Very strong performance against Paxman by Clegg. Particularly on immigration and the pupil premium. Command of detail excellent.
But I am rather concerned about the wildly populist overbidding in their bankhating proposals. Do they think publishing these salaries will stop bankers competing against each other? No – when you know your mate’s salary, you promptly ask for the same plus 5%. Relative rather than absolute amounts are what motivate.
Do they think the very idea of a variable payment (what is known as a bonus) is so wicked? Because from my economist’s point of view, they remove rather unwelcome gearing from the business model. I prefer sales people who are paid more when they bring in a sale, less when they don’t ….
Do they not think that these restrictions will have to migrate to every corner of finance, because it is the activities, not the word “banking”, that need to change – and those activities can take place in all sorts of organisational form?
Given that we need more lending in the economy, do they think the steps they suggest would encourage bankers and their ilk to energetically investigate new opportunities?
I’m afraid I don’t have huge confidence in any of these Five Steps for Transforming Banking, and can think of buckets of unintended consequences for this piece of symbolic hate-auctioning. Yes, the way bankers are incentivized had an effect on causing the credit boom. But it is just one in a whole bucketful of factors, including the level of rates, the long macroeconomic stability, the shortage of housing land, the way money markets work or don’t, international imbalances, accounting jiggerypokery.
Countries with nothing like our overbanked economy have also gone down in flames; look at Spain, where the regulation of banking was far better, and their problems now far worse. Over in Spain, no doubt, they are arguing about what sort of massive penalties to impose on property developers, those followers of Mammon that are behind all this.