Playing Silly Buggers with Pay Packets

MPs in London yesterday slammed the bonus system for British bankers, saying it had led to "lethal" risk taking. It did, and it will continue to do so until they revamp the bonus system and link reward with longer-term benchmarks. A little better risk management and stress testing would also help. The bonuses in the City of London were something to behold, making Wall Street almost pale in comparison. Real estate prices got so stupid I had to move to America to afford another bedroom. In 1997 I bought a flat in Notting Hill Gate for 205,000 pounds. Within 4 years it had doubled in value and before the credit crunch slashed London prices it was on the market for 695,000 pounds. This was a two-bedroom flat (one bedroom was so small it fit only a specially made double bed) with one bathroom and a tiny balcony. On one of the less desirable, non-leafy streets I might add. When City bonuses started taking off in the early noughts, every banker and his brother wanted to be in Kensington - the Central Line dumped them directly into Liverpool Street station. Traders who made bonuses in the millions were buying multi-million pound flats with 90% mortgages. Mothers were dropping off their precious little cargoes in financed BMW and Mercedes SUVs that could barely fit on the back streets. The bankers were, of course, in their Ferraris and Porsches - because even though they lived on the Central Line, they couldn't be seen TAKING the Central Line. The whole thing got way out of hand. And it is important to note that Brits were abusing credit just as enthusiastically as the Americans were. I hope the politicians and the regulators in the UK get a handle on this. Because the bonus culture made London unaffordable and unpleasant. And it used to be such a nice place...