Obama talks tough on day Goldman reveals bonus pot.

Obama has finally turned his attention to the banking industry, which is continuing to pay itself mammoth bonuses for gambling with other people's money, whilst remaining stingy about who it will lend to in the current climate.

"My resolve to reform the system is only strengthened when I see a return to old practices at some of the very firms fighting reform," he said, "and when I see record profits at some of the very firms claiming that they cannot lend more to small business, cannot keep credit card rates low, and cannot refund taxpayers for the bailout. It is exactly this kind of irresponsibility that makes clear reform is necessary."

There is no-one I can think of, apart from the bankers themselves, who would not applaud some kind of intervention to scale back the behaviour of these buggers.

The President's intervention came on the day Goldman Sachs reported its financial results for last year. The figures showed a doubling in revenues and profits that beat the previous record set on the eve of the crash in 2007. The White House press conference announcing the new clampdown began while investors and analysts were still listening in to a results presentation by Goldman managers. "We planned ours first," said the chief financial officer, David Viniar, when analysts grumbled about the clash.

Goldman's 32,500 employees were paid an average of $498,000 (£307,000) in 2009 – up from $317,000 (£195,500) during last year's financial panic but down from $661,490 (£408,100) in 2007. The company says that, while most bankers' pay takes the form of a year-end bonus paid in January, the total includes salary and benefits such as health insurance. The average is skewed by the huge bonuses paid to top earners, which can run into millions of dollars.

In the first nine years of the decade, Goldman distributed 47 per cent of net revenues to staff and looked on course to pay record bonuses this month. But it slashed the 2009 ratio to 36 per cent. Instead of paying more money into the bonus pool in the last three months of the year, it took out $500m (£308m) for Goldman Sachs Gives, an in-house charity that funds community development and education programmes.

On Wall Street, where the proportion of net revenues paid as compensation is closely watched, the change was being greeted as a daring experiment. Mr Viniar was peppered with questions about whether Goldman workers might flee to other firms where they may get a bigger cut.

"We have tried to strike a balance between the needs of the public with the needs of our people, and we think we have struck it well," he added. "We hope not to see high [staff] turnover."

And this is always the threat. That the staff will walk if they are not paid obscene bonuses. The "wealth creators" - as they flatter to call themselves - might run off and create massive debts for someone else.

Obama is finally signalling that the party might be over:

Mr Obama - who said he was "ready for a fight" with banks - plans to limit the size of banks and impose restrictions on risky trading.

"Never again will the American taxpayer be held hostage by banks that are too big to fail," Mr Obama said.

"While the financial system is far stronger today than it was one year ago, it is still operating under the exact same rules that led to its near collapse," Mr Obama said.

His proposals may mean that some of the biggest US banks have to be broken up.

They also include a ban on retail banks using their own money in investments - known as proprietary trading. Instead, banks would be limited to investing their customers' funds.

The fall in share prices at some of the banks appears to signal that they too realise that things are going to change.

The truth is that a lot of these companies are paying their staff huge bonuses, despite taking public funds in order to keep functioning. And, as always, they claim that they need to do this to stop their workers from walking away.

And their workers, they would have us believe, are continuing with this threat even at a time when they have almost brought down the entire world's financial system through their greed and recklessness.

Their behaviour since the crash shows that they have learned nothing from recent events. They seem wilfully oblivious to public anger at the debt they have saddled us with.

Obama should be ruthless with them.

UPDATE:



Here Obama talks of banks and financial institutions which took part in "this binge of irresponsibility".

Click here for full article.

Tags: Obama, Banking, Bankers, Goldman Sachs