Newspaper article The Evening Standard (London, England)

No Longer Can Banks Carry on Regardless

Newspaper article The Evening Standard (London, England)

No Longer Can Banks Carry on Regardless

Article excerpt


TRADE UNIONS could not believe it when 30 years ago Prime Minister Margaret Thatcher said she would no longer listen to them, give them privileges or allow them a special place in the economic order.

They had become so used to flexing their economic muscle and being listened to by government that they came to believe their own publicity. They thought they were so special, so irreplaceable, so essential to the functioning of the economy that no one would dare to try to run things without them. They seemed genuinely to believe they had a divine right to a disproportionate share of the country's economic output.

It took a long time for them to realise the world had moved on, and the mass of the public had switched off. Their behavioural excesses had destroyed their mystique and provoked a backlash so severe that most of us were no longer interested in them or their ideas -- still less their prosperity.

Today's senior bankers have a lot in common with those unions. They too have spent a decade over-exploiting their economic and political muscle, straying well beyond their original purpose, pretending to a mystique and importance they do not possess and trying to extract unjustifiably large rewards for their labours. They too have ultimately been brought down by their arrogance.

And they still don't seem to get it. The excellent City think tank, the Centre for Financial Innovation, organised a seminar yesterday on bankers' pay which sought to explore how it might change -- how it might be modified by political pressure and regulation on the one hand, and by lessons learned from the system's near-collapse.

The astonishing thing, though, was how none of the speakers seemed to recognise that the new world might differ from the old. One, indeed, argued passionately in defence of the system, because in his opinion bankers' bonuses played no meaningful part in the events which led to the disaster.

This view is at odds with that of former US Federal Reserve chief Paul Volcker (who has said that remuneration systems removed the incentive to worry about risk), with Lord Turner of the FSA (who has pointed out how the pursuit of bonuses amplified the excesses), and with almost everyone else who has thought about the bonus issue for more than five minutes. …

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