At the turn of the 20th Century, fearing an outbreak of plague, the municipal authorities of Seattle offered a bounty on rat-tails. Soon, substantial pay-outs were being made without a comparable reduction in the rat population.
Then, the Seattle Times reported that a rat-farm had been discovered, which encouraged other entrepreneurs to start their own rat-farms. Although it did not become a serious problem, officials joked about taxing the rat-farms to pay for the bounty.
No outbreak of plague took place, and by the bounty was discontinued.
During the Great Depression, with dilapidation of many properties and a large migrant population, rat problems resurfaced and the bounty was reinstated. Yes, rat-farms started again, and on a much wider scale. This caused great mirth in the national press about Seattleites being hoodwinked twice.
Similar could have been said about the financial boom which rode on speculation and short-selling and hedge fund management. Bonuses (or “incentive compensation” as Bob Diamond of Barclay’s Capital said) outwith the ken of hoi polloi were routine, leading the hedge-fund maestro, George Soros to be scathing in his criticism of a failure to understand anything beyond immediate profit and reward.
The rat-farms of financial services continued to be built, until the whole city was over-run. Ordinary residents now found themselves knee-deep in rat piss whilst the farm-owners sauntered onto other money-growing businesses.
One such individual was the aforementioned Bob Diamond who, after selflessly foregoing his incentive compensation for 2008 aback a salary of a mere £30 millions, has moved sideways to become Chief Exective for the Barclays Group. When taking-over formally from John Varley in March 2011, he can expect to receive an annual salary of some £12 millions.
Barclays had avoided mutualisation through less-than-transparent fundraising activities with Middle Eastern investors, and is one of those banks which Alistair Darling admits were able to subvert the banking supertax.
Small wonder, then, that Diamond begins each day smiling.
Diamond does not come from a retail banking background. Instead his entire experience is with investment banking and venture capital and rat-farm construction.
Obvious undercurrents of principle amongst LibDems are evident with the circumspect but pointed assessment by the Business Secretary, Vince Cable who concedes that it is not his “job to appoint the head of a private bank. But what this appointment illustrates is the wider policy question about how banks can be made safe, and we are worried about this combination of the casinos and the traditional banks”; whilst Matthew Oakeshott, a ‘mere’ spokesman, described Diamond as “very good gambler” who “should not be running a world-class bank”.
When Lord Vetinari, the Patrician of Ankh-Morpork discovered that rat-farms were being maintained with the offer of a bounty, he had a more direct way of dealing with matters.