Jake's View | Bankers' high pay is governments' fault

Ten times as many London-based bankers as previously expected could be caught by Europe's cap on bonuses in a fresh sign that regulators are attempting to clamp down on City of London pay.

Here is the relevant question to consider in this latest European Union tempest about bankers' salaries: How much rent would you pay for an asset that can earn you $10 million a year?

We shall put it in these impersonal terms because that is how they are couched in practice these days. People aren't people. They are human resources, sort of like plastic pellets are input resources and a line of credit is a financial resource.

The difference is that you cannot buy and sell this human resource asset. That would be slavery, which is a crime against humanity and has been eradicated from the world, except where it is politely called indentured labour and constitutes a significant proportion of employment in countries like Bangladesh and Pakistan.

But we are talking of London, where one can only (I hope) rent this asset and where it can always part company at short notice. How much would you pay for the (you hope) exclusive use for a year of this asset's time and efforts?

It wouldn't be the $10 million the asset can earn you. There would be costs involved in office space, desk, communications and lunch expenses and you also want to turn a profit on the asset's use. But it could easily be $5 million, if you have no other way of making this money, and you could easily justify paying that much if your shareholders ask.

That is why some bankers are paid huge salaries these days. They are worth it. They have spent years learning the detailed ways of whatever specific financial market they play and they can make buckets of money for a bank that wishes to put money at risk in these financial markets.