Bailed-out banks pay record bonuses
Bankers are set to pocket record bonuses this year - just ten months after leading the world economy to the brink of catastrophe.
Goldman Sachs is on course to lavish an average of almost £500,000 on each its 5,500 London staff after unveiling bumper profits yesterday.
Barclays and JPMorgan are expected to follow its lead. All three banks benefited from state bailouts at the height of the crisis.
Tens of thousands of City traders and powerbrokers will see their bonuses this year beat those handed out in the boom year of 2007.
The bonuses for the so-called Masters of the Universe are likely to enrage families who have seen their finances wrecked by the credit crunch. A million workers are expected to lose their jobs.
Ministers will be embarrassed because they had pledged to stamp out the greed and recklessness that spawned the credit crisis.
Goldman Sachs yesterday announced a £7.1bn pay and bonus pool for the first six months of 2009 - a rise of 33%. The firm's 29,400 global staff will pick up an average of £242,000 each for this period, which over the full year would double to £484,000.
The average payout in 2007 was £408,000. The 400 partners, who include UK boss Michael Sherwood, regularly pull in multi-million pound annual bonuses.
Dubbed Goldmine Sacks for the extravagance of its rewards, the bank has emerged from the financial crisis in better health than many of its rivals.
However, it was deeply entwined in the credit bubble that burst with such extraordinary force two summers ago. And it suffered the indignity of accepting a £6.2bn US government loan last autumn, which it has since repaid.
Vince Cable, LibDem Treasury spokesman, said: 'It really does seem to be a case of business as usual. If we are to have stability in the finance sector, we must see pay restraint in all banks, irrespective of which country they are based in.
'Executives at Goldman Sachs clearly have short memories. In the space of ten months, they've gone from taking a begging bowl to the US government to paying out massive bonuses.'
It was the prospect of life-changing bonuses that encouraged bankers to take ever greater risks in the year before the crunch. This culminated in the near meltdown of the financial system last September following the collapse of Lehman Brothers.
Nick Ainger, a Labour MP on the Treasury select committee, said: 'They haven't learned any lessons of the recent past. The culture that led to this crisis, which was driven by bonuses and by risk taking, just hasn't changed.'
Taxpayers have been left shouldering the £1.4trillion burden of the various support packages the Government has given to the banking system. Future governments will have no choice but to hike taxes and slash spending on key public services.
Andrew Love, a Labour MP, said: 'These levels of pay are inappropriate at a time when everyone is having to pull in their horns. Every indication is that shortterm bonuses lead to massive risk taking. City firms need too look at creating structures that pay to long-term performance.'
Goldman Sachs saw its underlying profits climb 33% to £2.1bn between April and June after earning record fees from helping companies raise cash. Its share and debt-trading division posted spectacular results after a raft of its competitors, including Lehman Brothers, collapsed.
Finance director David Viniar last night said: 'Goldman Sachs accrues compensation during the year based on results - it's a pay for performance culture.'
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