As the FT notes:
Britain is taking legal action against an EU cap on bankers' bonuses in an attempt to strike down the measure on the grounds that it hurts financial stability.
You couldn't make it up.
Bank bonuses did, we know, contribute heavily to the culture that brought the City and the country to its knees in 2008. We know that this culture has to change. And Osborne goes to court to defend it.
This is a fight for the right to inequality. And Osborne is willing to use state funding to support it.
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He’s using state funding to fight this case. Apparently we as a nation can afford it.
Many of the banks are still being subsidised directly by the Treasury (unless something has changed since I last looked). Apparently it’s absolutely necessary we continue to give the banks that money to stop the banking system crashing. And the chancellor thinks we as a nation can afford it.
The banking system crashing was caused by the bankers’ greed, stupidity, short-termism and in some cases outright criminality (proportions of each may vary). But they still get massive salaries and stupendous bonuses. We’re paying for these salaries and bonuses, both as taxpayers and as bank users. We can’t choose not to pay tax (generally) and we mostly can’t chose not to use banks or financial services. We don’t get to choose whether or not we can afford it.
But we can’t, as a nation, afford to feed our children.
The banks will just increase base salaries (as they have done previously) to combat any new taxation on bonuses. And unlike bonuses, which can be clawed back and paid in installments (and in equity), the salary will be paid in cash.
To some degree of course that will happen
But not as much as you think
Behaviour is changed by regulation
Sure, so it would be much better use of EU time to regulate the banks activities directly, rather than by the back door of remuneration.
No, both are needed
And even if it does happen, removing the mechanism that fuels the appetite for reckless risk has to be a good idea.
Dan Pink’s work shows clearly that bonuses only really work for repetitive menial tasks. So while there is little evidence they improve performance in complex working environments, the behaviors of many bankers shows they can have massively negative impacts.
Sort out the bonuses first and if the already unjustifiable salaries rise even more, then that’s the next problem but at least the risk heroin is being restricted.
Agreed