If bank bonuses had been 20% less over last 10 years, they would have had enough liquidity not to need a bailout

The above was said by WSJ journalist Scott Patterson on Jon Stewart's Daily show on 5th March (not viewable outside the US) this year. It was not something the conversation dwelled upon despite how significant a statement it was. There may be more in his book The Quants.

I recalled it when reading Robert Peston's blog today. He said:

Research by the Bank of England shows that if banks reduced the proportion of their revenues that they pay out in pay and bonuses back to what it was in 2005 (which was a pretty good year for the banks), they would free up £10bn - which could be used to strengthen themselves by retaining it as capital (which is what the Bank of England and FSA would prefer) or to pay higher dividends.

To put it another way, the failure of the owners to insist that this £10bn be deployed to reinforce the foundations of their banks or provide an income to them is one of the great mysteries of our time.

I'd be grateful if anyone can direct me to this Bank of England report as I can't find it. Thank you to anyone that can assist.

Comments

[David]

Like most of the articles on this site, this is another mute point not thought through. Had the UK banking sector not been competitive on bankers bonuses against global competitors they would have lost key staff to foreign banking sectors. This would of meant a loss of business in the UK, in turn meaning their share prices and profits would of dived, resulting in less tax for HMRC and the public funds and inevitable job losses. It's exactly this type of short sighted analysis of the economy which is stirring up unrest amongst people who don't understand the context of the global economy. It's no coincidence that the majority of supporters to this action have no commercial experience.

[Osama]

Hi David, you'll note the comments are from an American financial journalist and the Bank of England. Given the share prices of the banks are no different now than they were 10 years ago, we have to wonder what this commercial experience you speak of is, and whether we would be any worse today without it given the upheaval in the country. People will offer their help as it seems its needed.

[joe kane]

"Had the UK banking sector not been competitive on bankers bonuses against global competitors they would have lost key staff to foreign banking sectors."

- What a great loss that would be to British taxpayers, getting rid of "socially useless" speculators and architects of self-inflating financial bubbles which they construct at absolutely no risk to themselves. Indeed, they are rewarded for their lethal parasitic anti-free market activities and for the destruction of their host, the real economy.

The grossly over-large financial sector in Britian has long been responsible for many structural problems in the British economy.

Here is some great analysis of the corrosive destructive effects wrought on the real economy by these self-proclaimed financial wizards, with their deeply flawed evidence-free economic presumptions, who are only interested in taking vast risks at other people's expense, not their own -

"The Business Elites ... Are Instinctive Marxists"
Noam Chomsky
truthout
19 Nov 2010
http://www.truth-out.org/chomsky-the-business-elites-are-instinctive-marxists65195

ps
Sorry I can't help you with the report Osama. If I come across it I'll pass it on.