Analysis: Bankers’ pay in stratosphere as Osborne unveils reform plans
‘The time for apologies is over,’ declared Barclays Bank’s chief executive Bob Diamond in January in front of the Treasury Select Committee.
Diamond was suggesting that bank bosses should now be left to get on with what they do best. For two years, senior bank executives symbolically passed on accepting the huge bonuses they enjoyed prior to the most severe banking crisis since the Wall Street Crash. It was a sop to the ‘we’re all in it together’ ethos.
However, last January Diamond appeared to be saying normal service must resume. And now it seems the rest of the western banking elite agree with him.
We know this because tucked away in the second section of the Financial Times – the Companies & Markets bit – features a survey that deserves a more prominent platform.
The FT has assessed the pay awards of the chief executives of the 15 biggest European and US banks. It found that Jamie Dimon, the chairman and chief executive of JP Morgan Chase & Co enjoyed a 1,541% pay increase to $20.77m.
Goldman Sachs’ Lloyd Blankfein scooped a 1,536% hike to $14.11m.
And the man Diamond now succeeds at Barclays, John Varley pocketed a 239% pay rise to $5.94m according to the paper.
Later today the UK chancellor, George Osborne will announce at his annual Mansion House speech a measure to force banks to ‘ringfence’ their retail operations. The chancellor believes this will protect consumers in the event of another bank crisis. Osborne will also force banks to hold more cash as a proportion of their loans.
Commentators like the BBC’s Robert Peston and the FT suggest this move represents the most significant bank reform since the Big Bang nearly 25 years ago which launched the era of deregulation to the Square Mile that ignominiously ended with the Crash of 2008.
There is strong suspicion that Osborne’s ‘ringfencing’ reform will be seen as the final policy response to the global bank crisis and that going forward, the restructure of the UK financial system is now virtually complete.
Yet many areas of importance have been left unreformed and appear off the agenda. These include competition, the role of mutual banking, the abject service given to small businesses, the huge lobbying power of banks, the aggressive tax avoidance strategies deployed by them, progressive taxes on financial institutions and last but not least as this morning’s FT survey attests, remuneration.
In the US and UK, investment bankers operate in a rarefied microclimate divorced from the rest of society. Yet it must never be forgotten that western taxpayers bailed out the global banking system to the tune of at least $16 trillion – more than the entire US economic output. Huge central bank injections of cash buoyed markets allowing bankers to make big profits and so enjoy bonuses
In the US, jobless figures remain stubbornly high while growth has stalled not just in the US but throughout much of Europe. The governments of Britain, Ireland and Greece are now taking the axe to public services with enormous consequences to large sections of society.
In the midst of what promises to be hard times, bankers appear to be carrying on regardless as the masters of the universe their lobbying and governments have allowed them to become.
