Now watch banks slither round the bonus curbs

September 18, 2009

Marcus Agius, the immensely wise chairman of Barclays, told a Spectator conference this week that his board paid “as little as we can get away with” to the hotshots under his command, but that to get the best, he had to pay the going rate.

Asked from the floor whether the (reported) 500 million dollars paid to Dick Fuld before the collapse of Lehman Brothers meant that he was the best, Agius could only mumble that he didn’t know Mr Fuld.

A few hours later, Barclays unveiled its latest answer to the popular demand that something be done to curb the grotesque rewards of the gilded few in banking. It is shuffling $12.3 billion of its grottiest assets, and the department in charge of them, off into a Cayman Island company which is barely credible as a stand-alone business.

The deal was greeted with almost universal criticism, but that will hardly worry Stephen King and Michael Keeley, its architects. As the announcement made clear, the “management fees and distributions to the partners” (at 7 percent) would be the priority payments. Any cash flow left over goes to service Barclays’ $12.6 billion loan (at US Libor plus 2.75 percent, or about 3 percent currently) and if things go wrong, the Barclays shareholders are back on the hook.

However, unless Keeley & Co have made a terrible blunder, their salaries, management fees and bonuses should run into eight figures. Oh, and it’s unlikely that they will find themselves paying very much income tax at Britain’s new top rate of 50 percent.

But since they are no longer Barclays employees, their rewards are nothing to do with the bank.

Across the pond, Barclays’ competitor Citigroup has clearly been watching. Its chief executive Vikram Pandit is terribly embarrassed about the $100 million paycheque which may be headed towards Andrew Hall, who runs the bank’s oil trading unit.

This is, he agreed, excessive. Unlike Barclays, Citi had to be rescued. The US taxpayer owns a third of the bank. But rather than try and do something about the excess, Pandit is taking a leaf from the Barclays bumper book of fudge by proposing to spin it off.  Hey presto, it won’t be his problem any more, because Hall will be working for an “independent” company, rather than for Citi.

Of course, it may be that he’s such a brilliant trader that he’s worth every cent, and that investors will flock to give him their money to manage when he’s no longer under the Citi umbrella. We’ll see. But both cases show with dreadful clarity that when it comes to getting stinking rich, it’s business as usual at the big banks.

3 comments

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Slither is an appropriate term for these theiving bankers. Not one ounce of accountability required by the US. The US taxpayer had better wake up and embrace the horror. The brainiacs in Washington have allowed the nation to have it’s pockets picked with the awareness of a “first time to the carnival” rube. As a one third owner, one would think some weight could be thrown around! No problem for the mental giants in politics though. They’ll be properly compensated for their kindness to the banking industry via deferred payment, contributions, cool perks and a spiffy lobbying job if they get voted out.

Posted by RH Pyle | Report as abusive

‘Unlike Barclays, Citi had to be rescued.’

Precisely, so they can do what they want. Set up a ‘bad bank’ to offload sour assets? Great idea. Send out some ace traders to run it? Swell. Why is Mr. Collins critical of this? Sounds like good management to me. If Mr. Collins is so upset by this, well why doesn’t he just buy some Barclays’ stock and complain about it at the next annual meeting? JMHO

= Gotthardbahn =

Posted by gotthardbahn | Report as abusive

The bankers won’t do anything until the cell door clangs behind them and then they will be crying that they didn’t know they were doing anything wrong. We have credible people in the banking industry, but they are pushed aside by the whiz kids who claim they can make soup from rocks and they do it by dishonest means. It is the duty of our government to take care of our people, and to make banks a safe haven for their hard earned money. Our present and former congresses and presidents have sold out to the bankers for peanuts.

Posted by f belz | Report as abusive