BBC business editor Robert Peston on fading hopes for a payouts agreement
The idea that we should be reading the last rites for the City and the UK's financial services industry, because of new constraints on how and what top bankers are paid, doesn't seem quite right in the context of the announcement today by JP Morgan of substantial new investments in London.
This leading investment and commercial bank, one of the top two or three in the world on some measures which employs 11,000 in London, is purchasing the not-so-old former Lehman HQ at 25 Bank Street as its new European investment banking HQ. Resonant or what?
It is also purchasing another building which it already occupies, at 60 Victoria Embankment, and it will continue to work with Canary Wharf on developing Riverside South.
In symbolic terms, given that all the talk recently has been of bankers flocking to Switzerland or Singapore - to escape the UK's 50p income tax rate and constant sniping from politicians and media about bonuses - this is quite a big deal (although some will argue that the lack of a firm commitment to the ambitious Riverside South development shows there has been some scaling back in Morgan's British ambitions).
And as luck would have it, the disclosure comes on the day that the bosses of the UK's biggest banks troop in to see the Chancellor, to discuss what commitments they can make to increase their lending to small businesses and decrease their bonus payouts to bankers.
What is clear is that the plucky efforts by John Varley, chief executive of Barclays, in talks primarily with the Cabinet Office minister Oliver Letwin, to establish some kind of entente cordiale between bankers and ministers are close to collapse (see my assorted notes on all this from November 14 onwards). A source told me that "all hope of a deal is hanging by a thread".
The mood of bank bosses about all this is one of despondency, and a number of them now think a deal with the coalition is impossible.
This is how the source put it: "special advisers have fessed up that a spat with banks removes the political pressure from Clegg, which is the coalition priority".
So the Conservative members of the coalition won't rein in criticism of bonuses by Lib Dem ministers, notably Nick Clegg and Vince Cable, on the basis that the Lib Dems have to be thrown some kind of bone, given the self-harm they endured over student fees.
For what it's worth, the gossip in bank boardrooms is that Mr Varley is so miffed at the apparent implosion of his assiduous efforts to agree a deal with ministers (which went by the moniker of Project Merlin) that it contributed to his decision last week to step down as chief executive a few weeks earlier than originally announced.
Here is the fundamental obstacle to agreement: Britain's banks feel they cannot unilaterally and permanently cut bonus payments to their investment bankers, without in effect signing a death warrant for those operations (because their top people would quit).
Although investment banking in general has had a worse year in 2010 than in 2009, bonuses at Royal Bank of Scotland would still be a smidgeon over £1bn when they're announced early in the new year, if they are pro-rated on the basis of the 2010 payout.
And total remuneration for investment bankers at Barclays' investment bank, Barcap, (that's their salaries plus bonuses) would be somewhere between £5bn and £6bn, if trends for the first nine months of the year are sustained.
Now to be clear, for both RBS and Barclays these rewards to investment bankers go to thousands of people all over the world, not just in the UK. But, even so, at a time when the public sector and many parts of the private sector are still feeling the pinch, no mainstream politician is going to stand up and celebrate bonus payments running to billions of pound paid to bankers widely viewed as having made a particularly handsome contribution to the mess we're in.
However, the problem say the bankers is that in the absence of some kind of entente between the banking class and political class, the banks continue to feel discombobulated, and that makes it harder for them to join the common struggle to rebuild our economy (bankers, of course, say this more in sorrow, rather than as a threat).
So is there any scope for compromise? Well, it is interesting that Vince Cable, the Business Secretary, has been banging on about the need for banks to disclose precisely what they pay their biggest earners (to prevent what he calls the "fungus" of unwarranted pay spreading in the dark). His call for publication follows the decision of the Treasury in late November to shelve legislation that would have forced such disclosure.
It certainly wouldn't be hard for the chancellor to reinstate that legislation. And, as it happens, bankers tell me that they really wouldn't object to fiercely. As one said to me, "if we can't justify what we pay, we shouldn't be paying it".
Second, there is some bemusement that the Financial Services Authority didn't slightly toughen up the bonus restrictions agreed by European regulators when interpreting them for London.
In particular, it might have made life easier for those who run our biggest banks if the FSA had imposed a ban on all cash bonuses - in that if none can pay in cash (as opposed to paying out in shares or subordinated debt) then they would not have to worry about losing people to rivals down the road.
So I wonder whether a common agreement to avoid all cash in bonus payments might not form the basis of some kind of truce with ministers.
Would that avoid all criticism of bonuses? Of course not. Bonuses paid in shares or subordinated debt will still be very valuable to the recipients, and will be seen by many as unfair and unwarranted.
But, at least, when shares are paid in paper rather than cash, there is some benefit to banks' depositors and creditors, in that the capital of the banks - and their ability to absorb shocks - is increased (although shareholders may resent the dilution of their interests).
You can keep up with the latest from business editor Robert Peston by visiting his blog on the BBC News website.