financial system. Yet somehow, your performance was deemed good enough to earn a multi-million dollar annual bonus.
In banking, there is no concept of failure. If an investment turns a profit; bankers get a bonus. If an investment goes bad; bankers still get a bonus. When times are good, bankers complain about excessive regulation and the need to downsize the government. If the financial sector goes into a downturn and firms start to collapse, bankers claim that the economy is about to fall into another great depression and a massive injection of taxpayers resources is needed.
Many have commented that bankers privatize profits but socialize losses. Bankers do more than that; they also ensure that their receive their fat unmerited salaries and bonuses regardless of their performance.
Something is terribly wrong here. We do we put up with it?
5 comments:
When control passes from the capitalists to the workers, the workers loot the company. Blue-collar workers did it at British Leyland, white-collar workers in the banks. No surprise there.
they know this is the end. Why not go for one last jolly? And this time it's courtesy of the taxpayer. Cheers!
String 'em up! Its the only language they understand.
Oh come one Alice. In a company as big as Lehman's there's departments that made money fair and square, and one's that lost a ton. The bit Barclays is buying is one that's been profitable all of the past five years per the papers. It's an equities division for Christ sake. It's the fixed income and derivatives divisions that lost all the money. When you buy am investment manager you are buying two things - the decision making staff, and the salesmen's relationship with client decision makers. They hold value, so they'll walk without a bonus. If they really were so worthless, Barclays wouldn't be paying to keep them.
Nick
One of the analyses of the 30's depression is that is was an unwinding of the excessive credit in the system, which went up hugely and allowed the excessive speculation in shares. The P/E ratios of recent years have been ridiculous - only really paralleled by their peak up to 1929. All the parts of the investment banks have depended on the excessive credit spun into the markets by complex instruments.
So who's guilty? Well, certainly the 'valuable' senior executives who pushed the bubble for all it was worth and ought to have known better. Goldmans bet against the US property market a little before the end - their people at the top might be worth something; the rest, system-wide, are lemmings who only know how to sell. And who's buying now?
B. in C.
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