I was talking to someone from one of the big US banks yesterday and I have to say, his arrogance astounded me.
We got onto the subject of bailouts. And it was of course the government had to bail us out, the alternative would have been the total destruction of the world financial system (this argument is one I’ve heard used quite a lot – as if letting a few failed banks go to the wall would have meant the end of the fabric of our society as we know it). It’s the you just don’t get it argument.
And on the subject of “heads we win, tails you bail us out” banking. Well, yes, but then what else is the government supposed to do …. (!)
I am so uncomfortable with the government having such large amount of bank debt and bad loans on its books. It’s passing risk of default from the banks to the country.
So this would be my solution :
1. Anyone who works at a bank which has had to be bailed out or nationalised is collectively treated as a failure – hence their salary is capped to a maximum of £50k per annum
2. No bonusses until the bank has recovered and is back in private ownership
3. All moneys that contractully exceed the maxiumum salary or bonusses that would have been earned contractually put in a liquidity fund
4. Specialist turnaround help can be brought in at a higher salary than this, but any excess over £50k must be dependent on success in taking the bank back into private ownership, and clearly linked to success in turning the bank around.
This way, both parties bear the cost of a bailout. And both are motivated in the right way to get out of it. Anyone see any problems with this ?