Bonus fixation will not solve anything.
Posted on October 9th 2009
Labour’s fixation with banker’s bonuses makes no sense to me whatsoever. How can tinkering with the bonuses of a few very well paid individuals make the next financial crisis less likely? This whole episode sounds like political sound bites from a party that has conceded that it has lost the election based on the general state of the economy and the bonus argument is a convenient distraction.
Call me a cynic but I wouldn’t mind placing a bet that whatever legislation comes out of this, if any, those clever highly paid bankers will ended up earning just as much money as before. The real crux of this crisis is that banks that had an implicit tax payer guarantee were taking too many risks and when those risks became apparent we had to bail them out. Playing with bonuses is like shifting deckchairs on the Titanic; a real solution in my view is simply to limit the risks of deposit taking organisations to simple low risk transactions. If they wish to take more risk they should be forced to take that risk in an entity that has no impact on the deposit taking entity. In other words if bankers want to take risks let them take risk but make sure it is not with our money.
I don’t care how much bonuses the risk takers get just as long as when they get it wrong they go down the tubes like everybody else in the real world.
