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Banking system's woes increase British vitriol over U.S.-style pay - International Herald Tribune

LONDON: This past spring, Mervyn King, the governor of the Bank of England, gave a speech denouncing the hubris of bankers. That very same day, the British bank Barclays disclosed a £18.5 million pay reward to its president, Robert Diamond Jr., for 2007 - despite sustaining a £1.6 billion write-down that year.

King followed up his criticism of the excesses of the City of London, as the financial district is known, by choosing not to accept an increase in his salary of £290,000, or $516,000.

Diamond, by comparison, is the American-born chief of Barclay's asset management and investment banking businesses, whose outsize personality and bonuses have made him one of the most visible symbols of a Wall Street ethos that has taken root in the financial district.

Stark as the contrast might have been, it was a mere hint of the uproar, led by Prime Minister Gordon Brown of Britain and joined by union leaders and theologians, that has emerged here in recent days over how to best curb a perceived culture of escalating pay packages that propelled bankers to push for exorbitant risks.

by Fran on Tue Sep 30th, 2008 at 03:33:59 PM EST
[ Parent ]
Let's blame it on the Yanks and send them home!

This gets funnier by the day.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Sep 30th, 2008 at 03:37:20 PM EST
[ Parent ]
What's the problem with US-style pay if you set a top marginal rate of 95%?

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Sep 30th, 2008 at 03:39:47 PM EST
[ Parent ]
Becasue

i) We don't.

ii) it';s not covered by normal tax and he'd be so covered by tax loopholes and exemptions he'd never pay a penny. As Lord Vestey once said "in the UK, once you're out of PAYE (earned income tax rates) paying tax is entirely voluntary.

Our lords and masters have, for decades, created a tax system where the rich pay next to nothing. Labour have never challenged these cosy little arrangements, even when they were mistaken for a left wing party

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Tue Sep 30th, 2008 at 04:46:28 PM EST
[ Parent ]
Our lords and masters have, for decades, created a tax system where the rich pay next to nothing. Labour have never challenged these cosy little arrangements, even when they were mistaken for a left wing party
 

 Same here in Australia...at least for these 10 years that I am here.

Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Tue Sep 30th, 2008 at 09:27:45 PM EST
[ Parent ]
Perhaps Labour should then fight for a straight flat tax with zero loopholes.  Seems like you would get far more money out of the wealthy that way, and it would call the conservatives' bluff (assuming British conservatives bitch about progressive taxes as much as American conservatives.)

Truth unfolds in time through a communal process.
by marco on Tue Sep 30th, 2008 at 10:10:33 PM EST
[ Parent ]
"Zero loopholes" means the wealthy can't stash their loot in some nearby tax haven?

STALINIST!

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Oct 1st, 2008 at 02:32:50 AM EST
[ Parent ]
Let's blame it on the Yanks and send them home
!

Yeah.  Those hundreds of billions of Euros you morons spent to buy that crap we were peddling is all our fault.

It was obvious back in 2003 the Bush administration was the largest collection of goofballs ever assembled in one spot in human history.   They and their chums shouldn't have been in charge of a Fry-Up/Take-Away much less the US economy.  

And what happens?

US:  Here's a load of toxic garbage.  Want some?

EU:  Sure!  We'll take lots.

Admittedly the problem did start on this side of the pond but goddamnit you over on that side fed the Beast.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Oct 1st, 2008 at 03:58:26 AM EST
[ Parent ]
And while you may have some success in purging (or at least corralling) the Market Fundamentalists, I'm not so optimistic about the EU...

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Wed Oct 1st, 2008 at 04:45:23 AM EST
[ Parent ]
I'm not inclined to excuse the buyers of all the toxic junk in any way.

They could have know - should have known - what they were getting into. I saw a prospectus by Goldman Sachs for one of their Mortgage-Backed Securities salamis. There were 40 pages expalining in loving detail the risks for each tranche, including the possibility of a housing downturn.

People chose not to read these, or to ignore them.

Now, that the system pushed everybody in that direction is a reality, and a smart policy decision would be to change that system, but people still chose to follow the herd.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Oct 1st, 2008 at 04:57:02 AM EST
[ Parent ]
Depends who you mean by "people".
Let's face it Jérôme, even when it is explained, the vast majority of people cannot understand such implications. Hell, even the simple concept of actualisation is very difficult for the majority of people.

I do not say that as an insult, as implying that people are stupid children and should be despised. First, there is nothing despisable in not being among the cleverest of people, provided you don't run for the (vice-)presidency. Second, this is a very narrow field of human understanding. I would probably be unable to understand the implications of events on a variety of subjects even if they were explained in a leaflet, though I believe I happen to be fortunate enough to be in the top centiles of the intelligence distribution (OK, I own it, one letter of the previous sentence is not even completely honest).

So, prospectus notwithstanding, if people who could not understand either the implications or the likelihood of a housing downturns were being agressively advised to put money into such products, I won't place most of the blame on them. I know the libertarian meme of each person being the best placed for making all of his decisions for what it is, a fallacy.
Besides, when you say that people chose to follow the herd, it would be nice to be clear at what the alternatives were. If there is no landlord that lets you in, if you are not allowed to build a small house because of lot sizing, do you sleep outside?

Anyway, in any system, you can't rely on blaming the people. If human nature means that, unchecked, the system will crash, it's easier (terribly difficult OK, but still easier) to fix the system than human nature.

Now if you mean bankers by "people", I'm with you and have been wasting time typing all that ;-)

"It failed because Nacy Pelosi said some unkind things about George Bush in her speech"

by Cyrille (cyrillev domain yahoo.fr) on Wed Oct 1st, 2008 at 05:54:17 AM EST
[ Parent ]
well, the prospectus was going to bond buyers, whose job it is presumably to analyse the risks of whatever they are investing (other people's) money in. So THEY certainly have no excuse.

As to people, isn't buying a house - and taking the relevant mortgage - pretty much the biggest financial decision they'll ever get to make? Shouldn't they worry just a tiny bit about whether they can actually pay it back, and not just over the first couple years?

I have more sympathy for households, as they were brainwashed about perpetually rising house prices, and probably sold tainted goods by not very honest brokers (they are many cases of outright fraud), but (i) many of them were greedy and took on deals they knew were not quite right, and (ii) bondholders do not have that excuse. A rating does not eliminate the need to actually do your homework.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Oct 1st, 2008 at 06:45:55 AM EST
[ Parent ]
ATinNM: Admittedly the problem did start on this side of the pond but goddamnit you over on that side fed the Beast.

Not sure if this is relevant, but does any European country require a separation of investment banking from commercial banking, a la Glass-Steagall?

Truth unfolds in time through a communal process.

by marco on Wed Oct 1st, 2008 at 08:17:47 AM EST
[ Parent ]

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