There are, broadly speaking, two views of the huge salaries and bonuses that bankers have been paid in recent years and that many expect to be paid again, said The Observer. The first held mainly by bankers is that those huge sums were rewards for excellence and that they should still be paid so that those bankers can continue to be excellent. After all, says the Evening Standard's Simon Jenkins, the industry may have proved "rotten at the top" and its bonus system revealed to be "little short of corporate theft", but we should be careful not to over-react and kill the goose which lays our golden eggs. However, the second view, held by what The Observer calls "pretty much every rational person in Britain", is that the bonus culture encouraged irresponsible risk-taking which led eventually to the banking sector's near collapse and rescue by the state. "With the taxpayer now in charge, the bonuses must stop."
So why, if the government has both majority opinion and moral authority on its side, does it seem unable to exert any authority on the matter? France, Germany and the US have all used the "leverage of state bail-out to demand restraint". Here, Gordon Brown is said to be "very angry" at the banks' defiance (Royal Bank of Scotland wants to pay up to £4bn in bonuses even though its employees would have been out of a job without state intervention) and has commissioned a review of governance in the banking sector. Fat lot of use that will be, said James Chapman in the Daily Mail. It is to be led by Sir David Walker, a former boss of Morgan Stanley, who became known as Mr Whitewash after conducting two other inquiries into City behaviour that "ended up recommending little or no change".
Brown and his chancellor Alastair Darling's attacks are "utterly cynical", agreed Jenkins the bonus culture has permeated the public sector, too. The Treasury's "well-heeled and pensioned" staff receive £27m in bonuses, presumably for running the economy so well. Post-office directors, policemen, BBC managers and even Olympics organisers all get them. So greed is now "government-sanctioned", said Carole Cadwalladr in The Guardian. For example, Brown apparently sees nothing wrong in his home secretary, Jacqui Smith, claiming additional expenses of £116,000. As such there are only so many statements the government can make about the City's shortcomings. Smith "fully abided" by the rules, just as the banks did nothing legally wrong. "The problem is that it's obvious to everyone, that is, apart from Gordon Brown, that the rules are wrong."
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They are, agreed the FT. In recent years, financial institutions have paid bonuses to employees who "increased their margins by exposing institutions to bank-breaking hazard". This should not continue, but alternatives assessing bonuses over long periods of time and paying them in stock should be considered. Why? asks Martin Wolf, also in the FT. "Do we really want to reward the 'talent' that has brought down the world economy? Banking is not an exceptionally difficult job nor one that requires exceptional talent and it is a "gross misallocation of resources" to lure the most talented people into a business whose true added value is modest. If we are to support these "ghastly institutions", we should have a say in how their employees are paid. And that pay should be limited.
