The Queen of gold-rush City

The City of London looked its brash "loadsamoney" self again yesterday, after an unexpected takeover bid by an American bank handed three money managers riches beyond the dreams of avarice. Tom Stevenson watched the new money rolling in.

The streets of London were truly paved with gold yesterday for a former librarian from Newcastle and her colleagues at Britain's biggest pension fund company. They are enjoying the fattest years in the Square Mile since the boom of the 1980s.

Carol Galley and two other directors at Mercury Asset Management (MAM) together scooped almost pounds 40m after American banking giant Merrill Lynch bought their company. In doing so, Merrill became the latest in a long line of foreign predators prepared to pay top dollar for a slice of the City's financial expertise.

Ms Galley picked up pounds 10m after the American bank bought her shares and options. This probably makes her the City's richest woman. Her colleague, Stephen Zimmerman, took home pounds 14m, as did Hugh Stevenson, the chairman of MAM. The payouts are certain to stoke the debate about the size of rewards available in the City.

The lottery-style bonanzas followed an unexpected pounds 3bn takeover of MAM, a group that manages more than pounds 100bn of the country's pensions. The swoop came as the City gears itself up for a Christmas bonus round that many believe will be one of the most generous yet.

Although Gordon Brown, the Chancellor of the Exchequer, this week publicly criticised the pounds 247,000 salary of the Thames Water chairman, Sir Robert Clarke, there is a growing feeling that far from changing the City's culture of greed, the election has simply hailed in New Labour, same old fat cats.

Although the pounds 10m Ms Galley received for her shares and options was small beer compared to that of some of her colleagues, it came only months after she hit the headlines with a pounds 5.5m salary and options package. That made the 48-year-old money manager, who shuns the limelight, Britain's best paid woman.

She is certainly Britain's best paid former librarian, having been catapulted into a world that her background as the daughter of a Newcastle council worker hardly prepared her for. Having started work in the library of investment bank SG Warburg in the early 1970s, she now owns houses in the south of France and Belgravia.

The managers of insurance and pension funds, who have traditionally presented the grey face of the City, have recently achieved an unexpected prominence. Ms Galley, famously dubbed the "ice maiden" for the cool manner in which she has dispatched underperforming managers such as Sir Rocco Forte during takeover bids, is one of the most feared women in company boardrooms.

She is one of many expected to benefit from the spiralling rewards on offer in the City this year. When Barclays said last month that it planned to pull out of investment banking, its chief executive blamed the withdrawal in part on the fairy-tale money that has to be paid these days to retain talented staff. Ironically, Barclays then had to guarantee large bonuses to its key staff to prevent them jumping ship before the company could be sold.

The jury remains out on whether the enormous rewards enjoyed by the Square Mile's best-paid individuals is good for the City as a whole, or indeed the country. The takeover of MAM, widely viewed as one of the City's biggest success stories, is the latest in a string of deals which have seen ownership of Britain's financial institutions passing into overseas hands. Establishment names such as Kleinwort Benson, Morgan Grenfell and, most famously, Barings, have been snapped up by foreign buyers in the past two years.

While London remains a leading financial centre thanks to the expertise built up in the City and its geographical position, only a handful of its institutions remain British owned.

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