How city fat cats took home £17bn bonuses... as their banks crumbled
The scale of City greed was laid bare today after taxpayers handed British banks an historic £37billion lifeline.
As the seeds of the current financial crisis were being sown, bosses awarded themselves a record £17billion in bonuses.
The extent of the Square Mile's reward system left MPs seething hours after Gordon Brown unveiled his unprecedented nationalisation of two of the nation's biggest banks.
Canary Wharf: The bonuses paid to city executives is nearly half that given out in bonuses last year
The Prime Minister called time on a bonus culture blamed for encouraging the risk-taking that brought the global financial system to brink of collapse.
However, it emerged that this year billions have been showered on the very bankers and traders at fault. The sheer scale of the payouts underlined the importance of Mr Brown's pledge to end the 'rewards for failure' during what he called the 'Age of Irresponsibility'.
In return for £37billion in taxpayer funds being used to buy stakes in Royal Bank of Scotland, Lloyds TSB and Halifax/Bank of Scotland he ordered an end to cash bonuses for bank directors this year, and no dividends for shareholders.
And Government-appointed directors will be placed on the banks' boards to oversee the taxpayer's holdings. On a landmark day for the financial system:
The Treasury announced the taxpayer will take a 60 per cent stake in RBS and become the biggest single shareholder of the new Lloyds TSB/HBOS 'superbank'.
Four leading bankers at the two institutions fell on their swords for their part in the fall of the businesses. France, Germany, Italy, and Holland joined the U.S. in unveiling British-style rescue schemes to prevent a global depression.
A wave of relief swept world markets with the FTSE closing up more than eight per cent. Wall Street saw its largest rally in history finishing the day up 11 per cent at 9387.
But startling figures showed Mr Brown's bank bail out will mean the biggest increase in debt by any peacetime government, equivalent to £10,000 for every man, woman and child in the country or more than £40,000 for every family.
Lenders including state-owned Northern Rock refused to pass on a 0.5 percentage point cut in interest rates to cash-strapped lenders - even as the Government pledged to ensure a good deal for borrowers.
There were calls for the Lloyds TSB/HBOS merger to be abandoned amid claims it would reduce consumer choice while feather-bedding jobs in Alistair Darling's Scottish constituency.
Mr Brown is being hailed by some as the saviour of the international banking system as his rescue plan was matched by other major countries.
The amount of public cash poured into the world's economic black hole topped an awe-inspiring £1.5trillion.
Mr Brown seized on signs of worldwide agreement after weeks of wrangling to issue an ambitious call for the creation of a global regulator to monitor international markets.
He even held out the prospect of a profit for the Treasury, but could give no idea how long the banks would be nationalised for.
Gordon Brown's masterplan is being adopted by other major countries
However, it was news of the bonus bonanza in the City that will infuriate families who are struggling to make ends meet.
One MP called for the Government to scrap the City bonus system altogether.
Dr Ian Gibson, Labour MP for Norwich North said: 'These people simply have not got the message.
'Well it is time the Government gives them the message - it is time we put on our heavy boots and stamp on this bonus practice completely. The people in receipt of this money are not worthy enough to receive such huge sums.'
Labour MP Austin Mitchell added: 'I hope this state nationalisation will put an end to these obscene City bonuses.'
While the City watchdog yesterday urged restraint on bank bosses, union leaders described the Government's approach as 'toothless'.
On the up: An investor looks at a screen displaying stock information at a brokerage house as China's stock market rebounded from early losses
It was clear the Square Mile's bonus culture helped propel major banks to the brink of collapse by encouraging bankers to take ever-bigger bets with little regard for the consequences.
Some 60 per cent of the record £28billion payout during this year's bonus season went to financial services employees, the Office of National Statistics said. Yesterday the City watchdog the Financial Services Authority wrote to banking bosses encouraging them to be responsible about payouts.
But the 'best practice' letter sparked disbelief among unions. TUC leader Brendan Barber said: 'We take the rather old-fashioned view that bankers, like the vast majority of people at work, should be paid a proper wage for doing a good job, and should not require bonuses to get up in the morning.'
Earlier Mr Brown claimed he wants to crack down on ' irresponsibility or excessive risk-taking for which the rest of us have paid'.
Chancellor Alistair Darling said board members must in future pay far more attention to the level of risk their banks were taking. 'It is really quite extraordinary that boards themselves didn't more fully understand what risks that they were allowing their banks to become exposed,' he said.
Yet while bankers are scrambling to protect their payouts, pensioners are due to suffer as firms slash dividends to shareholders. Under the rescue package the banks involved will pay no dividends until preference shares issued to the Government have been repaid.
The Government claimed to have secured 'strong commitments' that the banks will restore lending at competitive rates. Yet a series of banks, including Northern Rock, refused to pass on last week's reduction in the Bank of England base rate to 4.5 per cent.
'I love us taxpayers owning a bank.'