Saturday, November 01, 2008

Banks and Bonuses

The UK media suspect that the decision of Barclays to spurn the bail-out in favour of Abu Dhabi dosh can largely be put down to the bank's unwillingness to curtail dividends and bonuses, along with the other restrictions that Gordon Brown's government would have imposed.

But Barclays Bank has deeper ties with the Middle East than say Manchester City FC. 

When my uncle served with Montgomery's 8th Army in North Africa during WWII, he would use branches of Barclays to pick up money and communications from my grandfather. In theory the exact whereabouts of my uncle and his tank was supposed to be a closely guarded military secret, but my grandfather would get phone calls from his local Barclays branch informing him that his eldest son had just picked up a cheque in Cairo for example! 

I'd have to agree that financial sector discretionary bonuses had been getting out of control in the last few years. Lehman Brothers paid out nearly $9bn in bonuses during its final two years of operation. But many of those who are now calling for a curb on such remuneration forget that it was City bonuses more than anything that was driving up the value of London properties before the Crunch - and that, along with access to easy credit, was really what was making most ordinary Londoners feel prosperous.)

Our concern for the imposition of more equitable pay structures certainly appears more lukewarm when the rising tide is seen to be lifting our boat too. And we can't exactly blame overpaid bankers and TV presenters for the fact that the UK has half of the total credit card debt in the EU....can we? 

Avoiding a repeat of what has just happened to our economies will require us to consider the problem 'in the round' from now on. Prioritising the persecution of the more obvious scapegoats - whilst indulging in the holier-than-thou sensibilities of belated economic austerity - may actually be counter-productive right now. 

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