There was an article in the Independent today, which I disagree with in terms of its claims that we are overacting in regards to bankers bonuses, but then agree with in terms of some of the ideas it puts forward to tackle the instability of the banking system. The article appears to hold contradictions, as the proposals it offers to tackle the banking problems conflict with the first claim of the article, which is:
First, the problem with these bonuses is not, as is often stated, their obscene size, but their structure, and the encouragement of risk-taking that it usually involves...In fact it doesn't matter, in this context, if someone in a financial institution receives a bonus of £100 or £10m a year.
Actually, the size is part of the structural problem with the bonuses. The bigger the bonus the more risk taking they encourage, so the size of bonuses is something that needs to be tackled. It fundamentally matters what the size of a bonus is, especially in the economic crisis, as shown by the controversy around Fred Goodwin. So on both counts, I disagree...
If we look at the proposal the article offers to stop excessive bonuses, then the conflicting views of the author is highlighted. The author says that we should see more taxes on the banks, not the bankers, the more risky their culture is. However, this is where the conflict with the first point of how the size of bonuses occurs. Actually, in taxing the most risky banks, we would see the bonuses for bankers reduced in size, as they would have less ability to give the excessive sums they are. Furthermore, it appears as though there is a direct correlation between big bonuses and failing banks, as it is the greediness and moral incapability that got them into the mess. Therefore, to discount the size of bonuses as meaningless figures seems a tad bizarre.
The article does importantly suggest an end to the retail/investment joint banking system that we have at the moment, which is something that Vince Cable has advocated. However, overall the article seems a bit out of touch with the concerns around how greedy bankers have been. For example, to argue that:
Bankers are no more "greedy" than the rest of us, apart from Buddhist monks. If you or I were offered a £25m bonus, we would not hand it back. Nor would we say no to the taxpayer paying for a second home, as our MPs did. It is hypocritical to appeal to bankers' moral sense when it is no different to anyone else's.
Speak for yourself. There is no way that I would have accepted the massive pay off Fred Goodwin received after he collapsed the RBS. There is no way that I would flip my main and second home for personal gain at the expense of the taxpayer, whilst building a moat and calling the public jealous of my 'Balmoral house'. Absolutely ridiculous claims, and this type of attitude is helping aid the 'back to business' attitude that we clearly do not need. In sum, the structure of the banking system and bonuses do need to be changed, but this fundamentally involves the size of the bonuses too.