The UK’s Chancellor of the Exchequor, Alistair Darling, justifies his putative plans for a windfall tax on banks with the expression “we would expect the broadest shoulders to bear the greatest burden”.

Banquo will let others get into a lather about the negative consequences of capricious, retrospective taxes. What is most striking is the language that the chancellor chose to use. Isn’t it poetic? Doesn’t it make you want to do a Stanley Baldwin, call your tax office and make a voluntary payment? But also doesn’t it strike you as faintly sexist and old manual?  Shouldn’t wealthy women, narrow shoulders and all, pay too?

Maybe the chancellor has noticed that the Carringtons are back on TV and Joan Collins has the broadest shoulders of all. Or maybe the chancellor’s vision of the City of London is of sweating, muscular bodies hewing glistening lodes of gold from a mine deep below Threadneedle Street.  Harold Wilson’s “gnomes of Zurich”, but with broad shoulders.

Related reading:

Robert Peston: A bonus super-tax BBC

UK pre-Budget report 2009 FT

Westminster blog FT

Money Supply blog FT

Banquo is still an active investor so will declare his financial interest where appropriate in any blog post.

And another thing… (on bonuses).  One of the skews in the compensation schemes at large institutions with shared bonus “pools” is that those who do well when the firm as a whole does badly are paid poorly compared to those who do well when the whole firm also does well.

Why does this matter?  Because it encourages group behaviour.  If your institution lost big being long dotcom stocks in 2000, whilst personally you had a great year being short, you would have had the satisfaction of being right whilst all around you were wrong,  but not the satisfaction of spending a big bonus cheque.

So what would you have done? Resign to set up your own hedge fund, or stay loyal and make a mental note that next time you see a bandwagon rolling you’ll jump on board? And we’re surprised at herd behaviour!

Related reading:

London fights for its future FT

Beyond the financial crisis FT

Banquo is still an active investor so will declare his financial interest where appropriate in any blog post.

A few thoughts on paying our RBS brethren.  The best thing the board can do for all the shareholders at RBS is to reduce the government’s stake as quickly as possible,  à la Bank of America.  Diverting some portion of the bonus pool to repay the government or to reduce the size of the asset protection scheme might be tokenistic, but it would be good politics, and like it or not the board needs to be political.

Second, Banquo is on the board of a company that has an outsize compensation structure. This compensation structure needs to change, we know that. But wrenching, confrontational change will destroy equity value. There has to be a period of transition.

The alternative to managed adjustment of compensation processes is the painful, rudderless search for executive leadership now increasingly experienced (for different reasons) by ITVGeneral Motors and the aforementioned Bank of America.

The government knows that if Hester and co resign then the headhunters will draw up a shortlist with names like  Chris Flowers, Archie Norman, Howard Davies and Callum McCarthy, all competent in their own way, but better the devil you know…

Related reading:

Would RBS directors really resign? FT Westminster blog

Banquo is still an active investor so will declare his financial interest where appropriate in any blog post.

Much gnashing of teeth about the threat to London as a financial centre at the Merchant Taylors’ on Tuesday night.

Forgive me if Banquo doesn’t get too alarmed. London’s status has been under threat since the Hanseatic league, and funnily enough its market share keeps on growing.

London’s preeminence is built on much more than “light touch regulation”. More regulation won’t help London, relative to New York or Geneva, but the expertise to develop and manage within that new regulatory framework exists in London.  Each new regulation will spawn a new business line.  Reg Q lead gave us Eurobonds, Basel II was the mother and father of shadow banking. The worst outcome for London and markets generally is a prolonged period of uncertainty.  If Monsieur Michel Barnier brings some French dirigisme to the overhaul of regulation London and its European hinterland should cheer.

Banquo is still an active investor so will declare his financial interest where appropriate in any blog post.

“Transparency” and “disclosure” are the watchwords of the credit crunch, and when it comes to compensation that seems to mean more reporting of what is paid to “top earners” outside the boardroom.

Some regulators have even gone so far as to suggest that well paid individuals should be named (addresses anyone?)

There are lessons to be learned here from Japan. Back in the day, the Japanese tax authorities would publish announcements in the newspapers listing the countries’ biggest personal tax payers with a “thank you” for the large amounts paid.

One of Banquo’s colleagues routinely made this list but somehow scraped in at the bottom.  He also received a letter from the tax authorities wishing him health and continued prosperity.  What impact would this approach have on western taxpayers?

Banquo knows many whose approach would be “if I’m going to be on the list I’m going to make sure I’m above her“, and if the incentive for a top place was a letter from Tim Geithner or a seat in the House of Lords, maybe we can put a dent in the budget deficit.

Banquo is still an active investor so will declare his financial interest where appropriate in any blog post.

Banquo spent Thanksgiving in the US. Where else?

And the most popular Thanksgiving parlo(u)r game this year? “Have you bought a bank yet?”

With hundreds of banks and thrifts still sinking, the FDIC is going to stay busy in 2010. If you are of good standing and can scrape together an equity cheque (or “check” over there), the FDIC has banks and thrifts which could be yours by Christmas. Banks of all sizes in almost every state of the Union.

And don’t worry too much about those bad loans on the balance sheet, Sheila Bair, FDIC chairman, will take 80 per cent of the expected losses, rising to 95 per cent if losses are higher than expected. Prices are reduced for quick sale, which makes purchasing a bit like a lucky dip.

Little opportunity for you to prod and poke your potential purchase but with Sheila on hand to send you an early rebate cheque and wear (most of) the downside, no wonder everyone wants a bank in their stocking this holiday season.

Banquo is still an active investor so will declare his financial interest where appropriate in any blog post.

Banquo has spent more than 20 years in investment banking and the hedge fund industry, splitting his time between London, New York and Geneva.

Why is Banquo anonymous? Because he operates at a senior level across the financial markets, advising and investing, buying and selling, hiring and firing. He’s still in the game but if he has a relevant financial interest in the subject of his posts, you’ll know about it. Being anonymous keeps things simple. Banquo will never betray a confidence although he is privy to many.

Banquo is still an active investor so will declare his financial interest where appropriate in any blog post.

Banquo

This blog is no longer updated but it remains open as an archive.

Banquo has spent more than 20 years in investment banking and the hedge fund industry, splitting his time between London, New York and Geneva.

Why is Banquo anonymous? Because he operates at a senior level across the financial markets, advising and investing, buying and selling, hiring and firing. He's still in the game but if he has a relevant financial interest in the subject of his posts, you'll know about it. Being anonymous keeps things simple. Banquo will never betray a confidence although he is privy to many.

Banquo’s blog: a guide

Comment: To comment, please register with FT.com, which you can do for free here. Please also read our comments policy here.
Time: UK time is shown on posts.
Follow: Links to the blog's Twitter and RSS feeds are at the top of the page.

FT blogs

Featured blogs

Undercover economist

Tim Harford answers questions with tongue-in-cheek theory

Westminster blog

Jim Pickard and Alex Barker on the UK's political scene