Sunday, January 25, 2009

Money for nothing

...Whereas George Bush and Tony Blair stood shoulder to shoulder to pursue the war on terror, their successors are battling an altogether different scourge – the cabal of rich bankers who have caused the credit crunch, bankrupted their firms and undermined the global economy...

With the banks propped up by taxpayers’ cash on both sides of the Atlantic, the culture of huge salaries and mega-bonuses is facing a public and political backlash...

..The only people who don’t seem to understand the scale of the backlash are the bankers, said Charles Geisst, author of Wall Street: A History. He said the financial sector had operated under a “sense of entitle-ment” for most of the 20th century but that this had reached epic proportions in recent years. Many top bankers now seemed to be completely out of touch with the political and public mood.

“Bob Dylan said it best – You don’t need a weatherman to know which way the wind blows. These guys don’t have a weatherman between them,” said Geisst. That someone as seemingly sober as Thain could have lost his head shows how far off course they have blown.

But no. Wall Street bonuses declined only 4.7% last year to an average of $180,420 per worker, according to the latest figures from the New York State Comptroller’s office. One of the worst years in Wall Street’s history, a year when three illustrious banks – Bear Stearns, Lehman Brothers and Merrill Lynch – closed, was still one of the best years for bonuses.

“It’s not a popular thing to say this, and Joe Sixpack is never going to get this,” said one Wall Street banker, who wished to remain anonymous, “but if we don’t pay the bonuses, we lose the talent.”

That argument did not stop Lord Turner, chairman of the Financial Services Authority, from attacking the culture of financial innovation for creating profits that fattened bankers’ bonuses but did little to benefit the wider economy.

“If by some terrible accident the world lost the knowledge required to manufacture one of our leading drugs or vaccines, human welfare would be seriously harmed. If the instructions for creating a CDO have now been mislaid, we will, I think, get along quite well without them,” Turner said in a speech last week.

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