30th January 2009

"Bankers" what next

With the US and UK in a financial meltdown over the last few months it is good to know that more evidence regarding the arrogance, greed and worse is now coming to light. Senior investment bankers, even now, clearly have no conception of what is or was right or wrong.

The CEO of Merrill Lynch, who just resigned this week , issued this memo to staff. He had spent over $1 million dollars on an office refurb in 2008 which he simply dismissed as a "mistake", he also rejected claims that he managed to speed up bonus payments ahead of the BoA takeover.

Richard Fuld, the former chief executive of Lehman Brothers, the investment banking giant that crashed to the ground in September, taking the "world" with it, sold his $14 million beachfront property (one of 5 such properties he owned) to his wife for $100. It was possible that this was in anticipation of legal action from angry investors, but this is clear evidence once again of the contempt those at the top of these organisations had for those who invested in or advised upon their product offerings.

Citigroup – already in receipt of $25 billion of TARP money – has splashed out on a new $50 million corporate jet. The luxury Dassault Falcon 7X has a top speed of 559 mph, apparently, and a range of 5.950 miles, seating 12. Which in turn makes it almost as fast, but not nearly as big, as the jumbo jets the firms' execs might reasonably been expected to use when in receipt of public cash.

As Joseph Stiglitz said in Tuesday's Times, the bank bailouts are failing because they are haphazard and misconceived in assuming that banks' interests are aligned with our own. Today's bankers have only ever been interested in one-off bonuses, and the latest revelations make it even more difficult to believe they will ever learn how to change their ways.

All this comes on top of the news this week that the FSA is to start stress testing IFA businesses (perhaps the starting point should be, or should have been, elsewhere) that the FSCS announced that IFAs will be part of the FSCS subclass that will be hit by a �£40m levy in the wake of the Pacific Continental Securities scandal and that the FSA will not deviate from principle based regulation. All in all it makes you feel good to be alive!!!!

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