More on why bankers deserve shooting

This from Simon Carr in the Indie on the subject of greedy bankers. Good stuff.


Latterly, the top performers were getting Renaissance fortunes, the second level got second homes and the failures got Porsches. How did bankers pull that off? They are just very, very good at getting their manicured hands on other people's money. Even now, in their chastened state, they offer to take their bonus in shares rather than cash. But the shares are 15 per cent of what they were at the height. When the value doubles and trebles over the next five years the directors will be vastly richer than if they'd been paid in money.

Yet there is something our leaders might say to these insulate beneficiaries. "We'll save your firms from bankruptcy but as your new owners we've got new rules. Existing bonus contracts are void. You'll get a utility salary with nothing on top. You won't leave for jobs elsewhere because there aren't jobs elsewhere. And if there are, you won't get them because you'll have a court case pursuing you. Yes, chum, if you bale out we will prosecute you for a) trading while insolvent, b) fraud and/or theft, or c) misfeance. Now unravel these securities and derivatives and get this bank back on its feet."

Many think regulation is the answer. No, revenge is the answer. You can't specify what people should do in every situation. It is incentives that guide employees. The risk of catastrophic personal loss in the event of losing the money they were entrusted with – only that will produce the culture of responsibility politicians are after.

Darling, poor fellow, is out of his depth in all this. He assures us he will squeeze out "excessive risk-taking" from the banks. He has no idea what that means. I speak as one who sold his house to buy talking clocks. Was that an excessive risk? I don't know yet, so how would he know? The difference is – the money at risk was mine.

Hedge funds, operating with their own money, behave very differently from banks playing with other people's. The funds were leveraged just 1.7 times (now fallen to 1.4 times). Banks were leveraged up to 50 times. The wildest hedge fund ever to go broke – Long Term Capital Management – was only leveraged 33 times. Banks went to play out on the margins of finance with our money and they took home billions.

Fair play suggests they should pay for their current failure with their houses, their Bentleys and their children's school places. They want to participate in success – well and good. The principle, as the PM used to say, is symmetrical. The Chancellor has feebly agreed that "contractual bonuses" are sacrosanct. But surely insolvent companies don't have the right to enforce such contracts.

And where has the idea of a guaranteed bonus come from anyway? What is this modern contradiction in terms we are locked into? The "bonus culture" has been smuggled into the public sector – quangos, councils, ordinary administrators, they're all at it. The philosophy is: "Thanks for the job offer. We'll do it on a work to rule basis. We can do it properly if you want – but it's extra."

The fact is, the "extra" that bankers got depended on how much they behaved like Nick Leeson. Leeson ruined Barings, these fellows ruined their banks. The difference is that Leeson went to jail.