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Ben Chu

Ben Chu has been a leader writer at The Independent since 2004. Before that he worked at the paper on the comment desk, letters department and the personal finance pages. He studied history at Jesus College, Oxford between 1997 and 2000.

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Made a loss? Never mind, here's your bonus

Posted by Ben Chu
  • Friday, 31 July 2009 at 11:03 am

Read it and weep. We already knew that ridiculous bonuses had returned to Wall Street for those banks that had returned to profitability, like Goldman Sachs. But now, according to a report by the New York attorney-general, Andrew Cuomo, even those banks which are still making losses are paying out bonuses. Apparently, Citigroup and Merrill Lynch paid bonuses of $5.33bn and $3.6bn in 2008 respectively while seeing losses of more than $27bn each.
        
It's an outrage that banks like Goldman - which are benefiting from huge hidden subsidies from the US taxpayer (see a good explanation from Eliot Spitzer
here) - are continuing to pay out bonuses. But for firms which are losing money to do so is simply a bad joke.
         
Of course, in the amoral world of investment banking it is also perfectly rational. Once one firm starts paying bonuses, others have an excuse to start doing it themselves, even if they are still losing money, or relying on government support to survive. "If we don't pay bonuses", they say, "all our talent will migrate to the banks that do". And that's why the bonus culture has
crept back into Britain's bombed-out banks too. The bankers believe in the iron laws of the free market - except, of course, when they need taxpayers' cash to bail them out.
          
  When popular anger exploded in the US about
bonuses paid to AIG employees and in the UK over Fred Goodwin's pension I dared to hope that our politicians would finally be emboldened to stand up to the self-serving cant of the bankers. Now, I fear that the moment has gone and that the tireless financial services lobby has prevailed.


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