Tuesday, March 1, 2011

Greedy Fat Cats

I read in The Irish Times today that banks here will be forced to pay a levy to create a special fund to cover the future costs of failed banks, under legislation published yesterday to meet a condition of the EU-IMF bailout. The Central Bank will be given sweeping powers to take over, run and break up banks under legislation aimed at protecting taxpayers from the cost of a bank failure. And banks who refuse to contribute to the special resolution fund will face fines of up to €250,000 and can lose their banking license.

Troubled banks and their directors can face further fines of €10 million if they fail to draft plans – known as “living wills” – to show how they can recover or resolve their financial difficulties. Bank directors or managers can also face up to five years’ imprisonment for failing to draft the plans. The Central Bank and Credit Institutions (Resolution) Bill will cover all banks in Ireland, including foreign-owned banks and banks in the International Financial Services Centre (IFSC).

Given some banks and financial institutions inclination for risk-taking binges, it is important that there are limits put in place to stop this avaricious derring-do when pursuing quick profits and massive bonuses. That’s how the last economic crisis – which began as a financial crisis – came about to the detriment of many national economies. As we know, this resulted in markets plummeting, credit drying up and jobs vanishing. So it’s a good idea that there is a prudent mechanism in place that will protect taxpayers from bearing the brunt of bankers and financiers’ greedy orgy of indulgent irresponsibility. The global financial crisis of 2008-2009 is costing taxpayers mega-bucks that many of us, I am sure, have been itching to get these errant riffraff to face a firing squad.

Just consider this UK news report that was published in the Daily Mirror on February 16, 2011: “It is only three years since the banking crisis caused public debt of £890 billion, creating the climate for the ­Government’s huge cuts in public services. The same taxpayers who bailed out the banks are now struggling to survive the economic downturn, facing pay cuts, redundancies and rising unemployment”.

Yet, bankers are celebrating bonuses like the financial crisis never happened. As the said newspaper narrated, a portion of it is reproduced here:

With champagne corks popping from £200 bottles of bubbly, there was no sign of the biggest financial disaster since the Great Depression of the 30s.

Youth unemployment might be teetering at the one million mark but, in the bars of the City of London, rich ­financiers were splashing the cash like the worst excesses of the 80s. Traders from Barclays Capital, whose boss Bob Diamond yesterday revealed a £6 billion profit, celebrated their bonuses by downing £195 bottles of Cristal champers and buying luxury motors.

The ‘banker’s choice’ of luxury sports car – the £70,000 Porsche 911 Black Edition – is selling out as the fat cats fill their boots again.

The market in £1 million-plus properties in London also remains buoyant – and interest is even growing.

Independent estate agent Charles McDowell received inquiries from three senior bankers at JP Morgan, Deutsche and Barclays in a single day in January. He said the banks’ most valued staff “are getting just as much as before”.

And the size of the bonus? It was quoted: “Even if a guy is really lazy and has done s*** all year, he’ll still get a £600,000 bonus”.

“The PAs even got bonuses today, some of them got £60,000.

“Most traders got two, three, four, five and even six million. Some people are annoyed because they don’t think they got enough this year.”

It is worth recognizing that this ostentatious display of unashamed piggishness risks inflaming rising public anger about the scale of payouts to these snobs. That's why I still prefer to bring them before a firing squad.

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