http://www.telegraph.co.uk/finance/c...th-murder.html
Bankers are getting away with murder
Our savings and taxes are being used as a piggy-bank for the City
Adair Turner, the chairman of the Financial Services Authority, has said it, and now the cross-party Treasury Committee of MPs has said it, albeit it in a rather different way. But neither has said it strongly enough. Despite the worst banking crisis in history, costing the taxpayer £1.3 trillion in public support, bankers are behaving as if nothing of any significance has changed at all.
The easy money-making practices of the past are back, with record bonuses and retention fees, even in banks that have required massive state bailouts. The reform agenda is fast running into the sand. Worse, savers and customers are being leeched as never before to rebuild balance sheets damaged by bad lending decisions, while sovereign guarantees to prevent the banking system from collapsing are cynically being used to underwrite a recruitment and remuneration binge that eclipses even that of the boom.
After years of suffering at the hands of the “borrow now, pay later” culture, the careful were promised that whatever else the banking crisis brought, at least it would drive a seminal change back to the old-fashioned values of thrift and self-reliance.
How wrong can you be. It’s hard to impossible to get a real rate of return on your cash right now. The bankers have squeezed savings rates to virtually zero, even as they jack up what they charge to borrowers. So there is nothing clever about the supercharged operating profits bankers are once more generating: they are simply widening the spread .
Policymakers are meanwhile being hijacked by City lobbyists, who are achieving ever greater success in neutering and watering down some of the more radical proposals for change. Despite an economic contraction whose speed and depth matches that of the early 1930s, it seems increasingly probable that the structure, regulation, remuneration and culture of banking will emerge from the wreckage largely unchallenged. While everyone else is going to hell in a handcart, the bankers are making hay.
OK, so I exaggerate to make the point, but only a little. Apologists would say that the first priority in a crisis is to get the system working again. The recovery in banking should therefore be seen as a good thing. First into the crisis, the bankers are leading us out. There is plenty of time left to worry about how to change their ways.
Well, maybe, but unless you strike while the iron is hot, the momentum for change soon goes. Six months ago, bankers could hardly show their faces in public, so shamed had they been. Now they are back, writing learned articles in the Financial Times and ploughing the conference circuit. They are all frightfully sorry about what happened, but let’s be “grown-up” and “realistic”: we don’t want to throw the baby out with the bathwater, or kill the goose that laid the golden egg.
“Wilder voices” who demand a break-up of the banks, or the separation of casino banking from plain vanilla lending and deposit-taking, are being sidelined. Bankers are winning the policy debate. And while populist politicians rarely miss an opportunity to bash the banks, they also salivate at the prospect of this once-dynamic source of tax revenues returning to rude health.
This seems to be happening with a speed that would have been viewed as barely credible a few months back. Leading from the front is Barclays, which – with Lehman Brothers and Bear Stearns removed from the pack, and capacity elsewhere much depleted – has set its sights on becoming one of the world’s top-ranking, “bulge bracket” investment banks. Nobody has been more aggressive in recruiting top talent.
That’s produced a counter-reaction, with even the most damaged, state-subsidised banks being forced to pay big retention bonuses. Investment bankers who six months ago were being forced to contemplate a change in career and lifestyle, find their talents in high demand once more.
Barclays pleads freedom to indulge in expansionism, as it refused to take the Government’s bail-out money, preferring to recapitalise itself by flogging assets and seeking new equity from the Gulf. Yet in truth, it is underwritten by the taxpayer just as much as any other UK bank. Everyone implicitly understands that Barclays will not be allowed to fail . This sovereign “put” is being used to further the bank’s commercial ambitions.
It might reasonably be argued that this is a good thing. France has long used state backing to build national champions. But for many it will stick in the craw to watch bankers enrich themselves at the expense of savers and taxpayers. Having socialised the losses, banks are again pocketing the gains.
This contrast between Wall Street excess and Main Street misery invites the very regulatory backlash that the bankers have so far managed to avoid. It looks almost like a death wish – a final feeding frenzy before the political axe falls, as it inevitably will if the economy doesn’t swiftly follow the bankers into recovery. After what’s just occurred, common decency demands self-restraint. But bankers seem quite incapable of it.
===============================
Thing is that if any attempt is made to curtail them then they will go elsewhere. So lets hope Washington clamps down on them and they all move to London.
Bankers are getting away with murder
Our savings and taxes are being used as a piggy-bank for the City
Adair Turner, the chairman of the Financial Services Authority, has said it, and now the cross-party Treasury Committee of MPs has said it, albeit it in a rather different way. But neither has said it strongly enough. Despite the worst banking crisis in history, costing the taxpayer £1.3 trillion in public support, bankers are behaving as if nothing of any significance has changed at all.
The easy money-making practices of the past are back, with record bonuses and retention fees, even in banks that have required massive state bailouts. The reform agenda is fast running into the sand. Worse, savers and customers are being leeched as never before to rebuild balance sheets damaged by bad lending decisions, while sovereign guarantees to prevent the banking system from collapsing are cynically being used to underwrite a recruitment and remuneration binge that eclipses even that of the boom.
After years of suffering at the hands of the “borrow now, pay later” culture, the careful were promised that whatever else the banking crisis brought, at least it would drive a seminal change back to the old-fashioned values of thrift and self-reliance.
How wrong can you be. It’s hard to impossible to get a real rate of return on your cash right now. The bankers have squeezed savings rates to virtually zero, even as they jack up what they charge to borrowers. So there is nothing clever about the supercharged operating profits bankers are once more generating: they are simply widening the spread .
Policymakers are meanwhile being hijacked by City lobbyists, who are achieving ever greater success in neutering and watering down some of the more radical proposals for change. Despite an economic contraction whose speed and depth matches that of the early 1930s, it seems increasingly probable that the structure, regulation, remuneration and culture of banking will emerge from the wreckage largely unchallenged. While everyone else is going to hell in a handcart, the bankers are making hay.
OK, so I exaggerate to make the point, but only a little. Apologists would say that the first priority in a crisis is to get the system working again. The recovery in banking should therefore be seen as a good thing. First into the crisis, the bankers are leading us out. There is plenty of time left to worry about how to change their ways.
Well, maybe, but unless you strike while the iron is hot, the momentum for change soon goes. Six months ago, bankers could hardly show their faces in public, so shamed had they been. Now they are back, writing learned articles in the Financial Times and ploughing the conference circuit. They are all frightfully sorry about what happened, but let’s be “grown-up” and “realistic”: we don’t want to throw the baby out with the bathwater, or kill the goose that laid the golden egg.
“Wilder voices” who demand a break-up of the banks, or the separation of casino banking from plain vanilla lending and deposit-taking, are being sidelined. Bankers are winning the policy debate. And while populist politicians rarely miss an opportunity to bash the banks, they also salivate at the prospect of this once-dynamic source of tax revenues returning to rude health.
This seems to be happening with a speed that would have been viewed as barely credible a few months back. Leading from the front is Barclays, which – with Lehman Brothers and Bear Stearns removed from the pack, and capacity elsewhere much depleted – has set its sights on becoming one of the world’s top-ranking, “bulge bracket” investment banks. Nobody has been more aggressive in recruiting top talent.
That’s produced a counter-reaction, with even the most damaged, state-subsidised banks being forced to pay big retention bonuses. Investment bankers who six months ago were being forced to contemplate a change in career and lifestyle, find their talents in high demand once more.
Barclays pleads freedom to indulge in expansionism, as it refused to take the Government’s bail-out money, preferring to recapitalise itself by flogging assets and seeking new equity from the Gulf. Yet in truth, it is underwritten by the taxpayer just as much as any other UK bank. Everyone implicitly understands that Barclays will not be allowed to fail . This sovereign “put” is being used to further the bank’s commercial ambitions.
It might reasonably be argued that this is a good thing. France has long used state backing to build national champions. But for many it will stick in the craw to watch bankers enrich themselves at the expense of savers and taxpayers. Having socialised the losses, banks are again pocketing the gains.
This contrast between Wall Street excess and Main Street misery invites the very regulatory backlash that the bankers have so far managed to avoid. It looks almost like a death wish – a final feeding frenzy before the political axe falls, as it inevitably will if the economy doesn’t swiftly follow the bankers into recovery. After what’s just occurred, common decency demands self-restraint. But bankers seem quite incapable of it.
===============================
Thing is that if any attempt is made to curtail them then they will go elsewhere. So lets hope Washington clamps down on them and they all move to London.
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