Left Foot Forward has the backing of senior bankers at the World Economic Forum in Davos on eye-watering pay deals in the City, and that George Osborne is wrong
This blog pointed out last October that one of the main reasons bankers are paid such extraordinary amounts of money is that the industry is fundamentally uncompetitive; ironically, it is not subject to the market forces it is supposed to represent.
Unfortunately this crucial point has been disappointingly absent from much of the policy debate on how to address the issue of eye-watering pay deals in the context of unprecedented government support.
Comfortingly, it appears that Left Foot Forward has at least the agreement of senior bankers themselves on this issue.
The BBC’s Business Editor Robert Peston reports that in a private meeting at the World Economic Forum in Davos, a financial supremo is to have stated that:
“Banks are a regulated oligopoly and are not subject to ‘proper’ competition: they are therefore able to pass on the costs of their people to customers.”
Peston explains that:
“In other words, banks are able to pay their people more-or-less what they like, free from the market disciplines that apply to genuinely competitive industries.”
Financiers will be delighted to know that following a number of “good discussions” with “lots of bankers” at Davos, the Shadow Chancellor has made it categorically clear that he does not favour breaking up the banks, contrary to the recent thoughts of the Governor of the Bank of England, arguing that:
“I fully understand that modern universal banks need to offer their customers investment-banking services.”
This vacuous tautology ignores the basic point that banks do not necessarily need to be universal – particularly given that the financial crisis was precipitated by this very universality.
Most of the customers that anyone cares about absolutely do not need investment-banking services. That this is an essential feature of financial markets is a ridiculous concept dreamt up to maintain the good life for the City.
At the same time, Mr Osborne has expressed resounding support for President Obama’s bank plan in an attempt to ride the bandwagon of public outrage against Wall Street. But no one, not even those with far greater financial acumen than Mr Osborne and his team, know what the Obama plan will actually do, or what the effects will be.
Odd, then, to offer unwavering support to what is without doubt a well-intentioned, but as yet undefined reform plan, whilst at the same time committing to maintaining the cosy status quo.
19 Responses to “George Osborne is wrong. Even the bankers agree”
rob
Please do not post pictures of these guys in dinner suits. You just look puerile. “oh look he went to a posh school” isnt going to work on me and it detracts from the substantive issues of any given article. Everytime i see one i consider shifting my vote from lib to con just to punish labour, im a former labour voter.
John
school photograph? check!
alt text – gideon osborne? check!
seriously, not doing yourself any favours here are you… it was so obvious and weak a jibe it actually distracted me from any point you were hoping to make.
rob
None of us are culpable for where we are born. Why is it seen as ok to rip on people born into rich families? Yes they are priviliged but that dosnt tell you anything about them as a person.
Shamik Das
What does it tell you about Cameron and Osborne that they’re planning to give millions to the 3,000 richest estates with their inheritance tax plans? Plans from which something like 90 per cent of the Shadow Cabinet will reap huge financial benefits and become even richer than they already are, while the rest of us must endure “austerity”. Does that sound fair to you?
rob
Leave off on the inheritance tax cuts. All the tories are planning to do is raise the threshold. Labour have raised the threshold before. Your re-spouting a mantra, considering labour originally tried to steal the tory policy, just makes you look silly. im pretty sure a fair amount of the current cabinet and their friends will benifit from such a cut as well. The modern labour party is hardly a workers collective. I would also bet that the tories scale back this commitment if they get into office, consider it was made in 2007 in very different times.
http://www.youtube.com/watch?v=c_eI7XC3sgE i think this sums up my view on inheritance.
Try harder.