Get Ready for a British (Bank Executive) Invasion

Wow. America get ready for another massive wave of bankers to come to our shores. Last week we found out Canada was trying to drive all its top paid bankers out of the country with unfair practices [Sep 22: Royal Bank of Canada Set to Lose Almost all Employees to USA], and now the only country which can hold a candle to U.S. banker pay packages, the UK, is set to do the same. Remember the #1 argument of these pay packages is "if we don't pay them, they will leave the country to get paid". Unfortunately that argument is losing steam as we are running out of countries for bankers to flee to to get "fair value" for services they bring to us (such as ruining the entire financial system).

Advocates will cry "we still have Asia! They'll run to Asia, please don't let it happen!" but I just read last week that the CEO of the biggest bank (by assets) in the world (China) makes just over $200K. Gosh darn, it is going to be hard to advance this dogma of losing all our talent to other countries with facts like this.

On the plus side, things are looking better and better for the United States - our unfettered corporate socialism shall allow us to not only have 80% of the world's attorneys, but soon all the banking "talent" will be here too. Can't wait to see what innovations they cook up for us in the coming decade when there is only 1 country on Earth where pay is based on just throwing anything out on the street, and even if you cannot find 1 sucker to buy it, the Federal Reserve will - to promote growth. I knew there was a bright side of this crisis.

Welcome UK bankers - we are sorry for your persecution (like our forefathers over 300 years ago). We welcome you to the land of freedom and bonuses where you always win - even if the country loses from your actions. It's free market corporate socialism... err, capitalism. I'll prepare the tea, and your pay package that dwarfs that of any other sector, or pay in any other country. Because that's what the "free market" (backstopped by the Federal Reserve and U.S. taxpayer) allows. Shuffling paper around in quick fashion while adding a markup to it is what drives the American economy, so maybe you are not cherished anymore in your old country, but in America - you are a rock star.

Via AP

• British Treasury chief Alistair Darling said Monday that automatic annual bonuses for banking executives will be outlawed in an attempt to curb excessive risk taking in the country's huge financial sector. (can you hear multi-million dollar flats being put on the market as we speak?) Darling told the governing Labour Party's annual conference that new legislation to scrap the payments will be put to Parliament within weeks.
• This week, Darling will speak to Richard Broadbent, chairman of Barclays Plc’s remuneration committee, along with Colin Buchan of Royal Bank of Scotland Group Plc, Mark Moody- Stuart of HSBC Holdings Plc and Wolfgang Berndt of Lloyds Banking Group Plc. His proposals are based on an agreement among leaders of the Group of 20 nations last week.

• Darling said bankers in Britain will in future be offered bonuses for their performance over several years, rather than over 12 months.

Another completely unfair concept which would never pass in the "free market" of the U.S; this replicates the concept that Royal Bank of Canada set out last week of paying people for performance rather than "creating volume". Sorry politicos, bankers are not like you and I - they will chafe at being paid on performance ... it's wrong and unfair. And they will move (just don't ask where).

• "We won't allow greed and recklessness to ever again endanger the whole global economy and the lives of millions of people," Darling said.

Thankfully, we will. Oops - what I mean to say is Timothy Geithner and Larry Summers are looking very closely at new rules that will be watered down by lobbyists, and countless loopholes will be created to make sure nothing ever really changes, while politicos mug for the public about how "they fixed the problem" and are on "the side of the people".

Ok, I was correct in the first place... we will. It gets worse from there... I assume Heathrowmust already be jam-packed with guys in $8000 suits.

• He told the rally that new laws would include a claw-back provision and help to "end the reckless culture that puts short term profits over long term success."

So once again, the unfair practice of being responsible for nuclear financial bombs you set onto the world will be part of the new ethos of the United Kingdom. That's 100% socialism; I am sorry to see you go out like this Britain. Being not at all responsible for our actions might have got us here, but the last thing we want is all our bankers to move to...uhh... well...Morocco.

• "It will mean an immediate end to automatic bank bonuses year after year, it will mean an end to immediate payouts for top management," Darling said.
• The plans, to be included in a new Business and Financial Services Bill, will be proposed formally in the Queen's Speech in December, the annual announcement of the government's legislative program.

I am not sure how the UK legislative process works, but I can only pray that the lobbyists are 5% as effective as their American counterparts, so we can stop this persecution and continue to allow a small sliver of society to live in a parallel universe than the rest of the workforce. Let us only hope the next generation of bright minds in our country also understand that the investment banking sector is the only one where you get paid no matter your performance - the less scientists, engineers and the like running around trying to "solve things"... the better for our future.

Comments

[John Galt:]

Ok instead of the daily tank the bankers what's the solution?

Wasn't there some companies you highlighted that based executive pay/compensation on a 5 year moving average of earnings ( or even company book value), that was a better tie of pay for performance for management?

You know, like if oil went from 147 to 30 to 60, the CEO of Exxon wouldn't have wildly different pay year/year.

Or if there was a great flood, and insurance company wouldn't get nothing one year.

Then again there would be less incentive to cook the books like Enron and Worldcom.

So what ideas do you like?

Sep 29 08:56 AM

[john s. gordon:]

this article is spot on.
> jack

Sep 29 09:26 AM

[nova:]

TraiderMark,
thanks for a good review.

The major problem with corporate America is that executive fraud and thievery are allowed in public companies. Public companies shareholders interests are something inconsequential in corporate America.

Sep 29 12:29 PM

[TraderMark:]

already have made my views clear

Let there be no bank too big to fail, if you have to downsize them all, so be it.

Then let the companies pay whatever they want, but when they implode themselves not one dollar of public money goes. Then with a real system like that - with actual checks and balances - people will actually care about what the companies do, and how they pay.

Now no one cares - because the government and fed will be there to use taxpayer money to fix it.


On Sep 29 08:56 AM John Galt wrote:

> Ok instead of the daily tank the bankers what's the solution?
>
> Wasn't there some companies you highlighted that based executive
> pay/compensation on a 5 year moving average of earnings ( or even
> company book value), that was a better tie of pay for performance
> for management?
>
> You know, like if oil went from 147 to 30 to 60, the CEO of Exxon
> wouldn't have wildly different pay year/year.
>
> Or if there was a great flood, and insurance company wouldn't get
> nothing one year.
>
> Then again there would be less incentive to cook the books like Enron
> and Worldcom.
>
> So what ideas do you like?

Sep 29 01:05 PM

[Jason722:]

That's exactly it. The failings of corporate socialism are that: 1) when laws are broken, they are not enforced (lack of deterrence) and 2) bad decisions are protected by public money (moral hazard).

While I think the salaries and compensation of CEOs in America are ridiculous, what is really the problem is that almost NONE of these highly paid individuals have lost their jobs. In other words, I am actually ok with any amount that someone garners for themselves when things are going well and they are not breaking laws. It is what DIDN'T happen when laws were skirted and excessive risks turned on their masters that is the problem. How can anyone claim this is a free market when management teams can blow up billions of dollars of capital and no one gets fired?

To me, we have a choice:
- (my choice) A free market where successfully executed risks are bestowed with riches while failed risks are punished ruthlessly

or

- A firmly regulated market where no one takes excessive chances and no one hits the big time; but where failure is bailed out by the whole.

There are pros and cons with both paths. I prefer to have my destiny in my own hands and chose the option that gives me a level of control.

Sep 29 01:32 PM

[John Galt:]

OK I'd vote for that.

Sep 29 04:01 PM

[tripleblack:]

America has long attracted the top talent in many realms of endeavor, just as the top pay attracts the top talent in sports to the teams that pay the best.

Presumably any brits that emigrate to the U.S. will replace less talented individuals in the banks where they find work, assuming they don't do something else with their time. Its a Darwinian race, and right now I'm just hoping that we haven't started selecting for chihuahuas when we need dobermans.

Any investor who has ever just tossed their proxy in the trash - or just signed over their votes to the board/management team - can look in the mirror to see where some of the problem of overpayment for lousy leadership comes from.

Sep 29 10:27 PM