Alistair Darling’s addressing the Labour Party conference today, and as usual, the entire print media seems to know exactly what he’s going to say before he even stands up. Once again, voter-friendly banker-bashing will be top of the agenda – apparently we can expect more denunciations of ‘business as usual’ and ‘rewards for failure’, along with calls for deferred bonuses, claw-backs, and so on. As you’ll quickly note, there’s nothing particularly new here; the Government has said all this a million times already. But the Chancellor’s also hoping the weight of public opinion will shame the banks into paying smaller bonuses even before the rules have been changed...
Darling will apparently tell the assembled hordes that in the coming weeks, the Government will introduce legislation ‘to end the reckless culture that puts short-term profits over long-term success’. This will place new curbs on bonuses, as well as allowing the FSA to increase the capital requirements for particularly risky banks. However, none of the laws are going to make it onto the statute book before the banks get round to paying their year-end bonuses. So Darling (along with his new best mate, French counterpart Christine Lagarde) is trying to get them to comply voluntarily instead. This might sound optimistic, but the theory is that none of them will want the negative publicity big payouts will attract.
He may well have a point. Apparently Bill Winters, the co-CEO of JP Morgan's investment banking unit, told a conference last week that the financial collapse was the fault of 'greedy bankers, investors and borrowers' - i.e. his own City colleagues and clients. You might argue that people in glass houses shouldn't be throwing stones, but Withers (along with many senior bankers) has clearly realised which way the wind is blowing.
Of course, the Government’s hand-wringing on this issue might be a bit more credible had it not happily encouraged the status quo for the first ten years of its current tenure. Even Lord Mandelson admitted on Radio 4 that he did not ‘entirely blame people’ for thinking that Labour had ‘celebrated’ City bonuses while Gordon Brown was Chancellor.
But there’s another interesting consequence of all this, as the BBC’s Robert Peston points out today. Currently Lloyds and RBS find themselves at a competitive disadvantage because the terms of their state aid limit their bonus payouts. However, if the Government succeeds in limiting bonuses across the board, there’ll be less of an incentive for the best performers at these two banks to go and fill their boots elsewhere. So maybe this is all just a subtle form of protectionism to protect the taxpayer’s investment...
In today's bulletin:
Darling renews attack on City - as banker slams his own
Orange flexes its muscles with juicy iPhone coup
Not a single UK businesswomen in FT's Global Top 20
Regretful managers shy away from redundancies
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