Bankers should not get a "Government Bonus"

Dear Readers,

The distribution of bonuses for bankers and peoples resentment about it has been an upcoming topic in the international financial press this week. Hedge fund guru George Soros has commented on the situation in newspaper interviews and has given his opinion and concern.

The Financial Times Weekend as well as Reuters and City A.M have released articles about the situation and the concerns and comments Soros has made regarding the matter. All three sources are from the London base and therefore quite close to the market. The abroad press has at this point in time not really mentioned this subject, most likely cause it is about the London market and still very new. In my mind the topic is still very important, which is also underlined by the fact that the article was on the cover page of the FT Weekend, because it influences peoples behaviour and their belief in justice in the financial system.

Whereas Reuters and City A.M. just commented and reported on the Soros interview the FT Weekend actually added a little bit of background information about the matter and about Mr Soros, but still not a lot. All is very brief and needs to be read by someone who is already informed and in “the know” about the current situation. The FT and Reuters also write about Soros opinion regarding the dollar and stock market movement, which is not at all the case for City A.M. which just sticks to the bonus discussion. All three articles clearly report the statements Soros has given but there is no point of bias in any kind of way from their side.

As stated in all of the articles Mr Soros addressed that the funds which are now distributed to the bankers are actually not their own achievement and fruit of their hard work and risk taking, but hidden gifts from the government so he can understand why people see it unjustified.

People all over the world that were involved with the financial markets in any kind of way lost confidence in some of the institutions and the people working for them when they suffered from the financial crash which was mainly caused by them. The governments and tax payers had to stand up for the gamble some bankers and institutions took, which caused anger and broke trust. The question that arises for people now is “can we trust the governments and banks with our hard earned money”?

The worry some of the banks mention is that they do not think they can keep and maintain some of their most talented risk-takers without giving them their high bonuses which would make them loose out on an important sources of income if they change companies and go to hedge funds. Soros answer to this is that this would only be the best option due to the fact that there they deal with own capital and not customer deposits or taxpayers money. People know what they’re dealing with when investing in hedge funds and they do it by choice.

Especially at this point in time where trust in markets, institutions and their drivers has to be regained and recovered this is a very delicate situation. Investors and the people in general feel tricked by the system since they lost out from the behaviour and decisions of bankers while many of them still won and earned big with far lower consequences.

Many of the institutions and their members only survived the situation as a result of government and therefore taxpayer support and therefore we should ask ourselves

“should this be rewarded with another round of bonuses”?

At the current point in time with a lot of disbelief in justice in the financial systems and on top of that a lot of people and organisations in severe financial trouble, it is important to regain the trust and the belief in the systems to create and support investment. I can, as Soros, understand the resent and anger people have, since it just seems like they’re loosing again while the people that caused the misery win. The question arises “Is there justice in the financial markets?”

As it can be concluded from the articles banks see themselves forced to give those bonuses in order to keep their most important employees satisfied and loyal. They do not see the option of making the “just” decision since the risk for them loosing out in the scenario is too high.

As I see the situation there should be government intervention in this to create a higher level of satisfaction for investors and taxpayers and to restrain the banks in their way of acting.

The current situation has shown, that there are too little regulations, which has caused the crash and the misery. The government has distributed those funds and should therefore also have the power and a say in terms of their distribution. In the end of the day there has to be a certain level of justice and the adequate distribution of funds. The trust by people and investors in governments, markets and institutions has to be rebuild and regained. In my eyes bankers can get a bonus for their success and work, but taxpayers money and government support should by no means be used as bonuses for people that caused this global financial distress.

Sources:

http://www.cityam.com/news-and-analysis/qzp2vdhqgz.html

http://www.reuters.com/article/businessNews/idUSTRE59M5K720091023?feedType=RSS&feedName=businessNews

hardcopy of the FT weekend 24.10.2009