Margareta Pagano: £7,000 for a banker's wife's frock? Oh, please

WAG-chat in a Kensington café shows what's so wrong with banks and bonuses

Sitting in a café in Kensington last week, I couldn't help but overhear a banker's wife describing to a friend the problem with a dress she had just bought for £7,000 to wear at a dinner party which she is hosting for 30 guests.

The problem – she explained to her sympathetic listener – was that the zip wouldn't lie exactly flat unless she lost two kilograms. Her husband, it seems, had just pulled off the biggest deal of his career – hence the dinner – and it meant they would be moving to an even smarter Square which was a bit of a bore because she had just worked so hard redecorating their current house. The good news was that her design team could move straight on to her next house. It was impossible not to overhear the conversation because the tables at the Aubaine café in Brompton Road are so close together, and, every time this woman spotted another of her friends, they were waved over and the problem of the zip and the news of the bonus were shared once again.

Maybe the attitude of some of these women, whose sole occupation seems to be spending bonus money, should come in for a little more scrutiny – if not some of the blame. In the meantime, it might help the debate along if we make some changes to the language. Would these banker WAG types be quite so quick to boast about their husbands' bonuses if the term was changed to commission? After all, commission would be a more accurate and egalitarian term. Even they must know that the word bonus comes from the Latin, meaning the "good" beyond the line of duty. Unfortunately, it's a word which was hijacked by financiers about two decades ago to describe the volatile nature of the money people in the industry are paid. Typically, most bankers are paid a "low" base salary – say £100,000 a year – and then they get a proportion of what they kill. Staff costs usually make up about half of all overheads – this is the bit known as the bonus.

It's important to remember this when considering the farrago swirling around the latest bonuses being paid by Goldman Sachs ($23bn this year) and Morgan Stanley, and to be paid by Barclays, RBS, the state-owned bank, and others. They are able to pay out so much – although it's only a year since they were rescued from extinction – because they are profitable again. They are so profitable for three reasons: the market has shrunk because players such as Bear Stearns and Lehman Brothers have disappeared; markets are booming because companies and governments have been more active again; and because they can still charge their clients whopping fees.

And this is the rub. The big players get away with charging clients so much because they run a quasi-cartel – because the cost of entry is so high but also because companies are frightened of bartering over fees.

At last, the UK's big institutional investors are getting agitated about the high fees, asking for guidance from the Association of British Insurers on how they can help companies stand up to the banks. It's a good sign, and hopefully will start us on the road to reform.

Even more pressing than how much is being paid out is the way that bonuses are structured, often leading bankers to kill more than they need to eat. Once again, it took Mervyn King, the Governor of the Bank of England, to throw down the gauntlet last week with his call to break up the banks, a view which is causing such delicious controversy from the City across to Whitehall.

Whether or not you share King's analysis (I do, along with a growing number of top bankers and regulators), he's absolutely right to have thrown down the gauntlet because he believes the reforms being carried out don't go far enough to stop it happening all over again. The nasty way Whitehall snubbed his ideas was not only wrong but a disservice to the public in the long-term.

There's no doubt that breaking up the banks would be a radical reform, but we live in radical times. As the past few months have shown, little has changed. Despite the greatest crash in nearly a century, the bankers still don't get it. Like the aristocrats in the years before the Russian revolution, they are still dancing, dressed in their finery, and, it seems, oblivious to the public's outrage and the harm they have done.

If bankers want to run their own casinos – and buy their wives £7,000 dresses – that's fine, but they should do so without the guarantee of taxpayers' money.

Rolet is driving so fast he doesn't need to do the Paris to Dakar rally

Xavier Rolet, the impressive new chief executive of the London Stock Exchange, won't be driving in next year's Paris to Dakar rally because he couldn't get the insurance now that he's at the Exchange – too expensive, even more than Marilyn Monroe's legs, I'm told. But Rolet, who has driven in the rally for the past five years, may not miss the adventure too much as he's getting such an adrenalin fix from racing the London exchange.

Since taking over in March, Rolet has snapped up MillenniumIT, the Singaporean software design house, and is about to take over Turquoise, his arch-rival exchange, which was set up by investment bankers because they were so fed up with the LSE's high fees. They are smart moves; one bringing in-house for the first time the geeks who will ensure the LSE stays at the forefront of new technologies. Secondly, by buying Turquoise, the Exchange will have its enemies inside the tent rather than outside.

But there's another, much bumpier, road which Rolet tells me he wants to drive down even faster – the one that encourages the UK away from its reliance on debt to a more tax-efficient equity culture, making it more attractive for investors. The UK is still one of the most expensive countries in the world to buy shares or bonds.

As we all know, but few put into action, the only way the economy is going to grow is by investing more in our SMEs, the small and medium-sized enterprises which will create the jobs of the future. Now that the banks are refusing to lend to them, there really is only one alternative – securities of one form or another. That means abolishing stamp duty and introducing tax incentives. If anyone can persuade the politicians, I'm betting this highly eloquent Frenchman could pull it off. I'd also be a buyer of the LSE shares, whatever Goldman Sachs says. Bonne route!