Some of you will probably agree with this.Why City 'fat cats'...

Some of you will probably agree with this.


Why City 'fat cats' deserve their pay - and our respect


City workers earn a lot, but they risk their jobs to create wealth and stability, says Michael Snyder, policy chairman of the Corporation of London

Sunday September 16, 2007
The Observer


Every year, City 'fat cats' get slated for the size of their bonuses. Despite the billions in UK taxes paid by City workers, many people cannot accept that they are worth their large salaries - and even larger bonuses.
We can all understand, of course, why footballers like Michael Owen get paid a lot. They score goals and, as we have all kicked a ball badly, we know how scarce that skill is, and understand that the market must reward the best.


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But what these workers - in the Square Mile, Canary Wharf, the West End, Edinburgh or Leeds - actually do is a mystery to most.
So we don't think it's fair, even though financial services taxes pay for our hospitals and roads, and have made London the world's leading international financial centre, with all that implies for the arts and leisure. Even though a quarter of the UK's corporate tax take comes from financial services, and even though the City's success helps London make a net contribution to the rest of the UK of £20bn a year, still we say it's not fair.

City workers, however, have a special view of what's 'fair' because their livelihoods are tied to the market in a way that most of the rest of us would find chillingly risky. So risky that, as the worldwide credit crunch drags on, perhaps several thousand of those City 'fat cats' could be losing their jobs. Firms are quite shy about it, but we know that one big bank has culled 800 jobs and, with third-quarter reporting on its way, many investment bank staff are polishing their CVs in anticipation of a walk to the door with a cardboard box.

One pundit last week suggested that half of last year's 10,000 new jobs could go as the consequences of the sub-prime mess rumble on.

Compared with the problem of the liquidity levels in the world financial system - or the risk of a recession - these potential job losses are a minor issue. But everyone under threat is a person with a family and a home.

City workers earn their well-honeyed crust in the financial field, where loss and failure turn directly into job cuts. It may be that few of those who lose their jobs have gone anywhere near a sub-prime mortgage, but that won't save them if their employers (and shareholders) decide money has to be saved by yesterday.

This is the downside of the results-focused City culture, and one that few employed elsewhere get close to. Working in the markets, or in products and sectors related to the markets, means being subject to the toughest of market disciplines.

Like democracy, the market approach to global financial services is not a great system - but it's better than any other that's been invented. And the beneficiaries of this toughness are the general public, here and all over the world. Any time one of us leases a car, buys a house with a mortgage, expects to get a pension or lays off a risk using insurance, we are making use of City expertise and the ability of the City to assess risk.

When that assessment is wrong, punishment is swift. City workers (and markets) are part of the global entity that redistributes reward according to the ability to manage risk. They take the uncertain and package it, price it and find a home for it in a way that generates value and minimises inefficiency. So while some City workers earn a lot, they also take risks with their careers so that the rest of us can live in a world that is a little bit more predictable.

We've enjoyed strong bull markets in recent years, and some people have forgotten that times can be tough. Fear, or at least a focused edginess, is back in vogue, and across the City and the UK a lot more attention is being paid to the figures, and the reality to which they are tied.

This kind of thing is cyclical, and does not fundamentally undermine the sector, but it will undermine some jobs. And that, in one sense, is good. We are all living longer and expect financial returns to continue after we stop working; the quality of my life, your life and that of the granny next door depends on bankers, professional investors and credit analysts doing their job right.

When things go wrong, the seriousness of it is reflected in the fact that some people, good people, lose their jobs. It's a personal hardship and no fun being part of a down cycle in your local job market. But it's in all our best interests.

It's a (hard) fact of City life we should perhaps all remember the next time other people's bonuses are announced.

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