Dominic Lawson: Cut Bankers' Bonuses and We'll All Suffer

Dominic Lawson has a piece in the Sunday Times (Sept 6th 2009) which is entitled Cut bankers’ bonuses and we will all suffer . Here is part of his "reasoning":

Yet when people get a cheaper mortgage because some financial whiz-kid on the trading floor did some clever forward buying in the currency markets, they don’t feel any particular sense of gratitude to the bank.

The problem with this argument is that many UK taxpayers would consider that the "whiz kid" was probably more lucky than smart, and what is most irksome is that when the whiz kids on the trading floor are unlucky the losses to the bank are underwritten courtesy of the Asset Protection Scheme, aka the national income of the future.

Actually, I think Mr Lawson's iconography gives the game away (i.e. that he doesn't really know how banks structure mortgage products). Connecting whiz kids on the trading floor, engaged in proprietary currency trading activities for a bank, with the business of providing residential mortgages doesn't quite pass the bullshine test.

Comments

[Michael Clark]

We're all suffering now, except the bas---ards who caused this collapse -- and they are being rewarded. How can a bank or any firm pay ANY bonuses when that firm or business LOSES money. That should be the cardinal law: bonuses ONLY if the firm makes money; and then only an established % of profits for all bonuses, that is approved by shareholders. Does that not seem reasonable?

2009 Sep 08 09:04 AM

[Buckoux]

These threats of extortion are merely cornered bankers growling in their burrows. Banking is important to society and modern economies, however, bankers and banks are not. Toss a poison ball of money down the hissing bankers burrow and be done with them. As with all vermin, there's more where they came from.

2009 Sep 08 09:56 AM

[davidbdc]

Forget cutting their bonusses. Just get rid of them. Tired of hearing how talented these folks are.......perhaps some of them will actually go and start companies that actuall make stuff and employ some of their fellow countryment/women to make and deliver it.

What nonsense that people who lost trillions should have their bonusses supported by taxpayers making 1/10 or less of what they make.

And when the scenario described above happens.....the BANK keeps all the profits and gives them to the bankers as bonusses - no one sees lower mortgages.

2009 Sep 08 10:04 AM

[Ferdinand E. Banks]

Dominick Lawson is tops. He gave one of the dumbest lectures that I ever attended - either at Cambridge or in Washington - and afterwards, he strutted out like he was Einstein after his first lecture on special relativity. You could tell by the look on his face that he thought a lot less of his audience than they thought of him.

2009 Sep 08 10:11 AM

[NUCLEAR1929]

bankers stole this money from usa citizens, fed sucks

2009 Sep 08 01:23 PM

[John Lounsbury]

Clive - - -

Thanks for wading through the bullshine. Hope you got your boots hosed off. Larson's piece is so riddled with linking of unrelated factors that it could make dizzy those who lack in depth understanding and is sickening to those who understand a little more.

Larson can be contrasted to Blankfein (Goldman CEO) who made some suprising comments today (seekingalpha.com/insta...)

2009 Sep 09 12:14 PM

[Michael Clark]

That's why we want to prune the big corporations. They are dangerous at their current size and influence. So cut them loose and let them use their genius to re-surface in a more beneficial configuration.


On Sep 08 10:04 AM davidbdc wrote:

> Forget cutting their bonusses. Just get rid of them. Tired of hearing
> how talented these folks are.......perhaps some of them will actually
> go and start companies that actuall make stuff and employ some of
> their fellow countryment/women to make and deliver it.
>
> What nonsense that people who lost trillions should have their bonusses
> supported by taxpayers making 1/10 or less of what they make.
>
> And when the scenario described above happens.....the BANK keeps
> all the profits and gives them to the bankers as bonusses - no one
> sees lower mortgages.

2009 Sep 09 12:23 PM

[Michael Clark]

"Yet when people get a cheaper mortgage because some financial whiz-kid on the trading floor did some clever forward buying in the currency markets, they don’t feel any particular sense of gratitude to the bank."

Isn't that why we got this depression...because some financial whiz-kid came up with the idea of disguising high-risk mortgages as high-grade morgage bonds and then sold them to the public all over the world?

2009 Sep 09 12:25 PM

[derryl]

Well said, Mr. Corcoran.

Even if currency trading profits actually did contribute to lower mortgage interest rates, those trading profits can only be realized in equal amount to the losses of the parties on the other side of the trades. Which is like saying, "Bankers deserve bonuses when they use their bank's money to stake themselves and win in a poker game."

And as you point out, the bonus advocates never mention applying the same "just desserts" logic to bankers when their bets are big losers. I am willing to accept the bonuses on the upside if I also see equally large personal losses on the downside. No having cake and eating it and no heads I win tails I win.

Come to think of it, public sector employees and too big to fail bankers are probably the only people in win-win income situations. The rest of us rise and fall with shifting fortunes. But for bankers and bureaucrats the only direction they ever see is "up". Because us misbegotten taxpayers can always be relied on to prevent "down" from happening to the chosen ones.

2009 Sep 10 01:19 AM