Sunday, 6 February 2011

We're alright, Jack

Great headline to this Indy piece about bonuses in the banking sector. I've made this argument quite a few times in the past that the popular view of banks feels very similar to how the public viewed unions in 70s - too much power and an inability to exercise it responsibility.

The other interesting parallel is the response of the Conservatives since they came to power in both cases when popular hostility was high. In the former case they had no hesitation in taking on the unions and radically reshaping the regulatory and legal framework to rein them in - it was clearly a very significant change in direction. In contrast in dealing with the banks they have even backed away from requiring them to disclose a bit more data. It's even more remarkable when you consider that they would have the Lib Dems onboard in really tackling the banks. Their failure to act with any radicalism, as contrasted with their attacks on the labour movement, does lead even a moderate lefty like me to conclude that there is a large dose of class politics in all of this.

The other thing of note in the Indy piece is this line:
"Our shareholders have been told about the bonuses being paid out and are completely behind us."
The thing to remember about Barclays is that their major shareholders are actually in the Middle East.* In that sense perhaps this isn't entirely surprising. But I suspect that if you asked most of the banks what their (non UKFI) shareholders thought you would get the same answer. If you're expecting shareholder activism to solve the bankers' bonuses problem don't be surprised if the 'solution' is basically to let them pay what they want.

* It's important to remember, as some business journos are inclined to forget, that Barclays WAS recapitalised. To read some business commentators you would assume that Barclays had escaped the crisis unscathed. The only difference between Barclays and Lloyds is the source of the capital. The Barclays board would rather answer to private sector investors than the UK govt, and were willing to dilute their existing UK shareholders' interests to achieve this.

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