THE TELEGRAPH: Banks that have survived are in the black and it doesn't look like curbs on pay will stick, says Tracy Corrigan.
As the recession tightens its grip on the economy, guess who's doing just fine, thank you very much. Yes, after a blip last year, bankers are raking it in again. City and Wall Street bonuses are likely to bounce back in 2009, virtually unhindered by tight-fisted remuneration committees or draconian rules.
At the darkest hour of the financial crisis, when banks were going bust and governments were stepping in to save the system, it looked as if investment bankers' glory days were over – if not for ever, then at least for a respectable interlude, while the corpses were buried and the injured carried off the field.
But a quarter is a long time in banking. In recent months, profits have staged a remarkable recovery, as financial markets stabilised. Barclays and Goldman Sachs reported a sharp improvement in their fixed income, currencies and commodities businesses in the first quarter, while J P Morgan enjoyed "record results in credit trading, emerging markets and rates". At some banks, losses on old, bad debt continue to dent profits, but current conditions are surprisingly favourable.
How can this be, when the economy is still spiralling downwards? Part of the answer is that rapid contraction as a result of the crisis was a great help to those left standing. In the last year, Lehman Brothers went bankrupt, Bear Stearns and Merrill Lynch were taken over and the Royal Bank of Scotland pulled back dramatically. At all institutions, jobs have been slashed ruthlessly. The result is that while the pie has shrunk, it now has to feed far fewer mouths. Bankers are also past masters at increasing their profit margins in bad times – by charging customers more. >>> By Tracy Corrigan | Monday, April 27, 2009
