The social cost of runaway bank pay

August 18, 2009

If only the economy were bouncing back as fast as banking compensation.

Even as the first anniversary of the collapse of Lehman Brothers draws near, bankers and traders are now grabbing a larger share of their institutions’ net revenue than they did during the boom years. The leading U.S. banks are on track so far this year to pay their employees $156 billion — more than in sunny 2006.

Politicians have focused mostly on whether the bonus structure can be changed to discourage bankers from making reckless bets with their shareholders money. But a bolder solution to excessive banking pay is necessary. It starts with a simple question: Are bankers paid too much? The answer is a resounding yes.

Everybody enjoys a bout of cathartic outrage over the pay of reality TV personalities and sports stars. At root, however, we must accept that these salaries are determined by the free market. The same is not true of investment banking.

Even those banks not currently financially dependent on the largesse of the federal government clearly benefit from an implicit guarantee. Governments of every political hue have clearly demonstrated that they are unwilling to let large institutions fail. This enables financial institutions to take risks that a toothpaste manufacturer could not. Bankers took full advantage of this subsidy before the crisis and are starting to do so again.

A report by London-based Smithers & Co., while issued before the crisis, shows how that dynamic continues to work. Smithers found that the median nominal return on equity in banks towered above those in other sectors.

“With higher leverage than other industries they could achieve 20 percent returns compared to an average of 8 percent elsewhere,” Andrew Smithers said in a telephone interview. The downside of the banks’ high returns is high risk, much of which is born by taxpayers. This has become more dangerous since offsetting regulations limiting risks were dismantled.

The opaque nature of the business also makes it easier for financial professionals to capture a “wholly disproportionate share from the returns in the productive economy”, says Paul Woolley, an academic at the London School of Economics who set up the Center for the Study of Capital Market Dysfunctionality.

Before the crisis, financial services peaked at around 40 percent of total corporate profits. “Financial services are by far the largest item in most people’s budgets,” Woolley says.

Since the fees are hidden or opaque, however, this causes little resistance. For example, various layers of management fees reduce by at least half the gross returns that investors
would otherwise reap from equities. (Research by Kenneth French at the University of Chicago suggested that investors spend about $100 billion a year trying to beat the market.) Consumer financial products are seldom more transparent.

Nor, Woolley argues, do the activities of the financial sector add as much value as they claim. The boast, for example, that financiers funnel savings to their most productive use is overdone. As fund managers compete to beat the market they are often forced to follow trends. This momentum trading causes an over-allocation of capital to frothy sectors — as seen during the Internet bubble.

Realizing that as a society we overpay for financial services is the first step. The second is proper regulation. A study by Thomas Philippon and Ariell Reshef for the National Bureau of Economic Research concluded that the premium paid to bankers compared with similarly qualified workers in other fields gradually disappeared after the introduction of strict banking regulation in the 1930s.

The premium — between a third and a half — only returned after these controls were relaxed in the 1990s. Forcing banks to hold enough capital to pay for their own risks is the key. A powerful Consumer Financial Protection Agency in the U.S. could also ensure that financial professionals are not being overpaid simply because their products are difficult to understand.

Woolley also makes a strong case for a Tobin tax on transactions — reducing the wealth-destroying churn of financial assets.

Excessive banking pay is a social ill. The sector has long sucked in far too much of society’s brightest graduates — putting them to tasks which often have little social value and at worst are parasitic. Politicians should not regulate bank pay directly. But lower compensation for bankers will be a sign that regulatory reform is working.

52 comments

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Agree on all points. But what politician has the initiative to enact regulations? The banking lobby has them in their pockets and there’s nothing we can do about it.

Posted by Anthony Bolin | Report as abusive

I don’t understand it. Where’s the disincentive for them to keep from screwing up the economy?

Posted by borisjimski | Report as abusive

If things are as bad as they are when the industry is sucking up “the best and the brightest”, think what it will be like when “reduced pay” causes the industry to suck up the “averagest”.

Posted by jwg | Report as abusive

I totally agree with the article that bankers are way overpaid. As a whole sector, they hold a valuable commodity (money to lend) thanks to the continued support of the government on deposit insurance even in the good times. With that commodity always in demand, they feel the masters of the world and use it to their advantage for immediate profits (and bonuses), not for the good of Main Street.

Legislation must be enacted not only to contain bonuses, but also to restrict bank activity and capital resources to the productive economy. At present they are dedicating a large part of their capital to speculative/trading activities which do nothing for the productive economy and ride on the back of government support on deposits and eventual failure.

Posted by Luis Catan | Report as abusive

i totally agree with the article andregulation in the banking industry is paramount to prevent the current recession from ever happening in future

Posted by muhoro | Report as abusive

jwg I think you miss the point.

Some people in our industry are genuinely outstanding and worth high pay, but when I look at the sheer volume of top earners logic always suggests that a lot of average people are getting lucky. Banking is bloated, a lot of the so called “high fliers” just arrived at the right time.

My view is government and regulators shouldn’t restrict pay but design incentives to bring the industry back to a sensible scale. We should care more about the overall amount sucked up by banking than a few big bonuses. This way we’d still get some of the brightest graduates in banking, just not all.

As an aside – I agree an excessive amount of capital ended up allocated to tech in the internet bubble, however, arguably some of the best companies in America today came of age as a result so not a complete failure.

Posted by vk9141 | Report as abusive

HEY WALL STREET BIGWIGS, I WILL NEVER INVEST IN UNGARUNTEED STOCKS EVER AGAIN. PERIOD. I WILL NEVER LOSE A DIME TO YOU AGAIN. IF EVERYONE FOLLOWED THIS PRACTICE, THEY WOULD HAVE MONEY FOR RETIREMENT AND YOU WOULD BE BARELY IN BUSINESS. THE WAY IT SHOULD BE.

Posted by Dave | Report as abusive

Ironically, the market was about to dismantle the whole self-serving structure last fall in a not so gentle way, which may prove that when a system becomes too corrupt it tends to collapse under its own weight. But the US Government stepped in with a “too big to fail” policy and, in effect, has preserved a sick and corrupted system. I worry that along the way we have lost any sense of moral courage, and it is this, not the loss of Lehman Brothers or any other big bank, that will lead to the greatest pain.

Posted by Amandus Colver | Report as abusive

Top 50 or so banks too big to fail…too big to be. Bust them into less threatening pieces then see what things look like. Maybe they could share IT services, as this is a cost center that did not exist the last time interest rates looked like this in the 1950s. Following a breakup shareholders from the middle of the pack should pack the compensation boards of the new banks while Antitrust spends real effort in a major claw back. Of course, I still look at the utility companies as natural monopolies. Production-Distribution-Retail got the former electrics broken up (to the detriment of consumers)

You know, if the idea in the 60′s was…”We can change the world”, we happen to have come of age. ‘Tis time we did.

Posted by DanO | Report as abusive

Americans need to realize that the slowdown in the US economy has been coming for a while, as evidenced by low to zero wage increases for the past 5-8 years and a continuous flow of services jobs to emerging Asia.

The credit crisis was largely due to people spending money they didn’t have on things they didn’t really need. Putting all the blame on bankers is like blaming the super market for our weight problems.

The bigger question is what can we do to kick start the US economy and to keep up with foreign competitors? If the US doesn’t act quickly China and emerging Asia will leave us in the dust.

As far as bankers go, pile on the regulation and you’ll see Wall Street bonuses decrease but only because big investment banks will just take their business elsewhere to less regulated markets. If there is another growth spurt in the US economy, it will require Wall Street’s services, just as every other one has.

Don’t bite the hand that feeds you.

Posted by Alejandro | Report as abusive

[...] reuters Even as the first anniversary of the collapse of Lehman Brothers draws near, bankers and traders are now grabbing a larger share of their institutions’ net revenue than they did during the boom years. The leading U.S. banks are on track so far this year to pay their employees $156 billion — more than in sunny 2006. [...]

From your lips to someone with power ears. It is unlikely that those who benefit so much from this arrangement will allow it to change. The bankers will rally the very groups of people that are taken advantaged of by them to protest. Give them a few bucks and some placards about “Government Bad Capitalism Good” These people are smart and generally three steps ahead of those trying to stop them. And the bankers believe they deserve the money they make and will not go down without a dirty fight. Can you imagine how many lobbyist would descend on Washington?

Good luck – you have my support.

Posted by Paul Heine | Report as abusive

This article misses the point, is badly written and people posting here have no idea what they are talkig about. To use broad generalizations about the “Banking” industry is absurd! The vast majority (95%+) of “workers” to use “socialist” speak, DO NOT earn anything near these supposed high incomes. They are working stiffs like everyone else. Why is it, that people are sympatehtic to union auto workers losing their jobs, but the bank tellers, check or loan processors and middle managers of banks somehow must be “over paid fat cats”. Wake up, none of you know what you are talking about. By the way, Investment Bank does not mean “Federal Savings Bank” or even “Bank”. An IB is very different than the run of the mill “Bank”. So stop running around using the term broadly–you have no clue. Get your facts straight.

Posted by Scott | Report as abusive

First of all, why should one be concerned about banker, or anyone, getting paid more? Yes of course some industry pays well, but does that screws our economy? After all those high paid bankers contribute to the tax system more that others. If I were you, I would stop writing columns and go find a better banker job.

Posted by Greg | Report as abusive

I can’t stop the collective mismanagement in the financial service sector.

What I can do is vote with my feet. I’ll only invest in stock and bond index funds. For the cash portion of my portfolio, I make every effort to invest with local banks or in banks that have a solid reputation (no TARP for example). I still have some toxic assets in my portfolio from pre 2008 days, but am systematically disposing of them.

Posted by Barton Poran | Report as abusive

Overpaid? Runaway Bank Pay? Come on, it’s a free world. If your company wants the best it’s got to pay for them (even if that company doesn’t make net income 100% of the time). Who are you to say they are being paid too much? No really, who are you?

Speaking of overpaid, politicians and this writer are def overpaid with Runaway Pen Pay.

Posted by Yon Fu | Report as abusive

I agree with above – that the system was happily following all cycles and about to cut bonuses and release the best and brightest into the general workplace until it was saved by the governement. When things get too fat – they eventually collapse…why didnt WE not “THEY” let them? Oh thats right…becuase no one wanted to lose thier jobs as well, or have trouble with thier mortgage..thier loans, thier credit..

And as for making sure this “never happens again” – what a creepy world that would be – everything going up forever…the entire free market moving up at 2% year – FOREVER….Shoot me now.

Posted by TBILL | Report as abusive

Just would like to reply to Yon Fu’s comment.

When you make such comment bear in mind then you don’t have any right to ask the government for taxpayers money. Overall your sought odf thinking have screwed the life of millions

Posted by apan | Report as abusive

Isn’t it robbery in broad daylight right in front of the bewildered masses and their leaders,chosen to protect them and their wealth being looted in this blatant way.This greed of the financial sector has destroyed the financial well being of the current generation and is laying a massive (nuclear) land mine to blow up the whole world order for our children and grandchildren.

Posted by SC | Report as abusive

Nice article Christopher. Keep in mind when you look at overall pay in “Financial Services” that the “Services” part that is largely the overpaid sector is the capital markets and proprietary trading operations. A few points are very relevant and essential to keeping it focused. First, the capital markets proprietary trading sectors create little if any “real” GDP value, and largely the entire profit book on which pay is based is “artificial” economy. It doen’t mean anything to the national welfare, Joe Schmos, or future generations as we are seeing and discussing. Quite the contrary, it is the basis of future problems.

Second, and a very important point is the clarification of the services part of “Financial Services”. Think about the army of operations people and average low to mid level workers in banks, insurance companies, brokers, and global investment banks that actually serve real customers and create service value. Most of these folks are rarely overpayed like the capital markets big you know whats. Notwithstanding there is a small contingent of “institutional handlers”, traders and cutomer people who get overinflated bonuses and pay. We could basically do without most them who have, by large numbers, been automated out of business anyway. The few that remain handling institutional customers “based on relationships” are in the same category as the capital markets folks.

So essentially, the hordes of people in back office operations, customer call centers, making business loans, and standing behind teller terminals are at least providing an economic service that creates value and benefit to the customer and translates somehow back into GDP.

Third, keep in mind when all this pay started overinflating, basically more than two decades ago with the advent of what? The artificial profit deriving from swaps, and other derivatives and then later the mega acceleration of hedge funds, prime brokers, and securities lending. And don’t forget the Nasdaq market makers and the likes of folks like Bernard Madoff whose companies were essentially trading their own books against the customer market on spreads of up to a 1/4 until they got automated down and resorted to Ponzi schemes. All the artificial value groups. All essentially facilitating huge irresponsible pay envelopes and correspondingly negative contribution to real tangible GDP economic value. Let’s even give some benefit of the doubt to the investment bankers who provide funding to companies and therefore at least stoke the economy through the manufacturers and services businesses that get the funding.

In summary, what we really need is to take the approach of focusing on “the real economic value” and concentrate on redefining what the true economic value financial services is. Let’s quantify what they actually create. Let’s quantify what really works its way back into social and economic benefit, goods and services produced. Let’s review and oversight the “artificial economy” pay in financial services. Let’s start somewhere as a first step.

Tom Ricciardi

Interesting, why people continue to argue that the bankers are overpaid? Bankers deserve to continue exploit the American taxpayers as during the boom year, you relied on we bankers to boost your stock portfolio so that we could further install power in Treasury and Government. Now you taxpayer just paid the price for the bank-controlled Government and Congress!

Posted by Rose Eli | Report as abusive

Go after the root cause, not the symptom. To big to fail means to big to exist.

All that is happening is monopoly profits are being syphoned into the pockets of the corporate management rather than the business owners (as occured during the late 1800′s).

Although all the facts and figures are valid they conceal the real issues. You don’t regulate the syphoning of monopoly profits, you eliminate the monopolies.

Because the real issue is being evaded, one might conclude (correctly in my opinion) that the discussion is what a “good communist” would have called capitalist propaganda.

Posted by left_line | Report as abusive

“Woolley also makes a strong case for a Tobin tax on transactions — reducing the wealth-destroying churn of financial assets. ”

Buffet has an article out today about the need to pay down the US Federal budget deficit. A good start would be to tax the financial industry-the very people that got us into this mess

Posted by DR | Report as abusive

So what about the bloated pay of high flying bankers? It’s always been this way. We are pointing the finger at over-paid bankers as we sit in huge houses we can’t afford surrounded by big screen TV’s, cars, boats, etc. Our young children turn on the TV sets to a selection of reality shows about cheating wives, extravegant homes and pregnant 15 year olds. Every day, some politician is being forgive by Americans for cheating on his wife. We are a culture that is loosing (or has lost) its moral compass. And we think over-paid bankers is a problem??? Only a symptom of a society that is going down the proverbial crapper.

Things, in my opinion, are not going well generally in our beloved USA, not just in the banking sector, but overall.

Posted by RebeccaB. | Report as abusive

I would like to ask them a few questions about their excessive pay… Where does it actually come from?

If they are trading their books based off the 10% rule, they inherently create money out of thin air every time they issue credits. =10% reserve of a loan is required to issue a loan. The other 90% is created money based off the current monetary system. The money that then gets loaned out for buying a house for example, gets put back into their pockets as CASH or real money, thus increasing their reserve. THIS IS WRONG!!! The money they just put back wasn’t real money! But this continues as it has for 80 years since the Fed was created and money was no longer backed in GOLD. Something real.

If it wasn’t for the opaque nature of the business, as mentioned before, I have no idea how the tax payers can allow the government use our money that we pay the Govt for services to increase the risk/leveraging ability of these greedy banks in question by offering a SUBSIDY to bail out banks that risk too much and should fail. This puts us back in the same situation.

Alan Greenspan said in a speech in 1997 that catastrophic failure was inherent in the monetary system about twice a century. That was in 1997. The last time was in the 30′s, and we’re keeping with his statement.

The only way to fix the system is to demand our money is backed in GOLD like it used to be. This will curb inflation, and all investments will be made like any other business. They risk their own money not OURS.

Kill the Fed, it’s the only way to prevent it from happening again. Go back to gold. Save our retirements.

Posted by AndyO | Report as abusive

Hands off bankers ! They have extremely stressful hours and responsibilities. The super-rich will ultimately pay the taxes to bail themselves out ! Stay put in the middle class and have a long and healthy (shelf)life ! Discounted earnings rule, for all sectors ! Insider trading will always be around. Be brave and participate, stop complaining. The world is run by heads of illicit trades/ventures/mobs, not politicians, nor reptilians…Banks merely cream it off in the middle of this mess.

Posted by Casper | Report as abusive

This is my third attempt at investing in the market. I invested equally in our interest income accounts at my bank and the equal amount in funds and moniteres the 2. I have now come to realize that the financial investment world in one of incompetence, borderline ethics, sheep like behaviour patterns, gross profit taking with none of the accountability. When I asked my investment consultant what happened he merely said that it was the markets fault. I replied that it was his for not protecting my interest.
Shame on all of you!

Posted by Paul Beaudry | Report as abusive

This conversation is all well and good, but nothing will happen. We don’t want socialism remember? American’s are to dumb to see how the rich are fleecing them as they cling to antquated notions of greatness. Our country is headed for the third world, and frankly we deserve. I have tried to feel sorry for the middle class, I no longer do. If you continue to vote against your self interest, why expect a different result?

Posted by BB | Report as abusive

First, it would be wonderful if an author, any author, could separate the ranks of bankers. Most are low ranking people that make average salaries. These are the back room folks and low level customer service folks. The same error in media occurs with the classification of banker. There are brick and mortar banks and there are independent mis-regulated brokers. Brokers are the bottom of the barrel. I plead that authors finally get this. Otherwise your writing does little to improve the conversation.

Unfortunately, academia is partly to blame. Business Schools teach riches from banking and little about risk and reward.

Now, sales folks in banks and independent brokers are the problem and should be explicitly stated as such. They make absurd amounts of money. I have been witness to 100s of thousands going to the sleaziest [used car] salespeople alive- on a quarterly basis. Managers then get a cut of the sleaze. It then multiples up the chain. It is a legal pyramid scheme perfected over decades. We address this, we fix the problem.

Posted by Matt | Report as abusive

So take away the guarantee. Financial insitutions should be allowed to fail; successive levels of capital starting at the junior end should take the hit. There is no need for any taxpayer bailouts, and the moral hazard would be removed. That way the socialists can keep their hands off of market pay and we can avoid nationalization.

Posted by Tom | Report as abusive

The government bailed out the banking industry because it had to and because things would be a lot worse if it hadn´t.

If you are going to argue against government intervention, be consistent and take the free market view: let the banks collapse and allow Chinese and Middle Eastern money to come in and take over Wall Street. Survival of the fittest, right?

But don´t argue from the populist angle: “why did the banks get bailed out and the toothpaste factory didn´t?”.

Because you can make toothpaste in your bathtub, but you can´t sustain economic growth and recovery with a broken financial system.

Posted by Alejandro | Report as abusive

Stop having babies and lead a less consumptive lifestyle, buy commodity and banking shares/options (not anything else!),coin it, travel to capitalist countries, don’t make babies while on holiday, coin it, retire, travel to socialist countries, coin it, screw the rest, travel to Lalaland…

Posted by Casper | Report as abusive

[...] That does not surprise. But he goes on to demolish the arguments the banksters use to claim that they are somehow different and deserve to be overpaid. A nugget: Nor, Woolley (Paul Woolley, an academic at the London School of Economics–ed.) argues, do the … [...]

Why not bust some trusts to make the resultant banks small enough to fail? Instead of having a corporate monolith making the “big” deals, the wonderfully inventive free market can use technology to create consortiums or co-ops to syndicate the finance of projects deemed too large for one or a few institutions.

This “too big to fail” is the financial equivalent of the public option in the healthcare debate. Hmmm….don’t see too many business-oriented conservatives haranguing about that now, do we?

Posted by FairMarket Fred | Report as abusive

Surprisingly, Casper is right. The investment bankers are merely taking advantage of a broken system. I don’t feel sorry for them though, as they are extremely competitive, and put those ridiculous hours upon themselves to beat their colleagues. If you can’t beat them, join them. But be prepared. If you don’t hold your own you get tossed aside. That’s never going to change while the rules don’t change.

Isn’t it about time we fixed the system so this doesn’t happen again? and again? and our retirements devalued because of the inflation that has to occur with our monetary system?

See guys,

if people in banking industry are over paid, who is the net loser? Please be speicific about this.

Posted by Sreeram | Report as abusive

…sorry, I forgot to mention, first settle your mortgage/bond, credit cards, HP’s, palimonies, then screw the rest ! ps: Banks are here to stay, there will be no disintermediation

Posted by Casper | Report as abusive

What happened to Antitrust laws that were the safety valve to the notion “too big to fail”? We are now encouraging consolidation, putting back together what we took apart not so long ago, what changed? Why do the regulators permit Banks 23% over prime for credit card interest? How is it when one changes they all do, wasn’t this considers collusion not too long ago?

Posted by DAB | Report as abusive

George Bailey would turn over in his grave at the greed of these SOBs. They are even worse than Mr. Potter!

Posted by bob | Report as abusive

…oh well, I seem to be on my own now AndyO. Without getting personal, the Middle East is imploding on itself – partly an oil bubble, partly a Dubai bubble and partly a sectarian bubble. Chinese money will soon be junk money. Nighty night, the sun is setting in Africa, got to get home before it gets dark.

Posted by Bubbles | Report as abusive

…sorry, missed my donkey cart, one more thing: the world economy will never recover, too many people, too few resources, the scale has tipped, like the environment we screwed up with our lust for credit…Vaya Con Dios

Posted by Bubbles | Report as abusive

If anyone hasn’t already, google “zeitgeist addendum” and watch it. It’s a rather good and very interesting documentary on the monetary system and waste in society.

Or if you’re bored, read the former Chairman of the Federal Reserve Alan Greenspan’s speaches. He’s the most knowledgable individual about our current monetary system and probably responsible for his share of how it works right now. Bring a dictionary or read a translated version from Finance Talk if you’re not savvy.

If everyone were an investment banker, there would be no one to develop new technology, and economic growth would cease. I’ve seen so many bright students end up going to business school with the hopes of making a fortune in banking or the stock-market.

I blame it on a lack of National pride. Now days nobody cares if we build the biggest building or the longest bridge or the smallest microchip. (Let China do all that!) Everyone’s too busy pursuing personal wealth. Problem is, money is only worth as much as the Nation behind it.

A millenium from now, no one will care how strong our bank system was. Technological feats such as the Apollo missions, the Golden Gate Bridge, etc. will be what goes down in history.

Posted by Publicola | Report as abusive

Michael Lewis´s synical portrayal of the high finance mind set.

http://www.bloomberg.com/apps/news?pid=2 0601039&sid=aZruAW7s2eLI&refer=home

Posted by Alejandro | Report as abusive

If folks would read this man’s article, they would understand the completeness of it and the need for action by the government to curb these corporate excesses. Further action will have to be political, pressuring those in political power such that until and unless these changes are wrought into law their jobs will end at the next election; and their replacement will be someone who will do these changes.

Posted by Chester Drawers | Report as abusive

I would disagree.
“too big to fail” is not the financial equivalent of the public option in the healthcare debate.

Sorry for ther tangential comment, it is intended only to the reason for my disagreement. The common denominator is strategy used to avoid reforms which prevent syphoning of ill gotten gains

There is no healthcare debate. There is, however, a health insurance reform debate. (There unfortunately is no equivalent banking reform debate. To big to fail will not become to big to exist).

One party is attempting to reform the health insurance industry and the other (the health insurance industry) is attempting of avoid reform by means of trying to construct an alliance with the recipients of health care (sadly they have succeeded).

The public option is more or less a strategy which serves to prevent syphoning of ill gotten profits (achieved by cherry picking the insured, achieved by inappropriately denying claims, etc). It accomplishes this by basically forcing all insurance companies to offer a minimal policy (if they wish to compeate with the “public” option). Were this to occur (which it won’t) is there any chance that the minimal policy will cost more than the other policies offered by the insurance company or the “public” provider’s charge?

The same effect can be achieved without the “public” option, by obligating all insurances companies to offer the same minimal policy and mandating that everyone have the minimal policy, or one rated better.

This mandating aspect is the mechanism by which the alliance is constructed. For some reason people who are ignorant of the social coventant associated with insurance pools attempt to be freeloaders on the pool by concealing pre-existing conditions when they try to join a pool after many years of not participating. (The industry is trying to confuse managing your own health care with not participating in the pool ie managing your expenses.

This minimal policy is not a threat, it is paramount to a price support (as has been done in the past for various commodities such as cotton, wheat, etc.). That is the insurance companies will adapt and lobby to set the price the “public” provided charges. The adaptation to preserve syphoning privilage, rather than to function as risk sharing entities (which is the purpuse of insurance), is the real danger.

Posted by left_line | Report as abusive

…sigh, now we are busy with health care. Us corporate and merchant bankers have good intellectual genes, we excelled/borrowed and paid huge amounts to obtain our qualifications, we put in serious hours to achieve cum laude, we take risks on your behalf so that you receive optimal returns, we structure and finance projects. Yes, there is a lot of ‘Zeitgeist’ multipliers built into the system, but we all partake ! I certainly don’t want to carry a bag of carrots 5 miles to buy a Rolex… And don’t forget that my friends in transactional banking don’t earn that much, so let’s get our arguments straight and consistent. Not all bankers are ruthless traders and brokers !

Posted by Banker | Report as abusive

Banker bonus/ pay is a hot issue for just one important reason.

The relaxation of mark-to-market rules in April has produced magical profits for the zombies in Q2. Without the accounting gimmicks , many would be declared insolvent.

The era of false profits ….. and inflated compensation…. continues. It’s really not more complicated than this.

Posted by rayman in CA | Report as abusive

Correct me if I am wrong:

4 700 bankers received $1m last year = $4 700 000 000

The USA deficit = $1.58 trillion = $1 580 000 000 000

Does that mean that bonuses comprised .3% of the deficit ?

That’s nothing…

Posted by The Calculator | Report as abusive

[...] Swann had an interesting commentary in Reuters Blogs yesterday, arguing that: “Excessive banking pay is a social ill. The sector has [...]

I agree, they are paid too much and the money you receive when you place your money is not enough. I think I’m going to make my master on the financial field and go to work for a bank.

Correct me if I am wrong.

The deficit is authorized by bankers, not the US Congress and the President of the United States

Yes the money was provided to the banks usage constaints. Apparently the bankers did not understand why it was provided. How could they missed the political debate is beyond my comprehension

When someone helps you out custom suggests that you work with then, not spit in their eye by feathering your own nest

Posted by left_line | Report as abusive

Financial experts have traditionally held that equities belong in a portfolio because, despite involving greater risk than cash or bonds, when held over the long term they offer higher return potential. However, that conventional wisdom has come under fire since the double whammy of the dot-com crash and the credit crunch. If you’re wondering whether it’s time to revisit the amount you’ve allocated to stocks, understanding both sides of the argument can help you make a more informed decision.

One year on from Lehman Brothers and the near collapse of the world financial system, have the bankers greedy ways changed?

My answer to my own question is no!

While the governments of the world have taken tax payers money in hundreds of billions(without I may add, asking the tax payer if it’s happy for his/her money to be spent in this way) and saved the Bankers businesses and jobs, the bankers have said, thanks very much now we will pay ourselves a big bonus, and carry on where we left off.

It seems to me that governments are incapable, inept or in collusion with the bankers and the way they do business.

If manufacturing businesses can go to the wall and any other type of business for that matter, and all that governments can do is wring their hands and say, well that’s market forces. Why are the banks treated so differently? Why are they allowed to keep the money they have leached from their businesses over the years? Why are they allowed to pay themselves massive bonuses out of the money the tax payers has given them in order to survive? Why are they allowed to give themselves enormous pensions. Why are they allowed to pay themselves so excessively for massive failure due to greed and incompetence?

Am I alone in thinking like this?

Why haven’t governments stepped in to stop the excessive pay and bonuses?

They stepped in quick enough (with our money) when it all went pair shaped a year ago. They gave our money to these people. People who had ripped us off blind for years they appear to have been told to, “carry on boys and have some more cake and eat it, till it comes out of your ears”.

Are we the general public to be used and abused in this way for ever? If our Governments won’t stand up for us against these modern day robber Barron’s, then we the people of the world must unite to say, “enough is enough, we will not stand by while our money is used in this way”. “We will not stand by while bankers, gorge themselves at our expense”. “They need to be told that they are lucky to have a job, let alone a bonus of millions”.

I don’t know how we can stop them, but stop them we must.

Our public services are going to be decimated by the debt our government has go us into, in order to save the banks. Swinging cuts are going to be the order of the day. Unemployment is going to rise to levels we haven’t seen for decades. The Labour, Conservative or any other party seem happy to make us (the people) pay for the bankers greed.

Well, I for one, am not happy to pay for the bankers unjustified enormous salary and pension.

They need to be humbled, and the arrogance and contempt they show needs to stop. The public who are suffering and are going to suffer as a s result of their actions need to be assured that the banks appreciate what we have done for them, and they need to show some gratitude and contrition for the mess they got the world into.

I am not a communist but I want to use a phrase form that era. Not workers, but “people of the world unite” and lets change what’s happening, before we have to do it all again. Don’t let the pain and suffering they have caused pass by without using this moment to change what, and how they do their business. 15/09/09 by The anti corporate greed crusader

Much is made of the large bonus’ payed to bankers, because apparently they take huge risks. Do they? I would suggest they take no risk at all as all their actions are underwritten by the tax payer.

I found this: scroll half way down to see the image -sums up what I feel about bankers.

http://www.saatchi-gallery.co.uk/showdow n/index/233180

Posted by sj | Report as abusive