What’s this? Something useful?

That’s right.  A blog, by me, which is actually going to be informative in some way or other to some people.  Basically I want to talk about the disgust I feel related to the reaction to the salary cap imposed upon any financial institution which takes taxpayer’s money from the bailout in the US.  Naturally, this does not currently affect me personally as there is no cap for the salary of the UK as of yet.  I would expect this to change as whether Gordon Brown really feels strongly about it or not, there is no way that he can justify not following suite.

From my point of view, I do not feel that the majority of these highly paid executives earning obscene bonuses live anywhere near to the real world.  They are, in fact, so used to recieving such an exponential paycheck (with the top culprit, John A. Thain of Merrill Lynch earning in excess of $80 million, including salary, bonuses as well as other benefits) that they cannot understand what the big deal is.  Mr Thain himself reportedly “suggested to directors that he receive a bonus in 2008 of as much as $10 million, because he “saved Merrill” by selling it off to Bank of America.”

As is apparent to anybody who keeps up with the current economic affairs or even just reads digg now and then, the bankers aren’t happy with the imposed salary cap at all.  Unsurprisingly, the only complaints or arguments to be found are from the people affected themselves.  I have looked reasonably deep and found nothing from anyone outside the sector giving a subjective view on why it is not a good idea to cap their pay.  The kind of complaints given would be comical if they weren’t horribly depressing.

As an example of these absurd complaints, “Also, the order itself strikes us as a disincentive for financial firms to reach out for aid, which will just prolong the recovery for the sector and the economy.”.  Well gee, there was me thinking that taxpayers really relished the idea of their money (which a large number of people will have put more effort into earning while not earning even a hundredth of what these bankers do) being used to bailout a bunch of greedy assholes who have managed to bring the entire global economy into a recession.  That particular quote almost sounds to me like a threat, in that they are almost suggesting they won’t take the bailout and will allow the economy to slip even further if the cap is imposed (which I doubt very much).

I’m not going to pretend that I am a finance guru, because while I have an interest in the workings of it I don’t feel as though it is necessarily the sort of career path I would take nor do I suggest that I would be incredibly good at it.  However, the kind of stuff these people come up with is incredible.  Here’s a gem; “Wall Street may keep most of its bankers if they face pay cuts, but it is the top five or 10 percent who make these companies really profitable, and they will soon be on their way to greener pastures if this measure is enacted,”.  So let me try and understand this…  The top five or ten percent, who have been earning the kind of money that is unfathomable for the majority of the global population and will still be able to earn a guaranteed $1million a year ($500k salary cap, $500k bonus cap) as well as undoubtedly having countless other ways to earn more money (I’ll go into that later) and yet have caused this entire mess in the first place will leave?  To me that sounds pretty desirable as opposed to something to fear.  If the CEO of a bank dies, does the bank shut down?  Is that what they’re trying to say, that these people are irreplacable?

These people are very much used to the idea that “working harder” (i.e. earning more money for the company) means that they earn a higher salary, a higher bonus, more benefits and more potential for promotion.  This, in an ideal world, would be perfect – but most people don’t get such an opportunity.  Sure, in a lot of jobs you might get a promotion for hard work, but the people at the lower end of the spectrum working in places like McDonald’s are going to have to pull off some kind of miracle to get a promotion which is still going to be giving them pitiful pay.  There are far harder jobs to be doing which don’t offer these same opportunities.

This is where my suggestion that they are completely disassociated from reality comes in.  They take their incredible amount of pay for granted and then also take for granted the fact that they can INCREASE this simply by working harder, therefore giving them incentive.  Unfortunately, a large majority of people are not given such an incentive – they have to create their own.

The real problem with this entire situation is that it is foolish to think these bankers are going to be losing as much money as is suggested.  Their salary is capped and their bonuses are capped.  There is nothing to stop these same CEOs from creating dummy corporations and then paying large sums of money to said corporations as an investment.  I’ve seen plenty of other avenues via which they will be able to retain and even increase their ridiculous pay rate but I’ve already rambled on for long enough.

In conclusion, whilst not being an American myself I understand how absurd these complaints are especially as much like in my country people are being laid off constantly (and to even more effect due to your privatized health care) and struggling just to maintain a living.  I hope that our country imposes a similar cap, and also that both of our countries become a lot more serious about stopping this kind of crap.

As a sidenote, I’d be interested to hear any other ideas people have through which these executives will be able to earn more money and whether or not doing so can be considered illegitimate by the law – let’s hope to see lots and lots of court cases.