Outlook Proof, as if it were needed, that Barack Obama's administration gets it in a way that our own Government simply does not. The drastic pay cuts that Ken Feinberg, the President's pay tsar, unveiled last night for executives at companies where the US retains a bailout stake will do precious little to prevent future financial crises, or lift America out of recession. But they will go some way to appease millions of Americans who, like people all over the world, resent the fact that they're still struggling while those running the organisations which their tax dollars have saved are pulling down huge salaries.
Never mind that Mr Feinberg's strictures will apply to just seven firms (no pay cuts for those bonus-loving folk at Goldman Sachs, for example). Or that the blow of the 90 per cent cut in cash salaries he is ordering for each firm's top 25 executives will be cushioned by the fact that they'll still be allowed to receive stock (the actual remuneration reduction will thus be more like 50 per cent). And look past the fact that at some of the companies concerned, the pay cuts will be meaningless (Citigroup chief executive Vikram Pandit has already agreed to see his salary come down to just $1 this year).
No, the point about this move is that it is a blow against Wall Street struck on behalf of Main Street. It's a symbolic act from an administration that understands the huge frustration so many people feel about the perception that the good times seem to be back for the bankers but not for anyone else. And it will allow the debate to move on, enabling policymakers to refocus their efforts on the more fundamental issues of regulatory reform.
In this country, meanwhile, the sore of bankers' bonuses remains as painfully open as ever. The Government makes a great deal of noise about how angry it is that bonuses are once again being paid, but does nothing about it. Gordon Brown, Alistair Darling and Lord Myners have all talked about curbing the payouts, but given no clue about how they might do so. New taxes remain off the agenda, let alone any front-on attack on pay and benefits.
Even Lloyds Banking Group and Royal Bank of Scotland, where the UK taxpayer retains huge stakes, have not seen any hint of the sort of action the US is now taking. Indeed, Stephen Hester, the new chief executive of RBS, has been signed up with a multimillion-pound deal that has attracted much ire.
Our approach, of course, is the rational one. Now, more than ever, we need top-calibre people to run our banks. Pay is not the issue – it is the structure of future regulation that we must concentrate on getting right. Remuneration has, in any case, been reformed both domestically and internationally, through the auspices of the G20 agreement.
All true. But sometimes, the heart has to be allowed to rule the head. We should not pander to mob justice, but for everyone affected by the threat of higher taxes and lower public spending – let alone for those who have lost their jobs in the credit crunch-inspired recession – the perception of whether bankers are taking a fair share of the pain is important. Call it natural justice.
Naturally, President Obama was politically astute enough not to get his hands dirty on this issue. He may have given Mr Feinberg a mandate to tackle pay and bonuses, but it is not the President himself who is ordering these cuts. He will be able to say so next time he has to return to the fundraising trail with the many Wall Street financiers who have offered him such generous support.
Still, Gordon Brown and Alistair Darling could have given themselves the same get-out clause. UK Financial Investments, the government agency that administers the state's bank stakes, might have been asked to play the pay csar role in this country. It didn't happen. This Government, once so savvy about public opinion, has so far been unable to find a way to deal with the near unanimity of that court on City pay.Reuse content