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A malus for every bonus

Robert Peston | 00:01 UK time, Monday, 23 February 2009

As you'd expect, the prime minister tried to take credit in his Observer article yesterday for abolishing what he called the "old short-term bonus culture" (he swanked that "we are changing the bonus system").

But bankers who've been in the game for a while - a bit longer than the vaunted era when "boom and bust" had supposedly been abolished - tell me he could have gone much further in his reform of bonus payments at Royal Bank of Scotland.

It's true that the new approach at RBS should reduce the risk that its bankers will receive bonuses for deals that turn out to be stinky - because payments will be deferred till it's clear whether those deals have really benefited the bank.

But even this amended bonus system still represents a one-way bet for bankers, a wager they can't lose.

In keeping with the norm of the past decade or so, RBS traders and advisers will continue to be rewarded if they make a profit when investing other people's money, the balance sheet owned by Royal Bank's shareholders, not their own capital.

So what's the worst that could happen to them if they didn't make a profit or even if their deals generated losses?

Short of losing their jobs, they simply wouldn't get the bonus.

Unlike proper entrepreneurial risk-taking, of the sort routinely practised by RBS's clients, there's no risk to the bankers' personal wealth: they wouldn't be poorer when the bank made a loss, they just wouldn't be any richer.

A genuine reform of the bonus-culture, one that would really put the kibosh on bankers taking foolish risks, would re-introduce the concept of the "malus" - or the idea that when a firm does badly, or a deal goes bad, the partners (in this case the de-facto partners, the top executives) take a hit and suffer a permanent diminution of wealth.

Much of what went wrong with the banking system in the past few years was that all the bonus accrued to salaried bankers, while the malus fell on shareholders.

It was rational for bankers to up the ante in the global speculative game, because they scooped the lot if they won, but any losses fell on the banks' owners.

In fact the losses at some banks turned out to be too big even for shareholders, which is why we as taxpayers have had to prop up so many banks across the world.

So guess who currently faces the malus?

Yes, since we own all or much of our biggest banks, the prospect of the malus is with taxpayers - and only the bonus (albeit deferred and subject to longer-term performance criteria) goes to the bankers.

This doesn't sound quite fair, does it?

Surely the prime minister could have transferred some or all of the malus back to the bankers themselves?

Comments

Page 1 of 2

  • Comment number 1.

    Robert - you have written a lot of rubbish over the last few months, but this is spot on. What we have witnessed was not capitaism, because risks were taken with other peoples money, so capitalism is NOT dead!

  • Comment number 2.

    Mr. Brown is demonstrating - as if demonstration was necessary - that he is the saviour of the planet when in Berlin but an abject whimp when returned to domestic issues. What is astonishing is that a person who is so incompetent as chief executive managed for so long as chief financial officer.

  • Comment number 3.

    Surely the prime minister could have transferred some or all of the malus back to the bankers themselves?

    He could've but he's too busy saving the world, to actually think about it! Making the rich, richer and the poor, poorer.

  • Comment number 4.

    Puzzle of the day. In plain English, bonus is defined as extra and optional. So why are banks still calling them bonus when they claim these had to be paid?

    Deferred "bonuses" are a small step in a race that needed leaps after leaps. This may be just be a delaying, stalling tactics.

    No amount of fiddling on "bonus" regulation will stop a "mole" from fleecing the banks and getting much more rewards even if he/she loses their jobs.

    Now that everyone know banks will always be bailed out, no lenders to bank should charge more interest on the pretext of greater risk. Certainly, no commision, no "introduction fee" etc.

  • Comment number 5.

    Thanks Robert for this info.

    Yes, it's much as we suspected - wet, weak, confused, scared Gordon Brown has just not understood it, and is in the process of letting things go back largely to how they were.

    It's sickening, and just goes to prove he is still petrified of doing anything that will be unpopular in the City, where he has been currying favour for the whole of his political life.

    He continues to be tucked up nicely in its pocket. He's quite terrified of putting the City at any sort of disadvantage to other financial centres but has completely missed the point that the people of the UK just don't trust banks as presently constituted anymore, and we don't trust bankers (and here I'm referring to the spivs, traders, dealers, gamblers and executive board and directors - not the large number of foot soldiers).

    He's ***** Prime Minister of all the people of the UK, not just the ***** financial sector for heavens sake!

    It's us that puts the savings into these banks that they are using to gamble, and it's us that pays when it all goes wrong.

    I think we need to move to a system where depositors get some measure of ownership of banks when they money on deposit, so we can control these.

    (..... looks like we are going to have to wait until Obama nationalises Citi and BoA and imposes serious restructuring to those guys there before Brown thinks something similar here would be a good idea).


  • Comment number 6.

    Hooray for Gordon Clown give yourself a bonus for sorting that one. Retire then become a Euro MP give yourself a bonus save the world. Oh sorry thats Blair

  • Comment number 7.

    Robert,

    Is this just a rant aganst RBS?

    Some perspective please. The bonuses being paid are bound in law as in a contract. If the government disagrees with this, well simply sue or shut up!

    Lloyds TSB was fined recently for name stripping in financial transactions by the US regulatory authorities, as this transgressed anti terrorism laws. Why have not the UK government or the useless FSA or SFO acted in a similar manner?

    Please tell me, is HMG for or against Al Quaeda and Taliban? Hmm.

  • Comment number 8.

    So you can take the banks money and gamble with it at no risk to yourself, in the event you loose it all, no worries, the tax payer will step in and give you even more money to gamble with, with even less risk of you being held accountable. Great plan Gordon ?.

    In the event you do not reach the required standard to receive your bonus, you will just have to fall back on 90% of your salary to buy you a third world country to retire to.

    In the event that the third world country goes into melt down, or for that matter a first world country, the pension anuity we the british tax payer has now funded, will I am sure secure you a comfortable retirement.

    I am looking at a career change due to the down turn in my area of work, looks like banking or politics are the place to be, still seems to be no down side to being crap at your job.

  • Comment number 9.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 10.

    I caution, that revolutions have started in societies equally as inequitable as ours of this time. There could be great social upheaval ahead.

    Apparently in 2007 28% of World GDP was remunerated to 2% of the population.

    The last time that happened was in 1929.

    Shortly afterwards, the social fabric of some nation states crumbled and deep rooted nationalism took hold.

    When our leaders protect the few at the expense of the many (as is happening now), surely revolution is the only way to readdress the injustice.

  • Comment number 11.

    Metal traders from RBS Semprea Metals are trying to aboid paying income tax on bonuses. The guardian (18 Feb) article titled "Bailed-out bank fights Treasury on metal traders' bonuses"
    reported,

    'Bonuses were paid into an offshore trust. Cash was then provided to their spouses as "loans".'

    The traders, have a history of seeking to escape tax or national insurance on their bonuses.

    !!!

  • Comment number 12.

    Gordon Brown never stops searching for a soundbite that might save his shattered career.

    His forlorn attempts to regain his status as Gulliver trying to save lilliput are both entertaining and pathetic .

    We shall miss his telltale delusions of granderr and his tic tac,now that his day at the races is over and he's lost our shirts.

    I suspect his final utterance will be "get out of my way before i crush you"

    I never thought i would hear him use the word prudent again ,but how wrong i was !

    The poor fellow has returned to mantraland
    to await the return of boomerangue pie in the sky .

    Gordon is to economics what Homer Simpson is to a nuclear power plant

  • Comment number 13.

    What's this about risk takers, Peston?

    As a whole unless the economy is in a risk neutral position we are loosing out.

    If the economy as a whole is risk loving it'll produce less than it should acting risk neutrally.
    (If it's risk loving the chances that it will make a loss on its ventures are higher than that it will make a gain)

    If its risk averse it will miss out on some perfectly reasonable ventures (ones on balance likely to succeed).

    So we don't need risk takers or risk averters. Just sensible risk neutral people.

    Did you get to read any Keynes whilst learning in the Thatcherite universities. Peston? (Flanders admitted a year or so ago that she knew nothing except standard neo classical theory - all of it wrong of course)

    Remember him saying that it was perfectly possible that a society might happen to have NO new profitable investment opportunities at all. That the more profitable ones would be too risky and those with highly certain returns offered losses.

    What to do?

    Why, replace the existing capital stock and use spare investment funds UNPROFITABLY, but socially, in a valuable way.
    Housing here, clean water, schools hospitals home etc in Africa would do nicely.

  • Comment number 14.

    Up late Robert, watching the Oscars?
    You (as usual) are so right. I work in the Petrochemical industry. Failure means flames and death, followed by the sack if not prosecution. For the medical profession it is worse. This does make us risk aware (and averse) which means that we take less risk, because failure potentially means the loss of life or the company. The banks have effectively, on a massive scale, achieved this. They must be stopped. Gordy is not the man for this job, or any other. His lack of prudence is akin to theirs, he, as they must go. He has been in charge while a vast asset bubble has been milked at the expense of the common herd. We, the herd should not accept this. Remember this when you are retired. There is no jam because Gordy gave it away.

  • Comment number 15.

    Hi Bob,

    What do you reckon of *that* dress? Looks amazing, doesn't she? And so fashionably late!

    A bit like Gordon, really. Apart from the dress. And the fashion.

    But, it has to be said, Gordon is so far behind the curve that he is late more often than my girlfriend.

    BTW: The horse is in another field somewhere by now.

    See you in the pub.

  • Comment number 16.

    Carping about bankers bonuses as a diversionary tactic is wearing thin. It is merely the tip of the iceberg of moral hazard created by government bailouts. Politically motivated manipulation of loan policy will become far more significant if and when it materialises.

    Similarly, carping about Mr Brown is becoming a diversion from the important issues. At least he appears to have a vision of where he wants to be and what shape he sees for our future financial sector. Fairly obviously he wants to stay in No. 10 and he has quite prudently worked out that the best way of achieving that is to give Joe Public what they want. Which is, of course, a return to the glory days of 2006/7 where we will still need the investment wizards, masters of the universe et al. To achieve it he is flooding the system with paper money (electronic actually) and so needs to retain the investment banking, and near banking, mechanisms to digest government paper.

    We, the people and importantly the financial media upon whom we rely to interpret what is going on, need to get a grip on the options open to us. If, based on an informed judgement, we decide to opt for a return to the status quo then surely we ought to support the valiant efforts of Mr Brown to put Humpty Dumpty back together again. If we decide against the old system then we ought to be much, much more serious about proposing an alternative. Diverting attention towards the froth that is bankers bonuses is hardly a good use of our time and poking Mr Brown with a stick is not very productive.

  • Comment number 17.

    There is obviosuly a lot of upset with the financial systems around the world. However, folks, we can't keep crying over spilt milk - nothing we do can change the past. But what we can do is start working today to make a brighter future. So stop stressing yourselves. Get to work. Spend what you can. Enjoy today.

    We have been through worse in the last 100 years and guess what.....the world is still here and today we are stronger, smarter, and more experienced.

    Cheers from Canada

  • Comment number 18.

    Whilst I was one who stood and cheered when Blair went, I smetimes wonder how this crisis would have been handled had he stayed.

    For one we may have had a PM who could see further than the world of banking. Who may have just spent some of the £b that have gone to just one section being spread out more fairly, to the victims of the crime, rather than the criminals.

    It is not the bonus than is wrong, it is the system in which they operate. Salesmen have received bonuses since time immorial, but they have never brought the counrty to its knees. On the other hand murderers receive no bonus but they still murder.

    Next time you interview Flash, or chat with him on the phone, could you not suggest that there is a life other than banking and as PM he should be aware that the UK over which he presides is not just a load of bankers. He may actually be surprised to hear that the vast majority, have only ever treated the banks as servants.


  • Comment number 19.

    So far the proposed changes to banking rules and bonuses do not address the basic problem. If a bank is deemed too big to be allowed to fail, how can it be allowed to take any major risks?

    What we need is either the current banks to be split up into smaller entities which could be allowed to fail, or there should be a requirement that the major banks satisfy an even higher liquidity requirement before being allowed to lend to higher risk clients. Finally there needs to be accountability so that failure to follow the rules results in personal financial penalty or even prison.

    All this messing around with bonuses is avoiding the real issue.

  • Comment number 20.

    I say, Robert, that was a beautifully provocative/evocative post which contains a wonderful amount of common sense and food for thought.

    And before we sit down for a meal and/or continue planning for greater feasts of information, there are some chefs offering other exotic and quite alien to jaded palate recipes, to add zest and life to any banquet in worshipful support of capitalism and the current of its power, money supply, in this sister New Statesman thread ..... http://www.newstatesman.com/economy/2009/02/bonuses-bankers-banks-staff .... rather than there being any Possibility of Returning to any Banking/Bankers System* based/addicted/dependent upon the Choking and/or Throttling of its Power with the Restrictive Practices of Head Bankers, which are [not] Intelligently Designed Specifically to give them a Perverse and Obscene and Corrupting Personal Global Control .......... Ye Olde Worlde Masters of the Universe Syndrome, which has Short Sighted Idiots perceived as being in Control of the System and likened as to having some mysterious Godlike powers, rather than just being in the vanguard of a much lower order of Being in Humanity.

    Power today is Firmly and Securely in the Impeccable and Impregnable Grasp of Global Operating Devices which Create in CyberSpace the Command and Control of Computers and Communications?.** And they would have and would Offer that the Facility be Adopted and Adapted and Utilised for ITs Better and Beta Servering of Global Needs and Feeds.

    And IT will/is Able to Provision for All Client Needs so as to Eliminate the Doubt and the Clout of Less than Honest and Equitable Present Feeds from some Right Dodgy Systems, should Change be a Step/Quantum Leap to Far for them to make on their Own, for whatever reason, valid or otherwise.

    Such is the Technology and the Faculty Easily and Readily Immediately Available to Smarter Societies Planning for Future Environments rather than living in and on Past Booming Glories and Busted Dreams.

    And Freely Shared here on the BBC for Global BroadBandCasting as AI Prime Public Service for Transparent Non-Exclusive Peer Review.

    * If one is to Blame a System for Sub-Prime Performance/Meltdown Greed and Personnel Enrichment in Order to Escape a Justifiable Censure and/or Public Rage and/or likely Civil and Criminal Proceedings, to continue to be a Present Defender of such Systems for Future Use, would then undoubtedly Identify one as ....... well, there is a well enough known saying that "the Love of Money is the Root of All Evil", and thus would one be so tarred and feathered for all to see.

    ** And only a Question so that you may Pause to Ponder and Think further on what you don't yet know, and on other things which you now most certainly do know by way of them being so Freely Shared with you about the Future and Possibilities for ITs Direction/Production of it to Everyone's Mutually Beneficial Advantage.

    Welcome to NEUKlearer HyperRadioProActivity in NIRobotIQs .... and Seventh Heaven Global Communications IT HeadQuarters.

    Virtual Change which is for Real .... [and which is 4Reality2 too ...an AIdDNA h3g3 thing? :-) ..... FlowurPower for Control to People and People 42 Control urPowerFlows]

    I Kid U Not and do Cordially Invite you to Deny what you now know to be True, which would be to Deceive yourself and thus risk a Charge which Invites/Incites the Presence of an Active Thoughtless Madness.

    SurRealist Master, Salvador Dali, is creditted with having said ..... "The only difference between a madman and me, is that I am not mad." He was a very clever man and left us with Wonders of Art to Behold and Visions of Beauty to Ponder in Imagination's See.

  • Comment number 21.

    they should get
    free jars of vaseline

  • Comment number 22.

    if the employees were shareholders
    they could take dividends for profits

    he ain't heavy
    he's my brother

  • Comment number 23.

    For starters, we need a criminal offence of 'reckless banking'. It is amazing to me that whilst those who make relatively small omissions on their tax returns or commit small-scale benefit fraud (rightly) face the full weight of the law, those who have brought the UK economy to its knees via greed are left with massive pensions and in some cases a spot on a government body or two.

    Those who've trashed the economy and ruined people's lives should face criminal penalties.

  • Comment number 24.

    once again a statement from GB designed to grab a quick headline and to create the illusion of "doing something"....... The problem is the media fall for this every time, give him the headline and fail to hold him to account by asking "real" questions and demanding a "real" answer (instead of allowing him to waffle on about hard working families, global problems, better placed, etc etc)
    He could of course stop all bonuses if he wanted, all he has to do is create a new tax (he is good at that ) whereby all "bonus" payments are subject to 105% tax....... problem solved!

  • Comment number 25.

    Isn't it ultimately the shareholders who select the board? Aren't they able to influence the bonus culture? As a result it sounds totally fair enough if the shareholders lose out as a result of selecting poorly performing board members who choose inappropriate bonus schemes.

  • Comment number 26.

    THis post is slightly off message..because the subject of the article is just blindingly obvious.... and although such downside balance wasn't in place the government could inject it in the way the Americans usually do by selecting one or two to tak to court ----pour encourager les autres.

    The off-subject part is two questions (related to the revivivication of the Bank formerly known as Northern Rock)?... have the government worked out what the average (and all other house prices will be by controlling the two main elements in the equations about affordability...

    If 3 times income and 90% mortages are the parameters in the new prudent lending regime..given the average wage is £25K to £30K then does this mean that loans for homes will be no more than £90K and deposits at least £9K..making the average house price drop to below £100K??

    Following on from which .... what happens to the existing house price owners in the UK as this trend plays out while they sit in identical homes to their neighbours trapped in over 50% of negative equity and paying over 50% more living costs.

    Incorrectly bonusing distorts the market... 'fixing the market' also distorts the market...

  • Comment number 27.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 28.

    Robert

    You have hit the nail on the head, but it's not just the bankers. You might like to address the issue of fund managers who invest the pension funds of UK companies. They have the same perverse incentives, every bear market is another opportunity to make a bonus of the next bull market, all the while the pension funds have been stripped.

    I often used to wonder where the massive bonuses of the City came from, the answer is You and Me and our pensions.

  • Comment number 29.

    Robert,

    I remember hearing these statements back in the 1970's and used to wonder, naively, if there was any real truth in them.

    "the rich get richer"

    "the poor get poorer"

    "politicians, national and local, always protect their own interests first, before those of the nation"

    "the wealthy always look after themselves"

    The last statement is spot on, along with your piece.

    Gordon Brown neither has the will, the courage, nor the negotiating power to take the Banks head on.

    He NEEDS the Banks and financial sector's support.

    Without them, not only does his Government fall, but every single project that him and NewLabour are connected with, will fall flat on its face, and the Bankers know it!

    We used to call it 'blackmail'.

    The new 'global order', which will inevitably rule our lives, will include the rich and powerful. i.e. the bankers and the politicians, who support them (not the other way round)

    Gordon, Alistair and Mandelson are, to put it in 'Dad's Army's Frasier's' immortal words:

    "they're all doomed. doomed I say."

    ps. glad to have you back from Wet Wales (W.et A.t L.east E.very S.ummer)

  • Comment number 30.

    The gambling mentality has got to stop, it also fuels the illegal (but hard to prove) side of banking – insider dealing and rumour-starting linked to short-selling. If I could make bets where, if I won I get the money but if I lost then someone else pays, then I'd probably start playing the market. Why should bankers be in this win-win situation?

    Brown has got to do one of two things to sort this out:-
    (1) He can either split the banking system so that domestic banks are again regulated and we can trust them with our money, while the investment banks will continue to gamble with investors funds. The difference being that the taxpayers clearly would not support the later if things go wrong.
    (2) Or he can regulate the system to limit borrowing (by banks) so at least they only play with their own (well, depositors money) rather than borrow hugely from money markets. Also the culture that rewards risk-taking must be abolished by reducing bonuses to a reasonable level – The amounts are obscene, but there also (counter staff) seems to be a view that if you do your job then you get a bonus. Bonuses are for exceptional behaviour (give counter staff higher salaries) and make sure that other contracts are written that bonuses are truly justified by beating the trend. Maybe only the top 10% performers get them?

    The trouble is that even with regulation excessive profits (with tax avoidance) and a rising gulf between super-rich and poor will continue if money continues to be this cheap, and enables the hedge funds/banks/whatever to continue buying up companies, moving the taxes into off-store havens, and then reselling as you described in your book.

  • Comment number 31.

    A bonus should be for running the extra mile and in the context of banking, the extra benefit to customers and other stakeholders should be seen as real and sustainaible. I am not convinced the bonus should become negative if the benefits don't materialise or indeed weaken the balance sheet. This might encourage severe risk aversion and I am reminded af the old adage "If you risk nothing, you risk everything".

  • Comment number 32.

    It's a start, a work of art
    To revolutionize make a change nothin's strange
    People, people we are the same
    No we're not the same
    Cause we don't know the game
    What we need is awareness, we can't get careless
    You say what is this?
    My beloved lets get down to business
    Mental self defensive fitness
    (Yo) bum rush the show

  • Comment number 33.

    Can't we ever ditch the great 'get rich quick' culture out of our system?

    How about a good old dollop of old fashioned, "a fair day's work for a fair day's wages" - and no "extra's", no bonuses, no back-handers?

    Whilst the old school of bank managers were well paid (comparatively) and generally well respected within the community, I don't recall all this bonus culture being prevalent. It was the shareholders- not the officers of the company - who got such things by way of dividend.

    And, yes, you're right Robert, people now seem to think they should get a dividend for gambling with other people's money ... not just a wage or commission.

    Going back to 'old fashioned banking' demands that we wave a final goodbye to the greed-driven, "give me, give me" culture of modern banking.

    And not just in terms of the bankers, but also the investors and the customers. Many ordinary people also need to realise they won't be property developing on borrowed money in the way that many have done in recent years. The Relocation, Relocation way of doing things is history.

    And if the financial ways of the nineties and the noughties are not condemned to history, then we'll reap the harvest of such civil unrest and disorder that the financial (and political) world will be changed beyond recognition anyhow.

    So, whichever way around, we've got to move beyond this way of thinking and doing business.

  • Comment number 34.

    Simply use existing legislation.

    Proceeds of Crime Act 2002.

    No imagination required.

  • Comment number 35.

    Ahh. Robert, but life was never meant to be fair, was it?

    Money talks.

    Money corrupts.

    Money makes the world go round.

    Ignoring Flash's 'smoke and mirrors' announcements for a minute, has anyone noticed the massive number of job vacancies being advertised in the Banking Sector?

    Amusingly enough, a number are for contract and consultant positions in SECURITY AND COMPLIANCE arenas.

    Saudi Banks are urgently recruiting for Compliance experts for Sarbanes-Oxley, European and UK legislative requirements.

    Note too, contract positions.

    Clearly when a Bank 'thinks' they have become compliant, they will probably 'dump' anyone who might know otherwise.

    Desperate measures for fast compliance?

    Smoke and mirrors? Of course.

    Status quo. Bankers. Politicians.

    Same time, Same jobs, same place and of course let's not forget, money again, SAME BONUSES!

  • Comment number 36.

    It’s not just the bonus culture, the banks and Gordon’s government both took huge risks with other people’s money over the past 11 years. The bankers were rewarded with bonuses which are now not due the Governments reward was political power which is also not due. The Government have managed to use the banking crises to divert attention from them, they encouraged and allowed the banks to lend as it kept the economy artificially prosperous for the past 11 years, it’s time for Gordon (during his role of Chancellor) to take some of the blame as well.

  • Comment number 37.

    So it's business as usual then.

    But not for the hundred small businesses being
    bankrupted every day by Banks ' withdrawal of
    overdrafts and raising of interest rates.

    Read Brown in the Guardian yesterday. Sick making.

  • Comment number 38.

    The damages in the tens or hundreds of billions of dollars. There is no way an individual or group of individuals could be penalized in a way that compensated the public and the shareholders of the bank for this kind of carnage.

    As for the cost of the public of the recklessness and incompetence displayed by the banker's management is according to Bill Clinton $30 trillion has been wiped out of the global economy in the form of asset values - more than twice the value of the American GDP.

    The bonus system indeed has to be rethought, but putting the onus on management for this wreckage isn't a way of proceeding.

    The penalties for corruption or deceit should be jail. Regulations must be amended to ensure that they are capturing any deceit that went on.

    Globalized nation has its advantages, but the centralized control exercised by a few worldwide financial institutions results in decisions that are correlated - when investments go bad they all go bad at the same time. Some thought has to be given to how to mitigate this effect, if indeed it can be mitigated.

  • Comment number 39.

    Re: #14 is spot on.

    Good article, Robert.

    Honest Risk Management and "conflicts of interest" in the ranks of the (banking) industry have been sorely lacking.

    Gordon Brown/Labour has been tainted, he does not inspire confidence and should move to a more suitable position.

  • Comment number 40.

    Robert,

    so are you saying that your friend wants more regulation? Is Mandy back in the country now?

    I think that is a red herring

    The current regulators couldn't use the rules they currently have, why would you give them even more to fail at?

    Nice to have you back Robert, but can we have something other than kite flying

  • Comment number 41.

    On point Robert.

    A good example of shared is the way the Lloyds reinsurance market works (or certainly used to work).

    1) Members of a syndicate are personally liable for losses (unless of course insured).
    2) Importantly, insurance profits are only assessed after 3 years, allowing for claims to be worked through.

    Bank trader's profits/losses should be looked at in the same way. Excess profits gained from market trades must surely be an indication that losses are piling up somewhere else, if not today then in years to come. Boom - Boom has never materialised.

    I also suggest that all such traders are subject to high taxation as a kind of long term premium ayable to the taxpayer for underwriting their excesses.

  • Comment number 42.

    It seems Brown has got something of a credibility problem given his past policies. Brown can not give up a bonus, so indeed he should perhaps do something else ......

    The credibility gap explained ...
    ... from Brown's 2006 Mansion House speech, only a year before Northern Rock imploded and he was still lecturing his continental european counterparts about deregulation:

    "Let me say I see no case for a European single regulator and will continue to reject such a proposal ..."

    "I believe that we were right not to go down that road which in the United States led to Sarbannes-Oxley, and we were right to build upon our light touch system through the leadership of Sir Callum McCarthy - fair, proportionate, predictable and increasingly risk based. I know Sir Callum is committed to reducing regulatory administrative burdens and the National Audit Office will now look at the efficiency and value for money of our system."

    http://www.guardian.co.uk/business/2006/jun/22/politics.economicpolicy



  • Comment number 43.

    Any news on the loan Deripaska seeks from Mandy, by the way?

  • Comment number 44.

    Robert,

    Maybe you could ask some questions about what this government is going to do over LDV?

    With all the hoohaa in the Lords about consultancies for Law Amendments, is it possible for Mandy to ascribe a conflict of interest because of his "friendship" with the owner of LDV?

    In the same interview we might then find out what happens at a yacht party when you only get one side of the story...or maybe there is a method of mortgage fulfilment that circumvents the current credit crunch. Who knows?

  • Comment number 45.

    The solution was simple; tell the banks they've failed and let them sink in their toxic debts, remove the fractional reserve franchise from the banks and create a vertically integrated money-supply system for the shareholders of UK PLC (the taxpayers/citizens).

    The banks have failed to deliver "value for money" for the shareholders of UK PLC - why it's time to put the parasite out of it's misery.

    It's naive to think that it is not possible a complimentary or new currency system.

    What frightened me the most over the weekend was all the talk of the IMF coming with 500 billion to "save the world" - I'm sure most of you out there are aware how the IMF is financed - it's all very very worrying.

  • Comment number 46.

    When are the 21 silver coins going to be handed to the individuals for their crimes against the country.We can no longer allow our country to be put under threat

  • Comment number 47.

    Gordon Brown has always worshipped bankers (or so called bankers) - he refers to them, gives them jobs in government, surrounds himself with them.

    The not so big news is that he still does so he's not going to upset them.

    Meanwhile, on the European stage he's looking for a job (he's knows what we know in spite of what the sycophants say).... Global Regulator or whatever it's going to be so he's got to sound tough.

    Please, Robert, can we have something a bit more interesting?

  • Comment number 48.

    Read Supt David Hartshorn, head of the Metropolitan Police Public Order branch, also in the Guardian this morning: "Suddenly there is the opportunity for people to mass protest." How interesting...

  • Comment number 49.

    Ah!......at last we now know what 'industry' GB is lining himself up for regarding his next job.

    It's not only his cabinet colleagues making discrete enquiries regarding their next career moves.

    The compliant are well rewarded by the MotU (after their careers in politics).

  • Comment number 50.

    As much as it's fun to take everything out on bankers and their bonuses this would be a step too far.

    If you do things this way you are effectively asking employees to become entrepreneurs. They are employees. If they were entrepreneurs they wouldn't be working in a bank they would have set up their own business and funds by now.

    I'm all for deferring bonuses. I'm a buyer, my targets include savings targets and I'm not bonused on them until the savings are delivered. But anyone who thinks I (or anyone other employee I know) would give my company permission to raid my bank account should things go pear shaped they need their head read.

  • Comment number 51.

    A 'malus': that's very creative. What would be Gordon Brown's 'malus' ?

    Then again, we shouldn't rush to penalise someone who's been trying his utmost, should we ?!

  • Comment number 52.

    A return to the real Robert! Looks like the week away has cleared some of the fluff from the little grey cells.

    Yes, Gordy has got it wrong again and when the opportunity to get to grips with a real problem requiring real leadership presented itself he bottled it, again.

    It is very clear that Brown and Darling et al. are too immersed in the banking world and have bought the self interested opinions they are being fed to hold off from more radical reforms of bonuses, business culture and separation of need (retail banking) from greed (investment banking).

    How about asking each of them on the next public occasion this question:

    Will you rule out ever taking paid work for a bank or other financial institution in future?

  • Comment number 53.

    Folks, GB won't be a Euro MP, he knows as well as Mandy does that the European Commissioners mandates finish next year and must be replaced.

  • Comment number 54.

    ROBERT, YOU'VE HIT THE NAIL ON THE HEAD.
    This is what so many of us have been whinging about for so long.
    They're not businessmen...they take no risk.
    They must accept the downside...not just the upside.
    If they dont take a true risk, they're just bank workers...and their bonus should just be say...10k maximum.

  • Comment number 55.

    Robert what you say makes sense if you look at the microcosm - but if you step back there is a bigger picture.

    People should be able to choose where they put their money.

    If people don't like what the bankers are doing with their money, they should be able to move their money to another bank...

    The government has a role ensuring that organisations are honest with the public (for an organisation to be otherwise is clearly fraud) - but apart from that their involvement is not required.

    Creating new banks should be easier - and given the massive debts the current ones have, it shouldn't be difficult to beat them hands down.

    To operate properly capitalism requires poor business to fail - artificially propping them up is bad on all counts.

  • Comment number 56.

    Dear Robert

    Ive made my mind up now not to take any further interest in what happens in Britain regards the Financial crisis, those responsible are getting away with the carnage they caused to ordinary people, and ill bet you , that some of them will be Knighted
    To keep their mouths shut.
    In all this the General Public are the one and only loosers.

  • Comment number 57.

    If you think Bankers have their snouts in the trough,

    Meet A B liar.

    http://uk.news.yahoo.com/18/20090222/tpl-blair-sets-up-consultancy-5b839a9.html

    No doubt G B ruin will soon join in.

  • Comment number 58.

    So Gordon...........well done ! As usual you are a master of the understatement in asking banks to behave like banks and curb 100% mortgages.How novel of you to suggest this panacea to all our ails.And bonuses too-nice to see you have taken an"iron grip"on the situation.

    You've already cured boom and bust with these marvellous measures.

    Nice to see your U turn with N.Rock too.........now re-entering the mortgage market.Cold comfort then for the thousands of mortgagees you've already squeezed out of the system,not to mention the poor unfortunates you've turfed out of their homes.No doubt they'll be pleased to hear the news.The swagger and arrogance seen around the N.Rock announcement was beyond contempt.I for one ,would not wish to be associated with such a lame duck of a company.

    What a triumph ! I wonder when you are about to perform your next miracle.More to the point-where's the money coming from.After all you've already robbed us blind with the invoices arriving in the next fiscal year and for many years to come.

  • Comment number 59.

    bonuses, bonuses, i have never in all my working life had anything to do with bonuses and i have been on both sides of the fence. My view is -- Show me a place where a bonus exists and i will show you a weak manager. No more bonuses, EARN your salaries.

  • Comment number 60.

    Just stop paying cash bonuses.

    Simple - give them share options instead.

  • Comment number 61.

    "A genuine reform of the bonus-culture, one that would really put the kibosh on bankers taking foolish risks, would re-introduce the concept of the "malus" - or the idea that when a firm does badly, or a deal goes bad, the partners (in this case the de-facto partners, the top executives) take a hit and suffer a permanent diminution of wealth"

    Applied to politicians would be good, too!

  • Comment number 62.

    old hat Bert - the bankers and very few get these mega bonuses - why not dig into why Hornby is still getting £60k per month as a consultant to a bank he almost sunk

    now that is what I call a bonus

  • Comment number 63.

    If some bonus must be paid due to contractual reasons that cannot be changed then could the govt introduce a special windfall tax set at say 99.9% on those bonuses?

    You're all doing very well !!

  • Comment number 64.


    Sounds like yet more of "privatised profits and socialised risks".

    Surely, an unsustainable social model.

  • Comment number 65.

    Dear Bob.....

    Don't want to worry you, and i would have e-mailed but i can't find your address but something to mull over your cornflakes.....

    From John Mualdin's thoughts from the front line....

    "It is East Europe that is blowing up right now. Erik Berglof, EBRD's chief economist, said the region may need e400bn in help to cover loans and prop up the credit system. Europe's governments are making matters worse. Some are pressuring their banks to pull back, undercutting subsidiaries in East Europe. Athens has ordered Greek banks to pull out of the Balkans.

    "The sums needed are beyond the limits of the IMF, which has already bailed out Hungary, Ukraine, Latvia, Belarus, Iceland, and Pakistan -- and Turkey next -- and is fast exhausting its own $200bn (e155bn) reserve. We are nearing the point where the IMF may have to print money for the world, using arcane powers to issue Special Drawing Rights. Its $16bn rescue of Ukraine has unravelled. The country -- facing a 12% contraction in GDP after the collapse of steel prices -- is hurtling towards default, leaving Unicredit, Raffeisen and ING in the lurch. Pakistan wants another $7.6bn. Latvia's central bank governor has declared his economy "clinically dead" after it shrank 10.5% in the fourth quarter. Protesters have smashed the treasury and stormed parliament.

    "'This is much worse than the East Asia crisis in the 1990s,' said Lars Christensen, at Danske Bank. 'There are accidents waiting to happen across the region, but the EU institutions don't have any framework for dealing with this. The day they decide not to save one of these one countries will be the trigger for a massive crisis with contagion spreading into the EU.' Europe is already in deeper trouble than the ECB or EU leaders ever expected. Germany contracted at an annual rate of 8.4% in the fourth quarter. If Deutsche Bank is correct, the economy will have shrunk by nearly 9% before the end of this year. This is the sort of level that stokes popular revolt.

    "The implications are obvious. Berlin is not going to rescue Ireland, Spain, Greece and Portugal as the collapse of their credit bubbles leads to rising defaults, or rescue Italy by accepting plans for EU "union bonds" should the debt markets take fright at the rocketing trajectory of Italy's public debt (hitting 112pc of GDP next year, just revised up from 101pc -- big change), or rescue Austria from its Habsburg adventurism.

    Western European banks have been very aggressive in lending to emerging market countries worldwide. Almost 75% of an estimated $4.9 trillion of loans outstanding are to countries that are in deep recessions. Plus, according to the IMF, they are 50% more leveraged than US banks.

    Today the euro rallied back to $1.26 based upon statements from German authorities that were interpreted as a potential willingness to help out non-German (in particular, Austrian) banks.


    So we watch and wait as the lethal brush fires move closer. If one spark jumps across the eurozone line, we will have global systemic crisis within days. Are the firemen ready?"

  • Comment number 66.

    Make it simple and honest.

    Salary is for employees.

    Bonuses (dividend) is for shareholders.


    Anything else leads to corruption.


  • Comment number 67.

    The Directors have failed their primary objective, to look after shareholders interests and should face legal action against them personally, I cannot see the "Institutional Shareholders" doing that on behalf of their own investors so these Directors will sit on the fat profits they have acquired. Just has the Northern Rock Chairman lives out his millionaire life style whilst thousands of ordinary people are losing their homes ! They all drink from the same trough and there doesn't appear to be any decent large shareholder who will go for redress from the personal assets.

    In the meantime, Brown has diverted all of the responsibility from himself onto the banks and the press have fallen for it. If he is so troubled by the banks behaviour why hasn't he stripped the Knighthoods from those bankers who acquired them under false pretences. ! Probably because he is the biggest part of the problem. He should be thrown out of office NOW

  • Comment number 68.

    Clearly, giving people 'one-way bets' is unfair. Cash bonuses do need to be capped at a small percentage of salary and longer term bonuses should be awarded as shares or share options.

    It is aregued that the best talent will not accept this and move to organisations that will pay huge cash bonuses. If this is the case, then those organisations that pay such bonuses will be increasing their risk. So where is the problem?

  • Comment number 69.

    Good points, Robert.

    But what we really need is to restore the pre-Big Bang structure for securities dealing, and apply this to other risk-taking businesses.

    In those days, brokerage firms were not allowed limited liability status. They were partnerships, 'liable down to their cufflinks' if things went wrong. They did not take huge risks, because they had relatively little capital, and their own assets were on the line.

    Reversing Big Bang would not be ideologically difficult for Labour, as it was a Tory policy under Mrs T.

    So, reinstate the partnership structure, and apply it to all brokerage and trading activities, and you would restore a bonus-malus balance.

  • Comment number 70.

    Robert,

    I differ to reply #1.

    You have written a load of good stuff on the credit crunch, but this is utter rubbish.

    I was working at RBS in the early 90's when the bonus culture was introduced, and nobody wanted it. We were all cautios, prudent Bankers, in the vein that Gordon Brown wanted.

    The truth ios though, that if you don't incentivise Bankers, then we will go back to the days of the late 60's/early 70's when "The Corset" was in place, and you had to beg your local Bank Manager/Building Society manager for a loan/mortgage. Times of prudence, yes, but also times of zero growth.

    The trick is to incentivise lenders in a manner for them to take acceptable risks (all lenders do carry bad debts, they always have), and reward them overall. They must be accountable, yes, but if you start kicking them for every single bad debt through clawback, then they will simply take no risks whatsoever.

    The only lender that never lost any money, was the one that was too cautious. The trick is to provide them with a framework to work within, reward them for good lending, but make sure the regulation is tight enough to ensure that the "hair-brained" schemes never get through credit and off the ground.

    The alternative is that we all become deposit takers, not Bankers.

  • Comment number 71.

    Well the shareholders had the power to change the way the banks operated, but they chose not to exercise that power - they were only too happy to take the returns from the banks' recklessness and no questions asked.

  • Comment number 72.

    Bankers bonuses irrelevant. The problem is more fundamental.

    It is the nature of our monetary system to require infinite exponential growth. Without that it crashes.

    We need to change the money.

  • Comment number 73.

  • Comment number 74.

    But isn't Gordon Brown himself already done a malus ages ago?

    It's because of him to make British economy going strong for the past 10 years.

    It's because of him to save the world global financial system.

    But the economy crisis has nothing to do with him.

  • Comment number 75.

    I wonder if Gordon Brown regrets not waiting a few years to see if the then James Crosby's "services to banking" had been positive before awarding him with a bonus in the form of a knighthood.

  • Comment number 76.

    Robert, it is all very well saying that the bankers take the risk and the shareholders take the losses, but have you forgotten that the shareholders appoint the board of directors that run the bank and should be controlling the bankers!?

    The underlying problem is that no one wants to put the brakes on when things appear to be running well. If one bank suddenly takes a conservative approach, the shareholders would sell their shares and buy into another bank that appeared to be making the huge gains. It is just like the so called "rogue traders". The management surely knows what rogue traders are doing, but while ever they make big profits, they turn a blind eye to the risks - then when things turn bad, they all deny ever knowing what the rogue trader was doing.

    Greed seems to gather so much momentum that is it near impossible to turn around.

  • Comment number 77.

    I obviously have to be careful about commenting negatively regarding Mr Prestons "observations" as they keep getting blocked so here I go.

    A little of the kettle calling the pot black here with people taking credit for stating the obvious. Without the bonus being in the public domain there is just speculation as to what the make up of an individual bonus is.

    When you group together a market sector as bankers who is it you really are referring to. Is it just the CEO or Chairman or is it anyone that is involved with banking activity. If it is the later you could be talking about a self employment broker who is on commission only and is involved in knocking on doors (figure of speech yes I know it's done by phone from Mumbai.) It would be a bit harsh to say that their bonuses are under the same conditions.

    This vagueness in reporting as highlighted by the Toon Army v Me just means that whichever way the coin comes up, the dice lie etc Mr Preston will be able to continue to say things like as I first mentioned, brought up etc when infact all that has happened is the obvious has been stated. Perhaps it is a trait that comes from working in the puplic sector such as government, banks and the BBC.

  • Comment number 78.

    Unless house prices drop much further or 100 per cent plus loans are available, whether from a financial institution, the bank of mum and dad or the state, the housing market will stagnate.

    Today a typical FTB will need

    Legal fees, survey fees, search fees, arrangement fees, VAT on fees.

    A substantial deposit, compulsory fire and other insurance.

    A high probability to need some stamp duty as well, if they are to live near work.

    Doubtless, they will also likely have a student loan/s to clear.

    Oh, and how about a bed, bedding and cooker etc?

    Oh Gordon, get real.

    The country needs shared ownership, more social housing and fewer parasitic skimmers.

  • Comment number 79.

    i love the bbc and the government complaing about bank bonuses and who should get what.

    why not for a change focus some attention on the growing and growing public anger on mps expenses,bbc staff wages and expenses ALL PAID FOR BY THE TAXPAYER/LICENCE FEE PAYER ASWELL.

    Banks are becoming an all too easy target at the moment.

    do the bbc make any more for the licence fee payer-no

    do the government make any money for the tax payer-no

    yet they both cream much more money off and have done so for the past 20 years or so than any of the banks ever will.

  • Comment number 80.

    Despite his confident persona, Brown knows he's been found out.

    But like all "successful" politicians, he refuses to admit he got it wrong.

    He knows we know. He just can't believe he's got away with it for so long and is still PM.

    But deep down, he knows his days in politics will soon be over and he's preparing an exit route.

    Why would he force the bonus issue and upset his potential future paymasters, the bankers?

    It's going to end with taxpayers rioting in the streets.

    Best of luck, Dave.

  • Comment number 81.

    This cannot go on!
    We keep hearing about , they will go else where, its a legal issue not to pay them

    Let them go, and let them sue, let them stand in a court of law and argue how they have destroyed banking.

    The government are very capable of implementing new laws when it wants to, very quickly.

    So I suggest they do it now.

    I am all for a bonus for a good job, but come on there is no argument for a bonus when it has not only not performed, it has tied every person in this country to a debt for at least 30 years, and that is if it doesn't get worse.

    The alternative does not bear thinking about, so
    Gordon do us all this service.

    Reclaim all bonuses, emergency tax all hedge fund managers, and private equity firms, for the tax they should have paid, but you let them off with , with lax tax terms.

    Then say sorry and really mean it

    Drag Tony in who has been conspicuous by his absence, and put him and yourself on trial for crimes against the country along with the rest of the motley crew.
    Take Tony's penison off him, he has profited from failure, and the rest of you lot too,, because that is another big bang waiting to happen when we get to pay the public sector pensions.

    meanwhile my pension, which I have been throwing money at is worth half what it was worth last year so youve got me all ways, youve nicked my retirement, my wages in real terms are down, everything is dearer much dearer, now where is that song again "things can only get better" !!!!!

    Take in the Tories too, because they have been complicit, in their lack of opposition.

    Even if the banks are bailed out, this cannot go on as it is, nothing has changed except the plebs have picked up the tab, our rich friends get richer, because we keep paying the bill.

    Do it Gordon , or else we will end up in the Peoples democratic republic of Britain comrade



  • Comment number 82.

    "As expected........."

    That's for you to think not to say.

    Of late, a second pretender to "saving the world" has emerged.

  • Comment number 83.

    The actual quote is: "As you'd expect..."

    My apologies - but you got my drift.

  • Comment number 84.

    #7 excellentcatblogger

    If only it was so simple for every company - get into trouble, face backrupsy, Gov steps in, bonuses all round.....

    We could always withdraw financial support from them!

    I say give them the choice, let them vote – Jobs or Bonuses?

    “Some perspective please” !!!!

    #16 rwolff

    I beg to differ, the stick we are poking him with is not big enough.....

    His “vision” is to see himself in Number 10 for the next 5yrs and to do that he’s trying his hardest to come up with the shortest and quickest fixes he can. I have heard nothing that would indicate there is any real plan....... it is all fire fighting.

    A start might be for him to explain how we can NEVER return to the “glory days of 2006/7” – it didn’t work and never will........ and of course the “investment wizards and masters of the universe” will only work if you pay them enough to forget what the Marketing guys told the investors......

    In general Banking is a basic Maths exercise, it is solid, reliable and boring.... and has worked for 100’s of years............ and it will continue to work, unless you pay them enough to make it worth their while to break it!


    #26 e2toe4

    I’m not sure I understand your point, are you suggesting there should never be a lending guideline as 4x, 5x or 20x as a max would effectively be fixing the market?

    I am still in 2 minds as to whether the Banks were actively creating their own market (as opposed to your concern over fixing it) or just a little stupid – to borrow more the Banks needed the assets to be worth more and they were pretty much solely responsible for making them worth more by relaxing the lending criteria. We keep looking at this and thinking we have the Cart before the Horse, but we might have it the other way around.... I for one would like to see a copy of HBOS’s business plan for 2006 and see what they predicted wages, lending ratios and ave house prices to be over the next 5yrs ....... they can’t surely have been forecasting another 20% increase, could they.... and if not then they must have known they were in trouble!

  • Comment number 85.

    We should have two objectives:

    1. Reduce risk-taking which threatens the stability of the financial system;
    2. Reduce the liability of the taxpayer as lender of last resort to the absolute minimum possible.

    I've said this before, but we won't be making ANY progress until we go back to the days of partnerships. Not the new kind of limited partnerships (LLPs) but the old idea of partnerships where partners bear unlimited liability. This is the way the city worked pre Big Bang, and effective it was too.

    It is the only way to ensure that the risk takers and owners are the same, and to ensure that it is the owners and risk takers who take extreme risks that face the prospect financial Armageddon rather than the passive investor, or, more importantly, the taxpayer. Do we really believe that partners who face losing their houses, cars, wives and investment porfolios will be disinterested in the risks their employees are taking?

    It may take politicians a while to get there, but partnerships with unlimited liability are the only way to both control risk taking and prevent the state bearing risk without reward. Limited liability companies, with passive shareholders are suitable vehicles only for employees who want to take risks and get rich quick with the money of others, including taxpayers.

    We don't need a Glass-Steagall Act necessarily, but we must move to a situation where those that carry out high risk investment banking or hedge fund operations do not benefit from unlimited liability, which is, in essence, a state subsidy of risk. Limited liability investment banks separated from the banking system would still benefit from this subsidy of risk and thus Glass-Steagall does not achieve the required objective. Unlimited liability partnerships are the only realistic and proven mechanism to achieve this. The big financial firms were partnerships and they need to be so again.

  • Comment number 86.

    #50 camholder.

    The problem is that the bonus system distorts the focus of an organisation away from customers and away from quality outcomes.

    At its simplest, does the bank assistant suggest a credit card for you because it might be helpful to you, or because s/he'll get a bonus once you sign up for one? Focus is shifted from your needs as a customer to what the bank wants to sell you.

    Once you divert that focus by adding such an additional reward system, some people will work towards earning the bonus, which is never going to be exactly the same as delivering customer outcomes, however well written the bonus scheme is. It creates 'false needs' within the organisation.

    For example, many years ago when Maggie Thatcher put "Business Managers" into hospitals and paid them £30K or whatever a year to find ways of "saving" money (or looking like you were saving money, perhaps) then the first thing they had to do was find savings of £30K in order to pay for their own post.

    It led to a focus on making 'cuts' in order to show that cuts had been made, rather than a focus of delivering efficient and effective health services to local communities.

    If bonuses are to exist in financial organisations in any form whatsoever then they need to be 'ex gratia' payments. By that I mean additional (and unnecessary) amounts rewarding demonstrated excellence paid, perhaps, at senior managers' discretion to more junior staff for especially praiseworthy performance. Or perhaps, to senior executives after a vote by shareholders, again following exceptionally good performance.

    These contracted additional salary payments don't do the individual organisations, or the industry, any long term good.

  • Comment number 87.

    Amschel Mayer Rothschild said in the 19th century

    "Give me control of a nation's money and I care not who makes her laws"

    This is still the same belief system of the very same international banking families, including the Rothschilds (the richest family in the world by a long way), the Rockefellers, the Warburgs, the Duponts...the list goes on. These elite families have controlled the banking system and the money supply for centuries and have manufactured and financed every major conflict on the planet, including funding both sides of both world wars. This is doumented FACT!

    How can we possibly think that those political talking heads we see every day on our mainstream media 'news' can do anything to usurp these people?

    People need to get their heads out of the sand and wake up to advent of the much extolled, in many mainstream media outlets, of the New World Order. This is not a good thing! This is what ancient Rome strove to achieve and more recently Hitler.

    Few people will be aware that George Bush senior's father actually bankrolled the nazi party and Hitler and was almost tried for treason for trying to set up a Fascist takeover of America in the 1950's. He managed to avoid that fate thanks to his powerfull international banking friends. But for the bravery of Major General Smedley D. Butler, this would have been achieved. This is documented fact. Look it up!

    These bankers still run the world. This depression has been deliberately manufactured to further consolidate power amongst fewer and fewer people. They already control governments, including Obaaaama's Wall Street puppet Trilateral/CFR/Bilderberg cohorts.

    Please wake up people. We are on the road to tyranny, a world government, a world currency and complete control over every facet of our lives by a powerful elite who care nothing about human life when it comes to achieving their goals. If you think these bankers have any empathy, look at how their prototype world bank, the IMF treats the third world. They bankroll corrupt hencemen to run nations, rape these countries of their wealth, foment civil conflict and let the populations starve to death.

    This is a war on humanity by these people.
    When will enough be enough? Will you wait until you have nothing? Or maybe you'll accept being microchipped for your own safety? If you want to live in Orwell's "1984" or Huxley's "Brave New World" then pick up your shovel, dig a hole, stick your head in it and be oblivious, or look your children in the eye just for a second. Is this the type of world you want to see come into being for their future?

    Please people, do some research, turn off your TV and seek the truth.

  • Comment number 88.

    OK -heaps of banking stuff, Robert... we get the message; we know the score.

    What about a bit of variety? What about the mass march in Dublin to protest about the "pension levy" (ie the Irish government's attempt to bail itself out by extracting an average £2500 per annum from public sector pensions).

    Of course, big Gordy couldn't begin to tackle British public sector pensions whilst MPs continue to enjoy the most generous pensions in the universe.

    Although... hang on... hasn't Gordy just brought MPs pensions into the "debate"?

    The bills are accelerating... a visit to the IMF is looming... there will be no possibility of IMF bail-out without getting public sector spending down...

    Everybody on a public sector pension: you don't actually think that you OWN anything, do you, outside of a government pledge? Which is worth...

    He wouldn't.

    He couldn't.

    He WILL.

  • Comment number 89.

    It appears that you are lumping the Banking industry over the last few years as rather like the Hedge fund industry, in that the management involves one way bets with other peoples money !!

    Admittedly free flow of capital is rather important, but not with everybody's money, so that'll be a vote for rather more stringent regulation then :)

  • Comment number 90.

    @Zootmac

    Tell me about it! The pension levy in Ireland will cost us €3500 per annum with no guarantee of a pension at the end of the day!

    This is just a tax given directly to corrupt elitist bankers (they call it a bail out) who are stripping the wealth from the country further impoverishing the people to enslave them even further to the state and if you don't like it, you'll be put in your place by by a hoodwinked police force, or in the case of the soon to be defunked USA, the army.

    I'm pleading with you people to get your eye on the ball and not to be diverted by this smokescreen of mainstream media propaganda. The mainstream media is owned by the same people who own the banks. You will NOT get the truth there. They are nothing more than repeaters of disinformation fed to them by the talking heads of governments, big business and intelligence agencies.

    Do most of you know that the vast majority of all money in the world only exists on computers? When you go for a loan it's only represented by numbers punched into your account and that if around 15% of customers took their own money from any bank, that that bank would have to close it's doors because they simply do not have it! It is a massive fraud on the people, you are being charged interest on loans of money that simply never ever existed.

    These banks should go to the and people need to stand up and be counted.

    When will you decide not to comply?
    When they are herding you onto trucks to take you to a camp for your own good?

    It's too late then.

    YOU NEED TO PROTEST NOW!

  • Comment number 91.

    #84 Thinkb4

    I think we might be in agreement. My point is not that GB is correct, merely that I think he has a game plan to try to restore the old status quo of an inflating bubble economy. Reading these blogs it appears that whilst many are angry at which ever target Robert and co. set up to take the blame too many would really like to see the problems just go away so they can continue as before, albeit with a few bob of government (tax payers) money diverted to their favourite causes.

    It is for those of us who disagree to set out an agenda for systemic change. So far we are not doing so. Demanding a bit more regulation and a cap on bank bonuses is not a new agenda especially whilst the levers of fiscal control remain where they always have been, with the likes of Mr Brown and his army of civil servants.

  • Comment number 92.

    With reference to the comment "I think we need to move to a system where depositors get some measure of ownership of banks when they money on deposit, so we can control these."

    That would be a Mutual Building Society much like Halifax and Northern Rock were before we (the customers) got ripped off by them when they used OUR money to make themselves into banks and bought us off with "free" shares (also OUR money). The rot started a long time ago.

  • Comment number 93.

    from MALUS to MALTHUS in a few easy steps?

    I rather like your idea of malus Robert, though companies would easily find ways around it unless we move away from self-regulation to actual and real regulation

    The one-way bets on these co-called bonus schemes were an inevitable result of remuneration committees being the hogs in charge of the trough; and of the big institutional shareholders and big accountants all being at the same game or (in the case of the pension fund investors) to dim to see the downside

    Let's face it, the City and Wall St both need to be much more tightly regulated, just the same as all the off-shore havens do, whether the supposedly respectable ones like Switzerland (and London) or the more dodgy ones like Antiqua and the Cayman Islands - together they formed a gigantic

    PONZI LEAGUE

    so big and so successful that our Premier League would be green with envy

    Gordon doesn't really want tight regulation and neither do the Tories - they are both still in the pocket of the City boys; and as a reply from ?tombjones to me said yesterday said, the City has become the UK's biggest revenue earner and the govt had no Plan B, making the City's decline an unthinkable thought in Westminster, if truth be told

    the UK govt (either NewLab or Tory) will need to go along with the idea of tighter regulation and make the right noises about it while the Americans and Europeans are on the front foot; otherwise London could find itself in the same pickle as the Swiss

    but I don't think we'll see either a Lab or Tory gov't do more than the minimum in terms of bringing in proper regulatory controls

    my guess is therefore that London will remain the capital of PIRACY! but there will be fewer English Pirates and they'll have smaller ships, fewer cannon and less (cannon)balls

  • Comment number 94.

    Get the bonuses paid back! It's the only way out of this mess! Sorting out future bonuses will not help get us out of this recession. Put pressure on the US to claim the bonues back so the UK can do the same. The UK can only follow the US lead.

  • Comment number 95.

    At hedge funds it works like this:

    - if a fund makes a profit of 10% on its investments then the execs will take 4 % and give 6% to its investors.
    - if a fund makes 10% loss on its investments then the execs still take 4% and the loss to investors is 14%.

    The bonus culture seems to be the banks' way of running a similar scam.

  • Comment number 96.

    Ok, I can see your point.

    But who in their right mind will chose to work in banking if they risk actually losing (your own) money?

  • Comment number 97.

    There does exist a mechanism for precisely what you're proposing: it's called stakeholding. When employees own shares in their companies, then changes in the value of the company directly add to or take away from their personal wealth. When this interest is in the form of future-vesting stock options then the long-term value is part of their personal wealth.

    The chief executives of many of these businesses had and have these shares or options on shares, and many of them have incurred severe losses (which they're plenty rich enough to absorb) on those holdings. They had thought, of course, that their strategies were in the interest of the value of the company and therefore of those holdings. The problem was, though, that they were wrong.

    We could start paying traders in company shares, which they had to hold for at least ten years, and maybe that would help a little. Many of them expect to leave the company before ten years are up, but they might take more of an interest in its long-term health if their fortunes were linked to it even after they had left. Unfortunately, markets would still have bubbles so they could still be engaged in creating paper wealth that the market told them was massive, prior to its evaporating later on.

  • Comment number 98.

    I am hearing a lot of comment about bankers in the current debate. Specifically, this ill-defined group has led us to the point of financial ruin.

    Belatedly, some opprobrium has seeped into the regulatory sphere and I'm sure that we are all looking forward to the Turner and Sants show this Wednesday.

    However, where were the auditors in all of this mess? When Enron went down, Arthur Andersen went down with it.

    Who was looking after the accounts at RBS and HBOS when they bolstered the balance sheets with toxic assets. If the banks could have seen it coming then so could their high-priced advisers.

    While I am on this point, no mention of Merrill Lynch and its role in "advising" RBS on the acquisition of ABN Amro. Are we asking for their bonuses back? Or are we stopped from so doing because, despite doing business in the UK, it is regulated by the SEC?

    Time to share the love.

  • Comment number 99.

    'Can'tgettheborrow' wrote:

    "we have witnessed was not capitalism, because risks were taken with other peoples money, so capitalism is NOT dead!"

    ABSOLUTE RUBBISH my friend, you can invent as many 'rules' as you like and impose as many restrictions as the FSA and Government can muster.

    YOU CAN NEVER STOP THE DOWNFALL.

    The greed of the Capitalist is what chokes the system to death.
    No matter what clever rules are produced, the Capitalist will always find ways to circumvent them - IT'S HIS JOB TO DO SO.

    If you don't believe me then ask yourself what happened to the 'stricter regulatory climate' that was imposed after the 1988 stock / housing market crash the would "see the end to 4x salary lending".

    ....strange, but 2 years ago my mate got a mortgage based on 6x his salary.

    Any fool who thinks regulation can prevent Capitalist over-production and economic crashes is on the same footing as King Canute holding back the sea.

    However, if you want to continue putting your faith in a bunch of poor mathematicians and mis-guided fools then you carry on. The bankers merely dispayed raw capitalism, but it's becoming more and more common and obvious - have you seen the bonuses utility companies are paying themselves lately? - how about the oil industry? - or maybe the auto industry (who turn up for a handout in a private jet)

    No, no, all of this is normal for Capitalism - it's the nature of the system, not some 'out of control bankers' as your Government would have you believe.


    Still - I suppose if you have nothing else to offer the world then money would mean a lot more to you than the rest of us!

  • Comment number 100.

    I thought "malus" was latin for apple? I would rather executives be paid in fruit than money.

 

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