Social cost of the bonuses in the banking sector

As we approach the first anniversary of the collapse of U.S. investment bank Lehman Brothers, bankers and traders at major banks still receive a larger share of the profits of financial companies in which they work than they took during the years of economic boom.
Leading banking institutions in the United States have paid their employees 156 billion U.S. dollars since the beginning of this year. Amount exceeds in size even if the remuneration paid for the same period of 2006, when the economy and housing sector thrive.
In recent months, politicians discussed whether the structure of bonuses can be changed in such a way that top bankers are not so prone to take excessive risks and make bets with careless investment of its shareholders, Reuters writes in kolumnistat Christopher Swan.
All agree with the fact that salaries and bonuses of the bankers are too large. And this fact is the background of the security and financial assistance that banks receive from the state. Governments of many countries have made it clear that they will not let big banks fail.
This, however, allows financial institutions to take big risks, a manufacturer of toothpaste, for example, can not afford. Bankers are very well benefit from the state security and allow themselves to take risks that they bear a large yield.
Study of the London-based firm Smithers & Co. shows that the average return of the banks is much higher than that of companies from other sectors of the economy. With the increase in financial leverage, it may reach 20% per year compared to 8% for other sectors.
Higher returns, however, occurred in investments which have a greater risk. And instead of banks to bear the consequences of their risky investments when they turn out to be losers, is formed so that ultimately the taxpayer bear the cost.
Before the start of the crisis in the UK financial services generated 40% of all profits in the corporate sector. Costs of financial services and now have the largest share of the budgets of most households in the country.
According to Paul Woolley, who is a professor at London School of Economics, the problem would be solved if the public realize that it pays too costly for financial services and establish an appropriate legal framework to limit the size of bonuses and risky bets.
Forcing banks to have sufficient own funds to cover the loss of their own risky decisions is the key to solving the problem. Salaries of financial experts are not so great because what they do, it is difficult to understand.
Paul Woolley strongly supports the introduction of a tax on financial transactions similar to the so Tobin tax. All financial transactions can be taxed at lower tax rate, which will limit unnecessary speculations and destructive force of financial assets.
The financial sector for years attracted the most talented people and their assigned activities, which often have little social value and are parasitic. Politicians should not regulate wages in the sector directly, but to restrict it by the appropriate regulatory reform.