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Monday, August 10, 2009

Squeezing The Balloon

As the tide of public opinion turns against mega bonuses, Citywire reports that the City has come up with a "novel" wheeze for ensuring that their "star" players are not inconvenienced by having to cut back on their lifestyles.

Salaries are being increased to sop up the shortfall on bonuses.

Those of you with even a rudimentary intelligence will have probably guessed that would have happened anyway, you squeeze a balloon at one end it will expand at another.

The FSA have tried to direct people's attention to their "pro active" (albeit many years a coming) actions wrt bonuses. Hector Sants claims that the FSA would not allow any "new" multi-year guaranteed bonus payments to be made.

However, as the article points out:

"The FSA fears that if base salaries were low, it would make it difficult for a bank to eliminate or cut bonuses in a poor financial year."

In other words, in order for the FSA to show that it has actually done something (ie cut bonuses) it has to allow (nay force) companies to increase base salaries.

The FSA truly is a creation of Brown!

I look forward to its demise in the next 18 months.

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