My weekly commentary followed by this week’s links to blogs and financial articles.
I only wrote two posts for Monevator this week, instead of my usual three.
I’m currently working long hours, you see, and that’s devoured most of my free time.
But never mind, because according to the specious logic of self-justifying bankers, I must be entitled to a six-figure bonus check as a result of my labours.
After all, “We work hard!” is one of the cries that the denizens of the financial goldfish bowl use to justify their inflated incomes.
As if nobody else works hard.
They’ve been justifying themselves a lot this week, after Goldman Sachs announced stunning results:
Workers at Goldman Sachs have racked up an average $527,192 (£324,607) in salary and bonuses so far this year after the American investment bank made a $3.1 billion profit in the third quarter.
Average pay for staff at the group, which employs around 5,500 staff in London, is 46 per cent higher compared to last year.
Come on, you must remember Goldman Sachs? They’re the princely free marketeers who were bailed out by the US government last year, like humble autoworkers or farmers.
I am so sick of the hypocrisy that bankers and other financial service providers spout. Unfortunately I know some read Monevator, and I know from experience that they’re completely incapable of looking objectively at their grossly inflated incomes, so they won’t take this post well.
It’s bizarre — most of them are pretty smart, and the can debate the legs off a cow. They can be thoughtful and generous too, just like anybody else can.
But when it comes to pay they start from the conclusion “I deserve a £300,000 bonus” and then work backwards, reeling off disconnected statements that on the surface might justify their position but are logically irrelevant.
We work long hours! — So do factory shift workers and illegal immigrants. They don’t earn six figures a year.
Our jobs are insecure! — Yep, that’s why most staff from Lehman Brothers are now working at Barclays or Nomura or similar. Besides, out here in the real world we lose jobs, too. Just ask anyone in the unemployment queues.
It’s very, very hard! — Lots of jobs are hard. Vets train for seven years before they’re allowed to stitch a cat, which is about seven years longer than bankers study banking. Even London taxi drivers study ‘The Knowledge’ for a year. Researching cures for cancer is hard — I must have missed the stories about lab workers earning £1 million a year.
It’s really competitive! — This is certainly true. But then lots of jobs are competitive. Being a lap-dancer is competitive. Being a music journalist is competitive. Far more people want to play classical music professionally than there are jobs for violinists or viola players. Their average salary is about £30,000 a year, and they supplement it with teaching.
It’s a free market! — True, when we’re not bailing it out for everyone’s sake. Or when a company wants to raise money or mount a takeover, and can only choose from three or four names — and it can hardly shop around publicly. Like law, it’s a racket.
You pay your hairdresser a tip! — So therefore bankers should be paid £300,000 bonuses? This idiotic comparison was made by the Miss Moneypenny columnist who writes for the Financial Times. She’s usually savvy and a good read, but even she threw up these kinds of inanities in her desperate argument to justify obscene City salaries. Is the reverse true? She earns a bonus — so should she clip my ear lob hair and rub wax into my scalp, then sweep the floor?
It’s stressful! — Even French workers with their 30-hour weeks and excellent social safety nets find work stressful. In fact, some are killing themselves.
It does something useful! — I am not one of those people who argues the City does nothing for its money. I fully accept that the crude image of a 22-year old gambling away a pension in one window while he’s on the phone to a lap dancer booking the evening’s entertainment is misplaced. All the phones are recorded nowadays, so he’d have to use his personal mobile.
More seriously, of course we need efficient financial services, deep and sophisticated credit markets, people who can wrap up the obligations of a country, company or individual and turn them into financial packages with defined risk that enable them to be traded, insured against, or whatever.
But we don’t need pay them on average £300,000 a year.
Why does it happen? The answer is obvious to anyone who’s had a job.
If you work in a crisp factory, you get free crisps. If you’re an estate agent, you see the best houses first. Nobody who works in a sweet shop ever went without sweets. Staff at Gap and H&M get big discounts.
And if you work alongside money, and you’re moving billions about, and 1% is neither here nor there in the good times — there’s your £300,000.
They make lots of money because they handle lots of money, and they take a commission, whether individually or as a company.
At best they provide innovative and socially useful functions akin to engineering or air traffic control, and they should earn say £100,000 a year for the role.
(This is more like the money most earned in the 1960s and 1970s, when it was a slow job for simple posh chaps from the right schools. Contrary to banker propaganda, the world kept turning and the communists were kept at bay.)
In the middle, they are engaged in zero sum games — fund management, say — so in aggregate are just enormous friction. Use an index tracker or pick your own stocks to do your bit to help fight this flea that’s smothering the dog.
At worst? They put people into crummy pension schemes and charge 5% upfront fees and deliver mediocre returns. They create complicated products designed to extract value from customers, not to deliver value. They speak humbly about their $800,000 salary as being a lot from where they came from, like John Mack of Morgan Stanley did on TV this week, because they think that candid talk will play well to the masses — but they neglect to mention the $69 million he was awarded between 2005 and 2009 alone.
From this week’s personal finance blogs
- The five stages of financial enlightenment — Free Money Finance
- Black Swan Investing — Oblivious Investor
- What is your definition of self-worth? — Wealth Pilgrim
- Why Dow 10,000 may not last — The Digerati Life
- Five steps to six figures in seven years — Get Rich Slowly
- Communist, capitalist or socialist joint finances — Plonkee Money
- Watch UK TV online for free — Money Watch
Other interesting financial and money articles
- Smart people getting into banking caused the crisis — New York Times
- Self-employed face self-cert loan ban — Financial Times
- Do you fear inflation or deflation? — Financial Times
- British are in denial about pain ahead: ex-FSA head — The Telegraph
- Anthony Bolton tips emerging markets — Financial Times
- An appetite for global food stocks — The Independent
- It is cheaper to buy than rent in much of the UK — Love Money
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