Never has so much been owed to so many by so few
I know I’m a little behind the times on this issue as it really broke last week but I’ve been mulling it over in my head since and it doesn’t become any clearer.
The issue is that of the bankers’ huge/miniscule bonuses – their size depending, it seems, on whether you are the Duke of York or a normal person. And when no less a person than the Governor of the Bank of England, the redoubtable Mervyn King weighs in, you know it’s an issue that isn’t going to go away.
Nor should it. The Governor’s speech, part of which I have pinched and quoted above, was about more than just bonuses of course. He believes that, having trousered our (the tax payers’) money, the banks then took to heart the belief that as institutions they were simply too big to be allowed to fail and carried on doing what got them into the do-do in the first place.
And it looks like he’s right. Much of the popular press focused on the idea that since ‘we’ bailed the banks out, ‘we’ now ‘own’ them and that the bonuses shouldn’t be paid with ‘our’ money. Except, despite all the talk about nationalizing the banks, we don’t, in fact, ‘own’ the banks.
All that happened was that the Chancellor put his hand in his pocket and gave the banks shed loads of taxpayers’ money with few caveats attached to it apart from a politely worded request that they start to lend money to some businesses and consumers so we could get the economy going again. Oh and, maybe, the recognition that someone from the government ought to keep a bit more of a close eye on what happens from now on. The idea that banks would reform themselves just because they’d got their hands on a taxpayers’ cash and that it would be ‘the right thing to do’ is idealistic at best and downright loopy at worst.
And it must have taken a lot for King to say all this. So far there has been precious little real reform. After all, if the banks think that they are too important to fail then it follows that the taxpayer will bail them out if things go wrong again. Arrgghh!!
King wants to see real, more radical reform and I don’t blame him. He would like to “find a way that institutions can fail without imposing unacceptable costs on the rest of society”.
According to BBC economics editor Stephanie Flanders’ Stephanomics blog pages (something I highly recommend you read regularly) this could mean separating the boring, day-to-day side of banking – the bit we all do and understand – from the investment side – which is the bit that’s like a casino without the flashing lights and the blackjack tables. Before the repeal of the Banking Act in 1999 this was how it was done anyway.
Apparently the Chancellor, and many others, aren’t keen on this. I don’t know why, I don’t understand enough about economics to know what will and won’t work. I just know that it irks me in the extreme to be earning sod-all on my hard-won savings, while London estate agents are seeing the return of bankers desperate to off load their bonuses back into hideously expensive property.