The Chancellor of the Exchequer in the U.K. — the country's equivalent of the American Treasury secretary — is moving to clamp down on bonuses for bankers and traders, according to a report in The Guardian, a leading British daily newspaper.
Alistair Darling, the chancellor, is moving forward with plans to "crack down" on the practices that he thinks led to the global credit crunch.
The report in The Guardian indicated that Darling was concerned about news that Goldman Sachs is poised to lavish massive bonuses on its investment bankers, even though the firm received bailout money from the U.S. federal government.
The reason Goldman Sachs and others are saying "BAB," or bonuses are back, is that profits are up on Wall Street and in the financial sector in general. Massive layoffs late last year have improved profitibility, as has shedding so-called "toxic assets," or sub-prime loans from the banks portfolios.
The U.K. is going to get rough with the banks under its jurisdiction that give bonuses, treating them as if they are riskier investments than their rivals, according to the Guardian report.
Darling is also poised to implement "clawback clauses" in legislation, which would enable the government to take back the money from the bankers private accounts if their institutions perform poorly in the future. The government of the U.K. might require that any bonuses in the future be paid in shares, rather than cash.
This is somewhat similar to what the Obama administration has talked about in the U.S., and as Mark Calabria, director of financial regulation studies at the Cato Institute, wrote recently in The New York Post, another example of a liberal policymaker who chooses to "put politics ahead of policy."
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