The big bank stitch-up
I’m often accused of thinking too much in terms of black and white. But sometimes there just aren’t many shades of grey. Take the rich banker question.
It’s clear that a great many people working in finance are about to be paid far too much. George Soros summed it up this week when he pointed out that the apparent profits made by most Western banks this year are merely “hidden gifts from the government”.
With interest rates around zero, banks can borrow for almost nothing, buy government bonds and pocket the yield. That’s hardly the “achievement of risk takers” and shouldn’t be rewarded as such.
But we shouldn’t confine this debate to this year’s profits and bonus payouts. The fact is that some parts of investment banking make extraordinary profits – profits above and beyond those you’d expect a genuinely competitive environment to enable – nearly every year, regardless of how cheap money is.
• Read the full editor’s letter here: The big bank stitch-up