Ann Pettifor

Forget it: the bank-owned state won’t cut bankers’ bonuses….

11th January 2011

Here in the UK, the public and the media are all het up about bankers’ bonuses  The British people, it would seem, are insistent: bonuses must be cut. The government nevertheless resists. Acutely aware of public unease, and earnestly wanting to respond to the concerns of voters, they are nevertheless caught, they tell us, in a vice.  Apparently there is a small problem: the British economy will simply collapse in a heap if the people’s will is enacted, and bonuses are cut. So the people must be ignored, and even if it is embarrassing, bankers must be rewarded – excessively.

Personally, I am not at all convinced that a) the economy will collapse if bonuses are cut or b) that bonuses are the biggest threat/problem posed by the banking sector. Far from it. Lending practices, speculation, cross-border lending and borrowing by banks, and above all,  their existing unfunded liabilities – all these seem to me to be a  much greater threat to the British economy, and millions of innocent people.  Ultimately of course, these practices are also a threat to bankers, and the British banking system.  (For more on this, see the Bank of England’s recent Financial Stability Report which notes that: “UK banks’ holdings of sovereign debt issued by countries under heightened strain are relatively small. But total claims on these economies, including lending to households and businesses, are larger.  Losses on such lending could increase were heightened sovereign concerns to be accompanied by weakening economic conditions. Credit risk could also be amplified by the interconnectedness of European banking systems. UK banks have claims of almost £300 billion on France and Germany, whose banking systems are more heavily exposed to the most affected economies.” )

So while bonuses are not my biggest concern, I feel obliged, as peddler of the’ bank-owned-state’ hypothesis, to help readers understand why it is proving so very challenging for the Conservative government to do anything about bonuses. The fact is: government is now literally in the hands of bankers. David Cameron’s appointment last week of an Anglican vicar, Stephen Green, the ex-Chairman of HSBC as Trade Minister in Vince Cable’s Department for Business Innovation and Skills, simply confirms me in this view.

So as a service to my readers, I prepared to undertake research into the number of bankers inside the Conservative  (often referred to as Coalition) government.  But I did not have to look far. The Labour MP Tristram Hunt seems to have collaborated with the Daily Mirror in a very helpful investigation of the composition of the Conservative Government.

The Mirror investigation was led by journalist James Lyons and found:  “that of the 498 Tory MPs and peers, 134 have been or are employed in the financial sector. This includes 70 of the party’s 305 MPs. Among the 193 Conservative peers, more than a third work or have worked in finance or banking.

Among the Cabinet members with links to the City are Pay-master General Francis Maude, who has worked for Solomon Bros and Morgan Stanley; Leader of the House of Lords, Lord Strathclyde who was chair of Trafalgar Capital Management from 2001-10; Cabinet Office minister Oliver Letwin, who worked for NM Rothschild & Son from 1986-2009; International Development Secretary Andrew Mitchell, who worked for Lazard Bros from 1979-2009; and Commons Leader Sir George Young, who worked for the Samuel Hill merchant bank.

Eleven Tory MPs and peers have worked for Barclays, including Richard Bacon MP, Jesse Norman MP, former Chancellor Lord Lawson, Earl Howe and Andrea Leadsom MP. A further eight Conservatives have been at Rothschild, including John Redwood MP, Mark Garnier MP, former Chancellor Lord Lamont and Jacob Rees-Mogg MP.

And four worked for Lehman Bros, the company whose collapse sparked the financial crisis.

They include Steve Baker MP, Chief Architect, Global Financing and Asset Servicing Platforms at the company from 2006-2008; Brooks Newmark MP and Lord Freeman. Others with links to the financial sector include billionaire Lord Ashcroft, welfare minister Lord Freud, Harriet Baldwin MP and Kwasi Kwarteng MP.”

The Mirror omits to mention any reference to  Anthony Odgers recently of Deutsche Bank, who has been hired to run The Shareholder Executive, the state body responsible for stewardship of the UK Government’s business holdings. Odgers has been appointed by the Executive  “to find buyers for assets including the Royal Mail, the Tote and the Student Loans Portfolio.”

Nor does the Mirror point to the most powerful government banker of all: Lord Sassoon, who is one of those in charge of the British Treasury.

Nevertheless between us – the Daily Mirror and your humble blogger – we have been able to identify a large number of bankers in government,  to help verify the ‘bank-owned state’ hypothesis. We may of course have missed others, in which case it would be much appreciated if readers would oblige with references and links.


4 thoughts on “Forget it: the bank-owned state won’t cut bankers’ bonuses….”

  1. “They Squandered Only as Allowed”

    They squandered only as allowed
    On Côtes du Rhône o’er quails en croûtes,
    Then all at once I saw a crowd,
    A host, with golden parachutes;
    All on the take, per T’s & C’s,
    Plundering our purse with practiced ease.

    Contemptuous of the plebs that whine
    And grumble at their mega-pay,
    They stretched in never-ending line
    Holding the hoi polloi at bay;
    Ten thousand saw I at a glance,
    Boarding their corporate jets for France.

    The waves ‘neath LearJets dance; but they
    Out-did the sparkling waves in glee:
    Taxpayers could but feel dismay,
    At such a smirking company:
    I gazed—and gazed—and rued the thought:
    What wealth this shower from us had wrought!

    For oft, when on my couch I lie
    In vacant or in pensive mood,
    They flash upon that inward eye
    Which is the bane of solitude;
    And then my heart with loathing fills
    For those financial spivs and shills.

    -William Turdsworth

  2. Pingback: Tweets that mention Debtonation: The Global Financial Crisis » Blog Archive » Forget it: the bank-owned state won’t cut bankers’ bonuses…. --

  3. Pedantically, I point out that “the hoi polloi” should be “hoi polloi”, as “hoi” means “the”. This avoids the solecism when translated, the the people, or rabble, depending on your point of view. Unfamiliarity makes it sound odd. 🙂 Irrespective of that, the poem is excellent.

    Diamond would have been under a lot of pressure from his colleagues if not the entire profession to say what he has said. I was not surprised, nor was I surprised when he said that neither Cameron nor Osborne had spoken to him about bonuses.

    Whether C&O & Co are owned by the banks or not, their social interests seem to coincide and they give every indication that they have bought into the same specious cultural framework.

  4. Hello Ann,
    you’ve got me thinking on a different but related matter.
    So the Conservatives are made up of a large number of bankers and ex-bankers. So what is the make-up of the Labour party and the other political parties?
    Presumably because Conservatives have so many people who work and used to work in financial services, is that how they (rightly or wrongly) have the reputation of being “trusted with the economy”, while the other parties generally have people who know less about money, finance and economics? (Of course there are exceptions)
    Do the other parties need more economists and other financially trained people? Or perhaps Labour MPs need coaching in the world of economics?

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