Goldman paves the way for return of mega bonuses

BANKS are poised to start handing out multi-million-pound bonuses despite claims that excessive pay helped to fuel the global financial crisis.

Government bail-outs of failing institutions and a backlash against bankers saw bonus payments slashed last year as the world economy dived into recession.

But the curb on earnings looks to be short-lived after Goldman Sachs today paved the way for bumper payouts to staff in London and New York following better-than-expected results.

Liberal Democrat Treasury spokesman Vince Cable told the Standard: "I'm deeply concerned that they seem to have learned nothing from experience.

"It was the bonus culture that led these institutions into taking high risks which led to their collapse or near-collapse.

"They are ultimately dependent on guarantees from the taxpayer. They may claim to have paid off whatever taxpayer help they received but they ultimately depend on being bailed out by the Government if their position becomes untenable." Goldman Sachs indicated it would repay money borrowed from the US government, freeing it from restrictions on executive pay.

A large proportion of the payouts are likely to be in shares rather than cash to promote long-term success.

It could lead to unprecedented windfalls for bankers when shares rally from their current lowly levels. Goldman reported profits of $1.81billion in the first quarter of the year compared with $1.51billion in the same period of last year.

Other banks around the world are likely to argue they need to follow suit in order to attract and retain the best people.

Goldman chief executive Lloyd Blankfein is one of the strongest advocates of banks being allowed to resume paying bonuses. He is reported to have told him that a cap on pay "was going to limit our ability to compete, both here and aboard".

It comes after Gordon Brown and other world leaders used the G20 summit to argue that the days of large bonus payments were over. British banks which have been bailed out by the Government, including Royal Bank of Scotland and HBOS rescuer Lloyds Banking Group, were forced to cut bonuses or scrap them.

Barclays turned down all offers of government help and will next week outline its new pay structure at its annual meeting.

It will still allow it to reward top investment bankers with huge pay-outs but more of it is likely to be in shares than cash.

US Federal Reserve chairman Ben Bernanke tonight said the latest figures on housing and consumer spending suggested the rapid contraction in the economy could be easing. "Recently we have seen tentative signs that the sharp decline ... may be slowing, for example, in data on home sales, homebuilding and consumer spending, including sales of new motor vehicles," he said.However, disappointing figures from the US high street showed retail sales fell 1.1% in March.