The Peter (un)Principle(d)?

Hearing the news live on the BBC Radio 4 last night at 10.15 p.m., that Stephen Hester was declining to take his bonus, I thought: ah, he doesn’t want to be another Fred the Shred, he still has eyes on a knighthood. And sure enough, a précis of his explanation a few minutes later was that he did not want to be a pariah. So the European market is depressed because of the sovereign debt crisis, sending the Royal Bank of Scotland’s share price down by a third – it’s still a failure for a supposed Master of the Universe and why should failure be rewarded? He reduced RBS’s exposure here and slashed departments and offshoots there – this is his job for which he is paid handsomely to the tune of £1.2 million. A bonus is for going beyond and above the call of duty and succeeding. It is not a mandatory payment by virtue of its name – a bonus! If bankers don’t like these new strictures, they can relocate for there will be people who can fill their shoes happily under such rules and such people will be untainted of responsibility for the banking crash in the first place.


Also, Nicolas Sarkozy has unilaterally decreed that a Tobin tax will in be in place in France by August. A 0.1% tariff on transactions will not be a serious interdict to capital flows but will make bankers think twice when they sign off a deal, particularly if it is big. Sarkozy is clearly playing to a domestic audience’s dislike of globalisation and the CAC is not on the same par as the FTSE or Dow Jones, but it is brave nonetheless and making the people who damaged national economies are made to help pay for it (sure, within narrow limits most financial institutions may have repaid their debts but not for the wider damage that rippled out). Having Merkel campaign alongside him may rebound negatively though, as it did with Putin in the Ukraine in 2004. He won’t mention it during the election campaign but if Barack Obama wins a second term, it would be useful in staunching the runaway national debt of the USA. If Mitt Romney wins in November, expect all mention of a Tobin Tax to disappear without trace.