Friday, June 15, 2012

A Banking Hare or Tortoise?

With Europe in economic crisis, there is a feeling that the hare bankers have already left the problems behind, laughing all the way out of the bank. Let consider two traders of before the economic crisis - one called 'Mr Hare', and the other named 'Mr Tortoise'. Mr Tortoise makes his employing bank £10 Million a year for five years in a bull market, and receives a £1 Million yearly bonus. Mr Hare on the other hand is a legend on the trading floor of the same employing bank. Mr Hare makes £100 Million a year for four years (the good years), and a take home yearly bonus of £20 Million. The employing bank did not want their star to leave them to go to a Hedge Fund. But in his fifth year Mr Hare loses £500 Million and receives no bonus that year. Mr Hare has never had to repay his past bonuses, that money remains his.

In summary after five years:
Mr Tortoise made the bank £50 Million and was given £5 Million in total bonus.
Mr Hare lost the bank £100 Million, yet he was walked away with £80 Million bonus.

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