Bob Diamond lacks one — certainly according to rivals at JP Morgan, who have gone crying to the FSA over the terms being dangled by BarCap in front of Todd Edgar’s commodities trading team at JPM which Bob and Co are trying to poach.
Bonus rows seem to be breaking out in every direction. British chancellor Alistair Darling is threatening new legislation to curb City pay, just as a left-leaning pressure group of MPs, union leaders and academics called Compass has written to the Guardian demanding the creation of an Excessive Pay Commission.
John Plender is worried. As he declares in his On Monday column in the FT:
…the return of a “business as usual” ethos in relation to bank bonuses, suggests that the shame gene has gone missing in the financial system. Bankers’ lack of sensitivity to the wider concerns of society is also symptomatic of a culture that has become heavily transactional to the point of being blinkered.
He believes incentives in the financial world are pushing people in a direction that is at odds with ethical behaviour, where customers will be ripped off and conflicts of interest abused.
In a financial world where trust is lacking, the only way to prevent bad behaviour is tough regulation. The scale of the financial debacle is such that it would be natural to expect a hefty regulatory response on these behavioural issues as well as on systemic risk. Yet the current controversy about bonuses on both sides of the Atlantic raises questions as to whether regulators have the stomach for the fight.
Earlier this month, in a podcast interview with American radio host Terrence McNally, Liars Poker author Michael Lewis raised the prospect of an uprising once it dawned on ordinary people how their financial brethren were ripping them off.
From the transcript at Huffington Post:
ML: We are at a point right now where we should be radically reforming the financial system, and no Wall Street person with an actual interest should have a great deal of influence on that reform. Instead, the Obama administration is sort of half-heartedly reforming things, with little radical change — and Wall Street people are instrumental in designing the new rules.
I think they think nobody’s going to say anything to them about it, but I think it’s politically risky. There’s a real chance that there’s going to be an uprising about this, and they’re going to have trouble controlling the process.
TM: Do you mean they’ll face trouble when what they pass doesn’t work?
ML: Right. It won’t work, and the mess they’ve created is going to have slow-burning economic consequences. We’re going to be living in a very soft economy for a long time, and it’s going to create disillusionment and anger. I expect there’s going to be a crashing down of Wall Street’s influence. It’s just amazing it hasn’t happened yet. And it hasn’t happened yet because for thirty years their influence has become part of the air we breathe.
Neither Plender nor Lewis can be dismissed as alarmists, or lacking insight into the realities of high finance.
But how does this square with the financial world’s apparent insistence that it knows best when it comes to the inter-reaction of risk and reward?
And how much is someone like Todd Edgar actually worth? He reportedly earned his employer $250m last year punting gold, while “managing” a $2bn portfolio…