Fallout: The Financial Crisis

Good times roll again for U.K. bankers

Stephen Beard Jul 27, 2009
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Fallout: The Financial Crisis

Good times roll again for U.K. bankers

Stephen Beard Jul 27, 2009
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TEXT OF STORY

Bill Radke: So American bonuses are objects of shame to some people. Well, that has also been true in Britain, where they’ve had their own financial meltdown. But Stephen Beard reports British bankers are beginning to once again get comfortable with premium pay.


Stephen Beard: Only six months ago, some of Britain’s biggest banks faced collapse. As they begged for taxpayers’ cash, the bankers lined up before a parliamentary committee and apologized:

1st banker: We are extremely sorry.

2nd banker: There’s a profound and unqualified apology.

3rd banker: We are profoundly and, I think I would say, unreservedly sorry.

Six months on and not much sign of contrition in Britain’s financial district. This exclusive roof top restaurant is packed with financial types.

John Purcell, one of London’s top headhunters, meets his clients here. He says the good times are just beginning to roll again — especially for the star traders and dealers, the so-called “rainmakers”:

John Purcell: We’ve just heard that one of these rainmakers has just gone from one bank to another for a basic salary of £40 million.

Beard: Between $60 [million] and $70 million?

Purcell: Yeah, it’s huge bucks.

Barclays is paying out more than a billion dollars worth of bonuses to its 400 most prized employees. The bonus pool at Goldman Sachs is even bigger.

This may enfuriate the rest of us, but Jillian Tett, author of “Fools Gold,” says the banks have little choice but to shell out:

Jillian Tett: The banks are operating in a competitive environment, and there is concern amongst the banks that if they don’t pay people well, they could lose some of the key people they need to rebuild their businesses.

The U.K. government is now weighing up a plan to stamp on the bonus culture before it gets rampant again. To tie bonuses more closely to long-term performance. But, says Jillian Tett, with billions of dollars of taxpayer’s cash invested in the banks, the government has to tread carefully:

Tett: The challenge for the government is how do you encourage the banks to rebuild their businesses and be profitable again without going back to the bad old ways?

As unemployment rises, so does resentment towards bankers bonuses. A recent article in Rolling Stone magazine has gotten a lot of play here. It described Goldman Sachs as “a great vampire squid wrapped around the face of humanity.”

In London, this is Stephen Beard for Marketplace.

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