The Irish Finance Minister has acted promptly to shut down the programme of one his busted banks to pay out millions of euros in staff bonuses, which the management claimed they were legally obliged to pay. This is exactly what should have happened everywhere including the U.K.
The proposition that to do so would drive all the bankers abroad is propbably wrong. Even if they did go overseas, the problems for the U.K. economy are greatly overstated. Most U.K banks are technically insolvent, because 75% of all their lending is secured on property and property remains significantly overvalued.
Moreover, by fuelling a property boom which drove up assets way above their worth, the banks were at the heart of our economic crisis. Their focus on an essential commodity, which is what housing is, to the exclusion of business and industry, produced a fatally flawed economic model and saddled both individuals and the country with a mountain of debt. This debt will act as a brake on economic growth for two, maybe even three generations.
The FSA has published new and stricter curbs. What is needed is a tough doctrine like the Irish. No taxpayer support now or in the future if you do not curb your pay. We will let you go bust, you will lose all and if you have been reckless we will put you in gaol. However we rebuild our economy, if it is to last, it will not be on the current culture of what constitutes wise, profitable and socially useful banking. The present model runs huge risks, creates false markets and sucks money from the many to give to the few. It has no moral compass and is financially destructive. It is at the heart of all the cuts, the curbs and the suffering. Time to call its bluff.