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.


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