American Banks, Dumb Silent Majority, Banking on Risk-based Heaven and Basel…….
“Not so for some of America’s other banks. There, the owners (and in theory the controllers) of the firms seem to have been forgotten, even though pay remains relatively high. About the only consistent beneficiaries of the new boom are employees……….
“At Bank of America (BofA) common shareholders suffered a loss of $2.2 billion, and even adjusting for one-offs they still made a loss. Yet the banks paid out a combined $13.7 billion in compensation during the same quarter. Taken together, on an annualised basis, employees received the equivalent of 27% of the core equity in the firm, whereas shareholders got a return of zero…………
“Amid all of this, though, shareholders remain oddly quiet. In America proposed laws will allow them a “say on pay”—an annual non-binding vote on compensation. Perhaps this will help. The biggest mystery is not why banks’ employees, underwritten by the state, want to earn more and expand, but why their owners, having been wiped out, accept such a dreadful deal…………….” The Economist
Probably part of the culture of “if they can get away with it, good for them. Maybe next time I can do the same, if not in this life then maybe in one of the next ones.” But are they supposed to have banks over there? What if they have tougher reserve requirements and tougher required capitalization ratios over there, even tougher than Geithners recent proposals? Let's say tougher than the risk-based Basel I, Basel II, and all the other little Basels.
What if the scowling hairy guy with the trident is as stingy than Mr. Paulson and Mr. Geithner were generous to their former colleagues?
Cheers
mhg
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