Morning Line: The financial sector parties again like it is 2007

While the rest of the country is bracing itself for a new age of austerity, the City is enjoying a new age of plenty. How do they get away with it?

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by Tony Bonsignore on Jun 17, 2010 at 12:05

Remarkably, unbelievably, the City is partying again like it is early 2007.

If you don’t believe me, watch Will Hutton’s excellent Channel 4 Dispatches from earlier this week on ‘How the Bank Won’. Or read some of the excellent work being done by the Which? Banking Commission or the CRESC Centre at the University of Manchester.

Or better still take a trip to the City.

Speak to the recruitment consultants there and hear how there is now a desperate shortage of ‘talent’ at all levels in banking, and how far wages salaries and bonuses have pushed up this past year.

Witness the flash new bars and restaurants still springing up everywhere, packed to the rafters every night.

Or hang out with some City types in these same bars and restaurants, and hear how good times are once more, how back in demand are their services, and how they are all worth every single penny.

It is a perverse state of affairs when one considers that the financial sector is still yet to pay back the vast cost of the last bailout, and the pain being inflicted on ordinary taxpayers in the interest of paying off the bankers’ past losses.

Not to the mention the fact that their recent revival is little more than a state-sponsored mirage, and that the financial system remains perilously close to another catastrophic meltdown.

So how has the City pulled off this remarkable feat, and is it sustainable? It is a complex ruse, one that cannot be reduced to any one individual or over-arching master plan. But it is clear that the City is winning some important victories.

First, City firms have so far successfully lobbied to remain as big and as globalised as possible, hence making the collapse of any individual firm as potentially catastrophic as ever.

Firms are thus still able to trade aggressively off the implicit support being offered by central governments, knowing that – just like in 2007 and 2008 – they will never have to face the ultimate consequences of their actions should it all go wrong.

It really is difficult to overestimate the value this lender-of-last-resort assistance to the financial sector, though the total figure over the past decade is almost certainly in the many hundreds of billions – and perhaps even trillions – of pounds and dollars.

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5 comments so far. Why not have your say?

Unbelievably true.

A friend who works in one of the big 4 accountancy firm mentioned how there was a person in the firm that they were looking to make redundant (obviously not hitting the mark).

Strangely enough they came back and said they wanted to hand in their notice because they'd got a job that was paying 3 x the current amount.

Fantastic. But where was this 'talented' person going...??

RBS

Yes that STATE sponsored firm!

Go figure as the Americans say.

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They are now so big and pay such huge amounts of tax on earnings that no government dare touch them. So much for democracy

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Tony Says come to the city and see for yourself. I did only last month. I noticed that a full english breakfast in a basement cafe in Lombard Street was £17.50p Too expensive for me. I tried a couple of bars, Beer £3.50p a pint, but the young barmaids gave me the cold shoulder, kept me waiting. They knew I was not a City type. The following evening I went to a restaurant, half expecting to be treated the same, but I was ushered to a table by a polite waitress. The manager came and took my order personally. Shortly afterwards a bunch of city types showed up, there was a lot of boisterous loud chatter and laughter. To my astonishment the manager came over and kicked them out.

The level of affluence in and around the City of London is quite striking. The following day I travelled to Kew Gardens, and enjoyed a stroll along the tree lined streets of select detached houses, worth I am told a million pounds a piece, and not a single one for sale. This contrasts sharply with some of the terraces of the North where you can find an average of 10% for sale with asking prices below one hundred thousand pounds.

This disparity in wealth cannot be ignored. If those in power are not seen as trying to be fair, anarchy will come to the surface, and the events which occurred in Paris in the eighteenth century could be repeated.

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True, most jobs being advertised now are for bankers, whether for an investment bank, a digital bank or corporate. These jobs are restricted to those who have previously worked in such posts. They are regrouping.

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terry shead

Jun 20, 2010 at 20:34

you have to ask yourselve one question how many bankers have got the sack and its going to happen all again the big boys they retire or they promote them look at sir fred.

terry shead

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