City Bonuses Make a Comeback but Recession Never Left

June 28, 2009

‘Bab!” is the new toast in the City champagne bars. That’s banker-speak for “Bonuses are back.”

Perhaps you may have read about it in the papers. “Oh, good,” you’ll have gone, as you cancelled your annual holiday in the Med, scrapped the children’s riding and judo lessons and changed the mince on your grocery order from Premium Aberdeen Angus to Budget Extra Fat and Donkey Gristle.

“I’ve been feeling the pinch quite a bit this year,” you’ll continue, “what with the negative equity and losing my job and the sky-rocketing bills. So how utterly marvellous to know that Henry Red-Braces in the big house up the road can still fund his heli-skiing jaunt to the glaciers of the Andes.”

If this is starting to sound like the sort of rant you’d more usually associate with the Guardian, there are a couple of things I want to make clear. First, some of my best friends are bankers – my little brother, too – and by no means do I hate any of them so much that I wish them to die in agony, covered in pustular sores. I fully recognise that they have virtually no social life; that they work long hours; and that, yes, they do deserve some reasonable level of compensation for their arid, joyless toiling.

Second, I am not an anti-capitalist. Au contraire. It is my firm belief that one of the very worst things to emerge from the financial crisis is the glib, poisonous, Leftist, Franco-German canard that somehow “capitalism is to blame”. If the capitalist system had been left to its own devices, we’d all be out of this mess by now. Heavy-handed government intervention (mortgages for the unsuitable; artificially low interest rates; bail-outs etc) has much more to do with it than Gordon Gekko-approved greed.

But just because all this is so, it doesn’t let bankers off the hook entirely. Sure, they didn’t bring about this new Great Depression, but they did gleefully devise all those tricksy financial instruments that have made the crisis so long and so deep. They all knew that the system had grown so warped and inflated that it was little more than some giant Ponzi scheme. And still none of them had the moral courage to blow the whistle; still they kept their snouts in the trough.

So what, we might reasonably ask, has so dramatically changed in the City that these troughers have earned the right to be paid huge bonuses again? Have the banks now paid back all that bail-out money that propelled us into the ranks of the world’s most indebted economies? Nope – nor will they do so for many years to come.

Is the pool of available City talent now so small that only by offering the most insane bonuses can any banks be sure of securing decent staff? Hardly. Are the green shoots of recovery bursting forth with such vigour that only a fool would fail to bet on massive growth by 2011? No, no and thrice no. In fact, with a modest 50p spread bet, which I reckon will make me £500 by Christmas, I’m banking on quite the opposite.

Look at the shops. Look what’s happening to your friends. Does anything at all in your realm of experience suggest the recession is even halfway over? Of course not. The only place those green shoots exist is in the bankers’ imaginations.

How did they get there? Well, in order to make money, bankers need extreme peaks and troughs, and if those peaks can only be made by manipulating the markets and telling the odd porkie pie, that is what a greedy pig
must do. When – and only when – a real recovery begins, the bankers will start to earn their bonuses. Until then, they should starve like the rest of us.

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