Why bankers are like the miners

Rosa Luxemburg should have been an investment banker. Unlike any company I’ve ever worked for, investment banks typically earmark half their profits into bonus pools for their employees. It seems the financial sector is the last bastion of syndicalism, the early 20th century belief that since workers create the wealth, they deserve the profits. Shareholders at most investment banks have seen their wealth decline precipitously over the past few years, but the bankers who allegedly work for them haven’t done badly at all.  They have held on to their bonuses made in the flush years, perhaps had a lower one at the depths of the bust, and this year are set to get yet another record payout, funded, of course in large part, by taxpayer subsidies.

The notion that bankers deserve their outlandish salaries because they are ever so smart is laughable.  When was the last time you heard a witty quip from a banker?  When has a banker’s wisdom opened your eyes to the beauty (or menace) of the world?  There is a reason nobody wants to sit next to them at a dinner party. I have met grips and gaffers, bikers and poets smarter than much more highly paid financiers. Frank Partnoy, an author and former derivatives trader at Morgan Stanley, tells of a colleague who reminded him of Lenny, John Steinbeck’s intellectually challenged character from Of Mice and Men. Spectacular intellect is not a prerequisite for the big bucks in finance.



Tom Wolfe, in The Bonfire of the Vanities, his wonderful novel about 1980s New York, explained why bankers get paid so much. They gather “golden crumbs”, infinitesimal fractions of enormous sums. If you sell £10 billion worth of bonds, a £1 million bonus is just 0.01%, a meaningless crumb.  Bankers make so much money not because of their spectacular skills but because of where they happen to sit in the global economy.

Let us compare finance to advertising.  Martin Sorell, the owner of a slew of ad agencies wouldn’t dream of giving half his profits to his top copywriters. And yet the only asset of an ad agency is the talent that walks out of the door at the end of the day. Investment bankers like to pretend they and they alone create the wealth for their firm. Actually, they are pawns (albeit extremely well remunerated pawns), who without their firm’s capital would be unable to make a penny. The shareholders take the risk, they should get the reward.  Bankers today sound a lot like the miners did before Thatcher showed up. The miners thought they were irreplaceable too.