Indy Telecom & Industrial Media

It was bound to eventually happen, given the hue and cry over bonuses. And so it did.

Today, UBS announced what they call “Maluses” where previously earned bonuses will be forfeited if they underperform.

Just as bonuses (Latin for “good”) are paid out for good performance, maluses (“bad”) will be meted out if the bank subsequently makes losses or if the employee misses performance targets, UBS said. The maluses could wipe out all previously agreed share bonuses and two thirds of all cash bonuses under stringent new rules designed to align the interests of executives and traders with those of shareholders.

So, can we also extend this to the salaries of people, as well? After all, if you have to give up your bonuses when you underperform, why not give up your salaries and promotions when you underperform, as well?

Something tells me that this is not a good precedent — nevertheless, I see a lot of cheering from the sidelines for this move, unfortunately.

Paul Kedrosky talked about a blog post on Tired Fools, which talks about how in The Annals of Imperial Rome, Tacitus describes the credit crunch in ancient Rome, complete with property slump and government bailout –

Accusers were now intesely active. Their present targets were men who enriched themselves by usury, infringing laws by which the dictator Julius Ceasar had controlled loans and land-ownership in Italy. Since patriotism comes second to private profits, this law had long been ignored. Money-lending is an ancient problem in Rome, and a frequent cause of disharmony and disorder. Even in an earlier, less currupt society steps had been taken against it. At first, interest had been determined arbitrarily by the rich, but then the Twelve Tables had fixed the maximum at 10 per cent. Next, a tribune’s law had halved the rate. Finally loans on compound interest were forbidden completely. Fraudulence, attacked by repeated legislation, was ingeniously revived after each successive counter-measure.

Now, however, the praetor Sempronius Gracchus, responsible for the investigation, was compelled by the numbers of potential defendants to refer the matter to the senate. That body – being implicated to a man – nervously entreated the emporer’s indulgence. It was granted. Eighteen months were allowed in which all private finances had to be brought into line with the law. The result was a shortage of money. For all debts were called in simultaneously, and the numerous convictions and sales of confiscated property had concentrated currency in the Treasury and its imperially controlled branches. To meet this situation the senate had instructed that creditors should invest two-thirds of their capital in Italy, and debtors immediately pay the same proportion of their debts.

However, creditors demanded payment in full, and debtors were morally bound to respond. The first results were importunate appeals to money-lenders. Next, the praetors’s court resounded with activity. The decree requiring land purchase and sales, envisaged as relief, had the opposite effect since when the capitalists received payment they hoarded it, to buy land at their convenience. These extensive transactions reduced prices. but large-scale debtors found it difficult to sell; so many of them were ejected from their properties, and lost not only their estates but their rank and reputation.

Then Tiberius came to the rescue. He distributed a hundred million sesterces among specially established banks, for interest-free three year state loans, against security of double the value in landed property. Credit was thus restored; and gradually private lenders, too, reappeared. However, land transactions failed to adhere to the provisions of the senatorial decree. As usual, the beginning was strict, the sequel slack.

On that note, it is rather interesting to look at the fall of the Medici bankers. Forbes recently had an article on the Medici meltdown, which talked about how the Medician crash was caused by warfare and misappropriation of funds, resulting in a rather large credit crunch -

“The fear of being annihilated by foreign powers, combined with the lack of transparency, allowed the ruler of the Republic to turn it into an effective tyranny. With the declared purpose of defending Florentine freedom and its way of life, Lorenzo raised taxes for the war and embezzled banking funds with the result (does this sound familiar, anyone?) of creating a huge credit crunch.

“The Medici Bank… had tenuous cash reserves that were usually well below 10% of total assets. Lack of liquidity was an issue for banking since its origins. Of course, in the Renaissance they dealt with thousands or millions of florins–billions were yet unthinkable. But would a bailout have been thinkable at the time? Lorenzo certainly bailed himself and his family out of a political and financial mess with public funds. He eventually gained for himself the superlative epithet of “The Magnificent” by obtaining fforeign military support and by compromising his city’s liberty.”

It is amazing how some things never change; they only get amplified, for better or worse. Perhaps, it would be worth a reminder that history doth repeat itself.

The MIT Classics Archive has the Annals of Tacitus, and the Gutenberg project has The Reign of Tiberius, Out of the First Six Annals of Tacitus; With His Account of Germany, and Life of Agricola.