Banking Profits Set To Spark New Round of Bonus Storms

By: Mike Campbell
A sudden and dramatic loss of confidence in financial institutions on the back of some extraordinary “sub-prime” lending decisions was what triggered the worst global recession since the Great Depression. Banking giant Lehman Brothers was allowed to sink before concerted action from governments throughout the developed world produced massive support to prevent the world’s financial institutions from going into meltdown. The financial sector has always attracted high fliers who handle the vast fortunes that are the life-blood of modern, global capitalism. They have always been well rewarded (some would say obscenely so) for their efforts. The banking crisis has led many a politician to question the fairness of the bonuses that some of these employees make; in the light of a bail-out funded through the public purse.

From the broader perspective, banking sector figures for the third quarter have shown several big banks are healthily back in the black which is good news for the global economy. JP Chase Morgan posted a $3.6bn profit for Q3; Goldman Sachs figure was $3.19bn; Citigroup reported a $0.1bn profit.

However, the news that Goldman Sachs had set aside $5.35bn to cover pay and bonuses (and they will not be the only bank to do so) is bound to put the fox amongst the chickens. The enormous provision equates to an average payment of $172 581 per employee – of course the modal average will be much lower. These astronomic bonuses are easy to attack and politicians murmur about legislation that will cap them, but they are simply a reflection of market forces at work. It is cynical for politicians to decry these bonuses whilst they remain solidly behind the concepts of global capitalism and the free market. No doubt the subject will quickly be forgotten after another round of hand-ringing and bluster!
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