Best to ignore fro the time-being the ineffectual, British huffing and puffing over the Sir Fred Goodwin pension for the cack-handed, disgusting little sideshow it is. By contrast the US House of Representatives has approved a bill to impose 90 per cent tax on bonuses to employees whose gross income exceeded $250,000 at bailed-out firms. Now that’s action!
In response the FT states “Bankers on Wall Street and in Europe have struck back against moves by US lawmakers to slap punitive taxes on bonuses paid to high earners at bailed-out institutions” (20/3/09). Struck back? Really? How exactly?
By saying things of course. Fer instance, one banker was quoted saying “It’s like a McCarthy witch-hunt...This is the most profoundly anti- American thing I’ve ever seen.” Wooooh, scary. Sticks and stones and all that give or take the assumption its somehow wrong to take away the bonuses of people who directly contributed to a financial disaster now costing millions of people their livelihoods.
But, said one investment banker, these taxes could “send [the US] back to the stone age”. Crikey, crivens and help ma’boab! So taxing a few hundred or mebbe a few thousand people will do that to the world’s biggest economy? If it’s that fragile presumably its going to topple over anyway? And how exactly?
Thru staff retention of course judging by the comments of Vikram Pandit, Citigroup’s chief executive, in an internal memo; “The work we have all done to try to stabilise the financial system and to get this economy moving again would be significantly set back if we lose our talented people”. So that’s us over a barrel then if these people aren’t free to earn tons of cash.
Alternatively, I don’t think these people realise the wider implications of what they're saying. Fair enough its fun to have it made clear employees are motivated almost entirely by cash; we sell our labour in a labour market for a price after all. And sure thats the last however many years of HR dogma on employee engagement and motivation out the window to the extent I'm betting every training courses run by a bank HR department is being duly amended as I type this (or not). But, to be honest all I'm left thinking is the people making these statements sound increasingly like ignorant tosspots.
Desperately guddling about for actual evidence one noted “Commodity traders are already moving to companies like BP where they can make as much money as they used to”. So that’ll be a couple of dozen people at most have got jobs with a single company in an area that only really came to prominence because there was nothing left to speculate in towards the end of the bubble? Crikey!
Alternatively, the reality is most high finance labour markets will be notably cooler for the foreseeable future because they're oversupplied with high financiers that have recently been made redundant. I’d even expect commodity trader bonuses at energy companies to fall regardless of what governments do elsewhere because of this and the general state of commodity markets now that the change in status of the remaining investment banks has permanently clipped the wings of the hedge funds.
It’s this kinda rank stupidity and failure to see the bigger picture that makes me doubt if Vikram’s got it right. Are the same commodity traders who exacerbated oil price swings really helping to stabilise the financial system? My jacksie they are, its central bankers, treasury officials, finance officers and regulatory and risk experts thatare doing the ground work here.
Lets be honest, Vikram is most likely cacking it that when these other people (who earn significantly less than top traders) finally help achieve some sort of stability he won’t be able to pile back into high earning businesses because all the big bonus bods will have naffed off to err, I'm not sure exactly, its not as if most other countries aren't biting down hard on the bonus culture. And anyway this kidna piling into markets type thing is exactly the kind of herd mentality that helped create the credit crunch in the first place.
It all leaves me thinking these guys really, really don’t have a clue about how much attitudes have changed or much shame for that matter (even worse they were given the otherwise credible platform of an FT article from which to whine). Rather than striking back, right now it comes across as no more than huffing and puffing outside a big brick house, except this time its the piggies trying to blow it down. If I was them and was wanting to get my bonus back I’d treble my political lobbying budget to try and sway government behind the scenes, cos the arguments being made in public are selfish, half-arsed, incoherent mince for the most part.