The wealth of nations

Britain's biggest banks (or what's left of them) are considering a revolutionary new idea: Cutting the bonus pool. They are concerned taxpayers, who bailed them out in 2008, will object to large pay awards when they're having to tighten their own belts. One senior banker announced today:-

"It is probably true we are thinking about having a large lunch in the City, where it is not inconceivable that the subject of bonuses may arise, if only in passing. We are aware certain somewhat envious, and may I say, odious individuals, are incapable of grasping what the banking sector has delivered in recent years. These people believe that just because on one occasion the nation had to pay back all the money that had till then flowed into Treasury coffers, this represents poor value for money."

"Oh yes, they may well acknowledge the enormous tax revenues the banking sector generated over the past decade. Yes, they may well accept that my wife, Lady Banks, spent hundreds of thousands of pounds propping up the retail sector with her generous purchases of diamonds, of new kitchens and of designer clothing.

"But then they have the temerity to insinuate that senior bankers like myself and my hard-working staff have squirreled away many millions, nay billions of pounds in off-shore bank accounts, never to be seen again. They even claim that such nest-eggs were the product of the very credit derivatives deals that almost bankrupted Britain in the first place, and therefore should've been paid back when the banking system collapsed."

"But what kind of nonsense is this?

"If Britain is to retain it's number one banking slot, and if we are to incentivise future generations to follow the entrepreneurial lead set by myself - especially when said generations will leave academia saddled with debt - and if we are to revive the economy by allowing billions, should I say, trillions of virtual cyber-pounds and cyber-dollars to slosh around the financial markets once again, then surely we must continue waving these inordinately large sums in front of the deserving greedy, so they too can pursue the age old tradition much loved by all financial centres - namely, get rich quick and sod the consequences.

"So now, if you will, let me quote two historical characters who've had much to offer on the subject - that's if you won't take my word for it: First, that great economist Adam Smith who knew all there was to know about incentives: "Greed is good. And the good should grab all they can." Never a truer thing were said in my reckoning. And if that doesn't convince you, then what about the wise words of that other great Scottish writer, George Orwell (Eric Blair): "All men are created greedy, but some are greedier than others."

"So I say to you earnestly: Sod off and leave our bonuses alone. For if you don't, we'll sod off and take all our shiny buildings in Canary Wharf, and all our houses in Holland Park, all our private schools, our Porsches, our Ferraris, and all our foreign villas, and decamp to Beijing, Hong Kong or Taiwan where they are quite frankly desperate to invest in the kind of casino derivatives that brought the West to its knees in those heady and, may I say, exciting days back in 2008. At least over there they won't object to our paying ourselves massive bonuses. And why should they? For it is not their taxpayers that shall be bailing us out next time!"

In defence of bankers

This blogsite likes to give the 'other guy' the chance to defend himself. In the 'court of public opinion', everyone is allowed a say. Yesterday, a beleaguered lawyer asked us to see his point of view in relation to the Guardian/Trafigura injunction. And it has to be said that his argument struck a chord with many. Today it appears that the backlash against bankers is growing after it was revealed that bonuses this year are going to be substantial. It is only right therefore to allow a senior investment banker to defend himself on this site. Again he has asked for his name and employer's name to be withheld.

"Once upon a time it seems like we were the good guys. The sun shone out of our proverbial butts. You people in 'Main Street' truly admired us, wanted to be among our number. You worshipped the Italian silk suits, the Porsches, the penthouse flats, the jet-setting lifestyles. Even when that comedian Oliver Stone created the heartless Gordon Gecko, with his 'greed is good' ethic, you lapped it up. You loved it, admit it.

Well, I can tell you, I worked hard to get where I am. I have two degrees, one from MIT and one from your beloved Oxford University. From my first day on the trading floor I was working all the hours God sent me. Up at half five in the morning, at work by seven, not home till nine or ten at night. And the in-between bit was a jungle, that's for sure. A screaming, frantic hell-hole of a jungle. This was the rat race ten times worse than any of you guys have ever seen it, I can tell you.

So we guys are generating the wealth in your City of London that pays most of your taxes, that allows London to become the second greatest city in the world. And suddenly you discover that this wealth is also having a knock-on effect on your property prices, making you richer as well. And you're thinking, let's not have just one house but two houses or three or five or ten. You can get rich that way. You too can drive Porsches, and wear the designer suits. And before you know it, bang! You guys living your sleepy suburban lives become millionaires. You feel that you have become one of us. You are actually one of us, discovering for yourselves that, hey, actually greed isn't all that bad.

And then it all falls apart. The credit crunch arrives. There is crisis, there is meltdown, there is ruin, the fear of a second Great Depression. And the government has to step in, has to prop up the financial system with your taxes, boo hoo! Why boo hoo? Because its also propping up that property bubble, that consumer bubble, that lifestyle bubble that you had come to know and love. It is propping the whole infrastructure of exchange that supported those bubbles.

So we guys, whom you so kindly propped up back then, are now starting to generate wealth again. We are generating the wealth that your Gordon Brown needs to get this country recapitalised. We are generating the money that is going to pay you guys, the taxpayers, back. And do you know why that is? It is because, yes, we have returned to our old ways. But this time it's different. We are not carting around the toxic waste they call credit derivatives, or CDOs. So you guys don't need to worry anymore. We are trading only safe stuff, making real, tangible profits.

But, and this is the big but. Your Gordon Brown must realise, probably does realise that incentivisation must continue if we are to achieve the profits that we are achieving. We still need the stimulus, the nourishment, the drug, if you like, that feeds our enthusiasm to make, make, make. So he, Gordon, must know, and this is what you should also know: That if we guys in the banks are going to pay back you guys, the taxpayer, and pay you back quick, what we need is quick results, quick profits, and most important, quick incentives. We need our bonuses, quick!

So bonuses are not just back, but they need to be back. Bonuses, incentives, the wealth they generate, they are the way that we can get this country back on its feet again. And maybe, just maybe, you will all one day be able to share in that wealth again, and make your fortunes, and just possibly have the chance to live like investment bankers, just as you've always wanted. Because, let's face it: We can all do shadenfreude from time to time. We can all hate the other guy who 'caused' the crisis, but in the end he is really just a scapegoat, your whipping boy. But when things turn round, when things pick up, when the wealth returns, you guys will all long to be stars once more. You guys will want to get rich.

And maybe then, those sad and sorry events of 2008 will seem a distant memory. Yes, a bad memory perhaps, but one that you, that we, that your politicians, that everyone around will have learnt from, so that when the next crisis comes along, as of course it will, we'll all be much, much wiser, and, most important of all, we'll know how to handle things better.

So remember, when you hear people ask you whether greed is good, or greed is bad, just think: Greed is the only thing that will get us out of this mess. And if you don't get that, then guys like me will simply up sticks and take our business to Switzerland."

Hurray for the public sector

A group of public sector workers have breathed a collective sigh of relief over the fact that they will escape Conservative, and most likely Labour plans for a pay freeze. Shadow Chancellor, George Osborne had suggested at the Conservative party conference that when it came to a public sector pay freeze, "We're all in this together." However it looks as though one group of public employees is likely to escape the freeze.

In autumn 2008, in the midst of the financial crisis, the Government took what ended up being a 70% stake in RBS. As market commentators claimed at the time, RBS was nationalised in all but name. Overnight a large number of 'big swinging dicks' became 'big public swinging dicks'. Apart from the fact that they now sounded rather like people who exposed themselves in public, it also meant that they were effectively public sector employees.

The implications of this were horrendous, not least because many of them thought that they would have to do things like join a union and fraternise with civil servants, council officials and social workers.

It then dawned on them that this government, and future governments might also consider themselves entitled to treat these 'big dicks' as subject to the same guidelines on pay as public employees - with all that that would then imply for pay restraint.

But they can rest easy. Chancellor Darling and Shadow Chancellor Osborne have no plans to restrict the pay of these particular public sector employees, even less actually to get involved in the pay negotiations themselves. We must remember, banks like RBS might well be nationalised in all but name but when it comes to pay that name makes a big swinging difference.