The week that Lehman Brothers went bust, in September 2008, American TV networks began referring to the “end of the age of greed.” It was a neat phrase that summed up how a system had generated unprecedented riches for a tiny elite -- and then broke down. From now on, vowed politicians, things would be different. The banks would have to be reformed. Fat chance. Next month (December), the investment banks that are off government life support will stage their annual drama, as traders and executives demand, plead and haggle over their year-end bonuses. Goldman Sachs has amassed a global giveaway fund for this year of £10bn and rising, so that staff will scoop an average GBP323,000; the outlook is similarly sunny at Barclays.

How did crisis turn into business-as-usual? There are plenty of reasons -- supine governments, soaring stock markets (the Dow is well over 10,000 again) -- but a strong one is suggested by John Cassidy in his book: stratospheric bonuses and telephone-number salaries continue to be treated only as a narrow technical problem.

Get the incentives right, runs this thinking and the rest will fall into place. Convince the shareholders - who ultimately own Barclays, Goldmans and other institutions -- to work alongside government regulators in keeping pay deals under check, and the madness will be held at bay. In other words, the same system that brought us to this crisis but, in theory at least, tougher.

This is the approach taken by the British premier Gordon Brown and the British finance minister Alistair Darling. They have commissioned City of London (the U.K.’s financial heart) insiders to come up with proposals on how banks should be better regulated, which is a bit like asking the tigers to design their own cages. One of those reports will be published on Thursday by Sir David Walker, former chairman at Morgan Stanley. Early indications suggest it will have some good ideas -- stricter rules in the boardroom, greater transparency over City pay -- but it won’t go far enough.

As a recent report from the Bank of England shows, governments in the U.K., U.S. and eurozone alone have spent over $14 trillion to prop up the banks -- almost a quarter of global GDP.

Bankers’ pay was once a subject pondered over by academics while financiers played the system with abandon. Now, however, it is public and political.

The gauge of progress on runaway City pay will be if Brown helps bring in an international tax on bank trading, or if (his probable successor as PM) David Cameron demands a strict cap on investment-banker bonuses. And what are the odds on that happening? -- © Guardian Newspapers Limited, 2009

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