Goldman Sachs bonuses - Professor Stefano Harney comments

"President Obama’s announcement means the UK government will have to act to break up the banks here in Britain.  Not to follow his lead would be to condemn the City of London to become the largest offshore banking colony in the world, with all the corruption and instability that would come with that.

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The big banks had their chance to act, but the announcement yesterday of big bonuses at Goldman Sachs, and the condescending donation to charity accompanying that announcement, confirms they just don’t get it.  These banks need to be creating jobs and making loans, not making donations.  

And the only way they will do that is if they are broken up and forced to make money from investment not speculation.  The first duty of any government is to protect its people, and today that first duty is to protect people from the too-big-to-fail banks.  That is why you will see the U.K. government follow President Obama’s initiative.

While it is true that the size of a bank does not predetermine its level of risk management, very large banks present a risk simply because of their size, and the destruction they wreak when they collapse on top of the economy, and the taxpayer. 

Goldman Sachs insistence of massive bonus payouts is an example of the arrogance that can lead from democracy to plutocracy, from rule by the people to rule by the rich.  It has acted as if all the cheap subsidized money it has been given by the U.K. Treasury and the U.S. Federal Reserve, and all the bailout money it has been given at low interest, all the money handed to it through the bailout of AIG, and all the sweetheart contracts the bank has been given to wind down positions in failed institutions, was its by right.  That is the definition of plutocracy."

Professor Stefano Harney is Deputy Director of the School of Business and Management at Queen Mary, University of London.  He is Chair in Strategy, Culture, and Society, and Founder of Finance Watch.