Charles O "Chuck" Prince, the former boss of Citigroup, is 57 years old. Even if he survives to an extremely ripe old age, it is difficult to believe that he will ever be able to find useful ways to dispose of the $95m he has been granted in assorted share awards and pension entitlements after his sacking. That, of course, is not the most serious objection to this egregious example of Wall Street excess (and whoever called it the "street of dreams" cannot have dreamt of payoffs like this). The obvious problem is that this is a reward for failure – and failure on such a grand scale that it is undermining the world's economies.
American investment banks are supposed to be ruthless organisations that will fire failing employees with no notice, no regrets and no compassion. That will no doubt be the deal when the rounds of redundancies ripple out to hit the Porsche-driving classes. Yet the bosses of Citigroup, Merrill Lynch and Morgan Stanley, who are responsible between them for about $25bn of losses, have been allowed to escape with their riches. Mr Prince even gets to keep his chauffeur for the next five years.
We now await developments in the British banking scene. Thus far only the chairman of Northern Rock, a relatively minor figure, has walked. In a few weeks the likes of Barclays and Royal Bank of Scotland will reveal to an anxious world their candid assessment of their prospective losses. There has been an information vacuum enveloping the high street banks; as with nature, the market abhors a vacuum and into it has rushed damaging tittle tattle. Believe what you hear and you could be forgiven for thinking that financial Armageddon was around the corner. Barclays was forced yesterday to deny a claim that it was facing a £10bn write-down. Too little, too late. The banks will be in severe trouble if headlines about their share price and the stock market's nervousness infect their depositors.
The case for transparency has always been strong when it comes to these sort of prospective losses, and is stronger still now, given the potential public interest. Should the worst come to the worst, as with Northern Rock, the Bank of England and the Treasury will have to stabilise markets. They must do better than they did during the Northern Rock fiasco. And whatever happens, we should not tolerate obscene "rewards for failure" on this side of the Atlantic.Reuse content