It’s not just an American phenomenon:
Royal Bank of Scotland (RBS) has announced losses for 2009 of £3.6bn, after struggling with billions of pounds of bad loans.
Despite the losses, the bank is set to announce it will pay bonuses of £1.3bn to its staff.
The bank’s chief executive, Stephen Hester, however, has said he will not take his own bonus.
The UK taxpayer owns 84% of RBS after the government bailed out the bank at the end of 2008.
Mr Hester told BBC Radio 4’s Today programme RBS had lost out by not paying bigger bonuses.
“We’ve had a small experiment in this respect… some of our best-performing people have been leaving in their thousands,” he said.
Leaving in the thousands? Where are they going? Most employers are firing, rather than hiring. Just how many hedge funds are there?
Meanwhile, “Morgan Stanley’s Mack Says Investment Banker Pay Still Too High“:
Morgan Stanley Chairman John Mack said investment bankers are overpaid and Wall Street compensation won’t decrease much because firms don’t want to lose their best performers.
“I still don’t think the industry gets it,” Mack said yesterday during an appearance in Charlotte, North Carolina. “The issue is not structure, it is amount.”
I certainly don’t get it.
For a thorough, yet easy-to-understand piece on how Wall Street has used bailout funding to run its bonus racket, see Matt Taibbi, “Wall Street’s Bailout Hustle.”
Taibhi’s piece highlights the financial shenanigans Goldman Sachs has pulled to game the system and take advantage of government bailout money. For example, reclassifying its status (virtually overnight) to take advantage of banking assistance programs or (as was widely reported, but little followed up on) receiving 100 cents on the dollar on its claims from AIG, when it likely would have received pennies without the AIG bailout.
One of the most unbelievable aspects of this whole fiasco is that Washington D.C. has done very little to reform the system to prevent it from happening again. It’s like we’ve watched a pilot crash a 747 into a mountain (after ejecting) and have given him the keys to new plane without fixing what went wrong with the first one.