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Time to hug Goldman?

Robert Peston | 17:59 UK time, Thursday, 10 December 2009

Goldman Sachs, the world's most successful investment bank - the highest form of life in the liberal-financial-market jungle - has this afternoon announced changes to its 2009 comp programme.

Goldman Sachs office, New York"Comp" or "compensation" is bankese for pay. Which always seems to me an example of doublespeak that only a banker could construct - because some would argue that it's the rest of us who should be compensated for the mess the bankers have made of the economy, not the bankers who need compensating for dreaming up schemes to disguise the riskiness of their practices from regulators and investors.

Anyway Goldman's board has decided that the firm's "entire 30-person management committee" will "receive 100% of their discretionary compensation in the form of 'shares at risk'" which can't be sold for five years.

Arguably this will better align the interests of Goldman's bosses with the 80% of stockholders who don't work for the firm.

But it's not obvious that it conspicuously aligns Goldman's senior partners pay with the preferences of the rest of the world's citizens.

Goldman's banking aristocracy will still be pocketing bonuses worth up to $50m or $60m each on the back of profits earned from the exceptionally buoyant trading conditions created by governments' and central banks' exceptional measures to resuscitate economies.

Naturally their inability to turn that into hard cash right now will spark some sympathy in a few of us.

But others might well say the principle that a partner should hold stock till he or she leaves the firm is a pretty sound one, for all seasons.

In fact, keeping shares till exit has been the norm at Goldman since time immemorial anyway.

And as for the absence of any cash bonus, well for Goldman's top bods cash was already only about 20% of typical payouts.

So it looks to me as though this isn't much of a revolution and the ancient regime looks undisturbed.

Comments

  • Comment number 1.

    The issue was never one of "discretionary" one off bonus payments. That banks, those that hold our savings, mortgages and pensions, can carry on gambling, safe in the knowledge that they will always be rescued by the tax payer is the issue. One that this Government lacked the courage to stop.

  • Comment number 2.

    If they were after hugz they should have announced this on Tuesday, before the PBR...

  • Comment number 3.

    Bla bla bla...Robert tell us, you are a "business editor", have obviously no clue what you are talking about, use this tribune for self promotion, so why should the public pay your salary??? What a waste of money. Please do the only decent thing and give this money back to the public!

  • Comment number 4.

    Sure Goldman's took the $10b, but they didn't want to. The were directed to do so to ensure a "level playing field" among banks post bailout. Thee money was paid back as soon as they were allowed to do so and went on to do what most informed people would accept a bank is supposed to do - make loads of dosh.

    In most ways Goldman Sachs is a shining example of good investment banking. I have friends who work for them, and these guys really work hard. Longer hours, more intense than anyone in any other profession I have ever seen.

    I don't accept anyone in the world needs a bonus of $60million, but the reality is that this is only for the guys at the very, very top of the business and who are genuine achievers.

    What I think is wrong is that the average middle management, back office staff, analysts and people just striving to do a good day's work in the office should share the politicised tar brushing going on. These are pretty average earners (in London terms) and the bonuses would cover mortgages, school fees, child care.

    I think if a bank is doing what a bank is supposed to do, and doing it well, the bonuses should be allowed to employees without there being any knee jerk election prank of a penalty tax.

    However...if the government can change the law for bonuses, why didnt it do something similar to get some more money back from the pensions of former RBS bosses who bust their company?

  • Comment number 5.

    These bankers just don't get it.
    Surely they must realise that there is no point in them owning all the money?

    Presumably they must consider that there is still sufficient slack in the system for them to continue skimming their cream.
    It also means that they are still in charge.
    To do as they please. They are sticking two fingers up to the rest of us knowing that we are gutless/powerless to fight back.

    They might think their little game will go on for ever.
    I have a sneaky feeling it won't.
    I have an even greater sneaky feeling that they are going to take us all down with them.
    Great.

    I suggest we pump as much money as we can into the Large Hadron Collider.
    That way if the scientists get it wrong then we will all be gone in a fraction of a millisecond.
    The alternative is to remain labouring away for ever in debt to the bankers.
    That would not be too bad except they are sticking two fingers in the air..

  • Comment number 6.

    Robert, thanks for your increasingly frank and open exposure of the madness that has gripped the banking and financial sector around the world. Your choice of words is more and more straight to the point.
    I appreciate that. Too many con artists and ignorant 'alpha' males populate the banking system, too many people with little culture or genuine education, too many excessively greedy people who are ignorant about their destrcutive impact on the wider society. Keep on exposing the bad bankers, you are doing a good job!
    Please find on the following web site many more details and arguments why banks (and especially Goldman Sachs)do not need our sympathy, but need strictest control and reining in:
    http://globalinsights.wordpress.com/

  • Comment number 7.

    How much have put into a start-up venture fund? If the answer is zero then I'm not interested.

  • Comment number 8.

    Lest we fall for the pap and forget about Goldman Sucks and what they really are and what they represent.

    If you haven't already read what RollingStone Magazine writer Matt Tabbi reported about them, then I suggest you give it a read.


    http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine

  • Comment number 9.

    How much profit did the banks make between the Bank of England printing money (QE) and then buying it back as gilts?

  • Comment number 10.

    Robert,

    What's with all the hugging - you been taking ecstacy or something?

    "So it looks to me as though this isn't much of a revolution and the ancient regime looks undisturbed."

    Don't worry - it's just am impression neither the US or UK people have forgiven anyone - even if the politicans seem to have done so and they will find out soon enough.....

  • Comment number 11.

    I feel sorry for them in their new straitened circumstances.

    Robert, if you want to start a collection for them I am sure I can spare something from my 2.5% Pension increase!

  • Comment number 12.

    I'm sure many 'experts' said the way out of recession means a well educated workforce.

    ...so it's rather odd that higher education is going to be hit hard with cuts according to the Institute for fiscal studies.

    Many universities are already struggling to maintain their standards after a number of problems, student loans debacle, the higher expectation of students now they have to pay fees and the occasional mis-management of funds scandal.

    I'm sure there will be many people lining up to 'hug bankers' - but I fear the hug will be more like a lethal bear hug than a kindly cuddle!

  • Comment number 13.

    Robert

    You say

    'because some would argue that it's the rest of us who should be compensated for the mess the bankers have made of the economy'

    Well did the bankers rack up over 500,000,000,000 of new Uk government debt over the last 8 years to make a grand total currently of over 850,000,000,000

    Did bankers decide to add another 500,000,000,000 to that total over the coming three years

    Did they remove tax deductions on dividend payments to private pensions. No, that was Gordon Brown.

    Did they sell gold at rock bottom prices. No that was Gordon Brown.

    Did they introduce the feeble tripartite regulatory regime. No that was Gordon Brown

    Did they say 'no more boom and bust' No That was Gordon Brown

    Did they read this speech

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

    at the Mansion House in 2006. No, that was Gordon Brown

    or this from 2007

    http://www.hm-treasury.gov.uk/press_68_07.htm. No that was Gordon Brown too

    Did bankers increase Employers National Insurance contributions or Business Rates increasing the cost of doing business? NO

    Government wrecked our economy

  • Comment number 14.

    4. At 6:49pm on 10 Dec 2009, Disnaymatter wrote:

    "In most ways Goldman Sachs is a shining example of good investment banking"

    ....hav you forgoten about the $5bn bailout they received from Warren Buffett - or has that been wiped from the annuls of history?

    http://money.cnn.com/2008/09/23/news/companies/goldman_berkshire/index.htm?eref=rss_topstories

    Rather astonishingly Mr Buffett was reported to have said (from linked story)
    "But the legendary investor said his faith in the financial markets' recovery is contingent on Congress passing the $700 billion bailout, which would buy troubled mortgage assets from banks."

    ....rather odd don't you think? making Government policy a condition of a private sector bailout? I believe Mr Buffett was offered very favourable terms for his stake - is that the sort of deal a company in the strongest position makes?

    It would seem that the masters of investment management are anything but - once again the history is being re-written so we accept that this is case for exception.

    P.s. Millions of people up and down the country work 'long hours' and carry out physical backbreaking work which is far more taxing than 'intensity' of investment banking. They do not 'push paper' like your friends at Goldman and many receive little reward - it's not advisable to compare the hard work of city staff (at any level) with other industries as you will offend a lot of people here and the floodgates of anger will be opened.

  • Comment number 15.

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

  • Comment number 16.

    what is the difference between high frequency trading and insider trading? about an hour

    sure pays well doing god's work

  • Comment number 17.

    This is at least a move in the right direction. Now we just need to remove limited liability and ensure that the only capital at risk is participants' own.

    Partnerships with unlimited liability:
    - the traditional solution;
    - ended not so any reasons other than partners wanted to make a quick buck and firms wanted more capital to play with;
    - worked for centuries;
    - moderated risk-taking as risk to personal wealth of partners unlimited;
    - limited capital to be gambled and thus led to greater stability;
    - easier for authorities to assess;
    - easier for authorities to control;
    - easier for tax (think individuals not trusts, offshore companies, etc.);

    Inevitably this is where we will end up. The only question is how long it will take us to get there. While individuals have little to lose personally whilst gambling with the capital of others the present instability and transfer of wealth from the mainstream economy and government to financial institutions will persist.

  • Comment number 18.

    Agreed but nevertheless a very smart PR move if anything

  • Comment number 19.

    It's very interesting that the tactics of some banks is to distance themselves from the crisis and claim they somehow were immune to the collapses.

    When comments are made to this effect we have to remind ourselves that it was the entire system that was bailed out - not just individual banks.

    For example, if we hard followed free market rules Northern Rock would have gone, as would HBOS (lets assume the Lloyds takeover didn't happen) - so the biggest mortgage lender goes bust and I think the 5th biggest, when the B&B went and some of the smaller building soc. people would have quickly lost faith in the system - remember market participants are rational - would you be risking your life savings?

    All the customers who lost savings in those banks would have taken all their money from accounts in other banks so as to not make the same mistake.
    Shares would have been sold in droves and the consequences of reduced savings, a high LIBOR and a massively reduced market cap it would have cut the cash flow and ability to raise money for may of these 'safer' banks and they would have started going too.

    The Government intervention stopped this rot - or slowed it down depending on your viewpoint, by guaranteeing savings they prevented a run on the system.

    So it is rather trite of banks like HSBC, GS, JPM, Baclays, standard charter etc. to say the Government bailout was 'forced on them' and that they did not need it to survive.

    Don't forget that these banks have also benefited from the demise of some of their closest rivals (Bear Stearns, Lehman's and GS I believe were in close competition). This has allowed them to expand into the gaps created and with Government efectively subsidising bubbles in the system they were able to 'make profits' on Gilts and Equities.

    When you analyse it carefully you can see how much the truth is being distorted and it would appear there are many entities involved in this peddling of lies.

  • Comment number 20.

    I'd like to register a formal complaint, please, with your masters at the BBC, Robert.

    Yes, I'm serious.

    I look to the BBC for a reporting of the facts in a very straightforward factual way.

    At the moment your website screams "No cash bonuses at Goldman Sachs".

    This is patently untrue, a lie, a complete distortion of the truth, a fabrication. Indeed the BBC has just taken the bait, hook line and sinker, that Goldmans has suckered you guys with.

    Why.... well, it is just the top 30 of the management committee that are taking their bonuses in shares!

    The rest of them (Robert, how many thousand is it?), will be getting fat piles of cash notes, thank you very much.

    Come on BBC.... or are you joining the Evening Standard Goldman Sachs Appreciation Society?

  • Comment number 21.

    Of course the bankers deserve their bonuses; they managed to shake us down for billions with just a touch of blackmail.

  • Comment number 22.

    13. At 7:35pm on 10 Dec 2009, mrsbloggs13c2 wrote:

    "Government wrecked our economy"

    Maybe..., but in your big numbers game you have forgotten to mention the
    £850,000,000,000
    ...we currently have in the asset protection scheme - which as I understand it are described as 'bad loans' - which gives the impression they won't be getting paid off.

    That is coincidently the same amount it took Gordon 8 years to build up!

    Whilst being careful not to defend Gordon, I would point out that at least some hospitals got built, and maybe some schools and colleges - whereas all the bankers did is fill their pockets with mammoth bonuses and then left the taxpayer holding the debt whilst they get on the next flight to Switzerland if we dare ask for any back.

    Although Gordon v the banks is not much of a choice, it's similar to the 'non-choice' I will be presented in the ballot box next year....so I had beter get used to it.

    I'd take Gordon over the banks any day - he's certainly 'better value for money' for society despite the wastage you accuse him of (which is no different to any UK Government of either colour that I have ever experienced)

  • Comment number 23.

    Robert, this is just a little too much like American culture, all this hugging.

    No more, not at work please.

  • Comment number 24.

    #13

    'Whilst being careful not to defend Gordon, I would point out that at least some hospitals got built, and maybe some schools and colleges'


    Dear Writingsonthewall

    I think you will find that most of the hospitals, schools and colleges were built under PPP/PFI schemes by private companies borrowing from banks and that these schemes are IN ADDITION TO the 850,000,000,000.

    The GMB is estimating 250,000,000,000 per annum of revenue costs associated with these schemes

    Take a look at these

    http://www.projectdatafile.co.uk/news_story.asp?id=2788
    http://www.projectdatafile.co.uk/news_story.asp?id=2787
    http://www.projectdatafile.co.uk/news_story.asp?id=2790

    Yrs

    Mrs Bloggs

  • Comment number 25.

    Criminals do criminal things. Their governmental handmaidens will not object as these are the people they will call for jobs when their careers in governmental prostitution are over. The peons are always complaining about money and if they continue the banks will just take a bigger dip into those individual retirement accounts, so keep it down.

  • Comment number 26.

    4 Disnaymatter

    School fees! Aw, the wee lambs need money for school fees. I don't think so! There are free schools for everyone in England, so school fees are not needed.

  • Comment number 27.

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

  • Comment number 28.

    Robert - always being negative as usual. You should work for Sky!

    At least it's a step in the right direction. Winston Churchil lost wars / battles prior to WWII, yet when it mattered, he was chosen to get the country the result it needed.

    With bankers, they are the best people to get the country out of this mess, and we have all had a part to play in this recession.

    If a child is sick from eating too many sweets, the shop, the parents.... and the child should equally take responsibility. We didn't have to take the loans, bigger houses, nicer cars etc etc when they was offered to us all.

  • Comment number 29.

    Just one more thing......

    Yes, you're right, Robert, we should definitely see through this supposed huge announcement from Goldmans for what it really is - a derisory 'sop' thrown to those "sub-humans" (I think that's what they're viewed as in the firm....) that don't actually work for Goldmans..... which comprises the vast majority of the population of the world.

    They still do not get it.

    The structure of the monetary system that our elected western capitalist governments allow so-called "investment" banks to get away with, means that they are still, in the words of Rolling Stone "the great vampire squid wrapped around the face of humanity".

    Why?

    Well we all know that what makes up the vast majority of Goldman's earnings is the betting that it does on its own account - proprietary trading - which takes place largely in the exclusive interest of its employees.

    It does this essentially via the accessing of proprietary information before the market gets to hear of things.

    This happens in a number of ways:
    - high frequency trading on their own behalf. Their trading systems can pick up your buying and selling instructions before your contract is struck, so that they can buy or sell before you do, moving the price adversely that you get, and thus making money from your trade without you knowing.
    - "special" information. Obviously I would never want to say that they systematically trade on inside information (.....pah! no, certainly not!) but let's just say they have good personal contacts... which leads on to the next point....
    - the information that they get from the deals that they do, and that....
    - their alumni are in a whole range of positions to be able to "maintain their reputation and mystique" and ensure their interests are kept at the top of the list (...yes, the government list.... e.g. Hank Paulson!).

    Excessive profits in an apparently free market are generally speaking an indication of just one thing and one thing alone...... a lack of competition.

    Right now, in the markets that Goldmans operates, there is an absolutely catastrophic (... and I'm talking for the health of the UK economy here) lack of competition.

    We need a people's uprising to demand a change to the rules of the game.

  • Comment number 30.

    I post this blog again:

    I am a self employed working Joe, husband and father of three, and here is a memory from many years ago. We’re back in the early 90’s with an example of the damage and misery that reckless financial institutions wreak on the optimistic general population.

    I was last call at a small but attractive detached house before a possession order was applied for.

    Husband was a salesman, wife worked part time if I remember correctly, and they had three kids, all girls.

    He had been lent a substantial amount of money to buy a ‘dream home’, his income being assessed on both a high multiplier and the bonus commission he earned in his best year.

    Recession hit, as recessions do, they couldn’t keep up with the payments, husband and wife fell out because of it and split up. The strain of it all was clear in the children’s eyes; the mother broke down.

    There was no hope for them, none, a family had already split was soon to be destitute.

    The wife’s parting comment as I left was ‘why does it have to be like this’ or words to that effect. I had no answer, only a Gallic shrug.

    There is a human price to pay for all this, and what galls me most is that the young have to pay the lion’s share of it.

    Who out there feels as I do?

  • Comment number 31.

    Investment bankers do not create wealth. They just pump balloons. By their pumping they get rich.

    Their pumping is greased by the creative and enterprising people who really do create wealth by the manufacture of information and material artefacts of value.

    Those good people are now rewarded with increased taxes to pay for the consequences of the bankers' folly and selfishness.

    This system is hateful and destructive and has to end. Now is the moment in history. Rise up!

    Where are the leaders?

  • Comment number 32.

    #30 Dempster

    You know who does and who doesn't feel as you do.

    What you are doing is holding up the Ghost of Christmas Present - of way too many people and the Ghost of Christmas Yet To Come for possibly many more.

    Heads are rapidly being pushed into the sand. Sporadically popping up for just a moment to echo shouts of feckless to those who are in the process of having their lives ripped apart.

  • Comment number 33.

    I do not understand how the newly announced 'windfall tax' on bonuses can possibly work.

    The banks have already demonstrated that they have no problem with diverting tax-payers' money into their own pockets. The new tax just means that they will have to use a bit more tax-payers' money to achieve the same result.

    So they take a bit more tax-payer's money then pay the extra back to the government as tax. Net result: Exactly where we were before.

    The only way to stop the bonuses was to ensure that there was no way the bankers as individuals could receive them. The best way to have done this was to have let the banks go into liquidation and sack all the staff, in which case all contracts would have become void. Then re-constitute new companies employing the same staff and occupying the same premises.

    Some posters here have mentioned how hard the GS staff work. In other words they probably have quite miserable lives and cannot fully enjoy all the money they are sucking out of the economy. But the wealth they are stealing is causing huge misery for the rest of society.

    What a daft state of affairs that a small group of individuals can cause untold misery among the population, and yet gain very little real happiness themselves as a result.

    Once we see the public taking matters in their own hands and physically attacking the bankers, money will be of even less use to them and the circle of misery will have been completed.

  • Comment number 34.

    Writingsonthewall,

    I suggest before listening to you, everyone looks at your history. Highly opinionated, highly politicised (Marxist) and an extraordinary certainty of your own wisdom versus all others. It is this kind of self-conceit that always leads to disasters. You are no better than those you criticise.

    Things are neither black nor white but all shades of grey.

  • Comment number 35.

    Scary isn't it? Some of my friends can't see the problems Gordon Brown has created. They believe the spin. The bankers are shocking but every piece of stimulus has been created to help confidence in the banks rather than 'joe public'. The fact remains, to get a personal loan with HSBC you need a perfect credit rating and you'll still pay 8.7%. The banks ae being allowed to milk us dry. If you believe we need a stable financial system then this is just about understandable. However, finding out they then give $50m bonuses just shows the lack of power we have as taxpayers but also governemnts.
    Time to show them the right way. No more giving the benefit of the doubt. Too amny people are being hurt. Don't let them get away with it.

  • Comment number 36.

    Unless I misunderstood you, Goldman Sachs are proposing the bonuses are predicated on the success of the value of the shares in 5 years time?
    If this is the case what's the problem? If Goldman shares tank in the future it will be because the beneficiaries of share bonuses have not collectively performed well. Wasn't this the problem with the Shreds Bank RBS. Too much instant reward with no evaluation of the short/medium term risk of the transactions underlying the bonuses. Simple as the Meerkat would say!

  • Comment number 37.

    @30. Dempster.

    Your feelings were mostly implicit in the Gallic shrug in your post. Please explain what you really feel.

    I suspect I feel very much the same as you. Do you think there is enough popular feeling to start a movement for change?

  • Comment number 38.

    32. At 10:05pm on 10 Dec 2009, copperDolomite wrote:
    #30 Dempster
    You know who does and who doesn't feel as you do.
    What you are doing is holding up the Ghost of Christmas Present - of way too many people and the Ghost of Christmas Yet To Come for possibly many more.
    Heads are rapidly being pushed into the sand. Sporadically popping up for just a moment to echo shouts of feckless to those who are in the process of having their lives ripped apart.

    Who are you CD? -------

  • Comment number 39.

    37. At 10:34pm on 10 Dec 2009, Ken Appleby wrote:
    @30. Dempster.
    Your feelings were mostly implicit in the Gallic shrug in your post. Please explain what you really feel.
    I suspect I feel very much the same as you. Do you think there is enough popular feeling to start a movement for change?

    For the first question..... Saddened
    For the second question…. I don't know, that's the plain truth of it.

    But I do believe if we do not act in the best interest of those who come after us, then when we look back, it will be in sadness.

  • Comment number 40.

    12. writingsonthewall

    I'm sure many 'experts' said the way out of recession means a well educated workforce.

    I've always had misgivings about just how factual that claim is. British industry hardly knows what to do with all our graduates.

    If education is a premium, then why are there thousands of graduates unemployed each year, even for the more traditional subjects such as Law - they have struggled for years and those not picked up usually undergo re-education in a different discipline.

    If an educated workforce is required, then why are graduates being told they are over-qualified, as though that is some kind of affliction that prevents them securing a job.

  • Comment number 41.

    Bless them! Time to find a new way to get cash out of whatever.

    Creative thinking for the rich to get richer, not not for the good of the country or people.
    Lets go back to JFK for the quote.

    I do not mind those earning if it was not for the facts that they are making the country broke

  • Comment number 42.

    #4 Disnaymatter. Ah yes the rewriting of history, always good to see a revisionist in action. Anyway maybe you should open an account:

    http://www.goldmansachs666.com/2009/12/are-goldman-sachs-clients-idiots.html

  • Comment number 43.

    For anyone interested in a more realistic view of Goldman Sachs, try this:

    http://zerohedge.blogspot.com/2009/07/max-keiser-goldman-sachs-are-scum.html

  • Comment number 44.

    Cheers Peston .. thats 6 minutes of my life I wont get back.

    What was your point? To generate even greater anger?

    We are all aware of these immoral miscreants. We don't need reminding how the froth (or should I re-phrase congealing sc*m) of the human race fester on their material excesses.

    The only consolation is that for all the wealth that they think they own. They dont. Their apparent wealth owns them ...

  • Comment number 45.

    Mine is less of a comment than a direct question to Robert: Robert, what would really have been the effect of saying no to the banks? No, no bail out at all- if you are insolvent you collapse and fail and perhaps new and better banks will arise from your ashes. Ok, it would have been traumatic but surely over in a year or two? Now we are faced with a bill (eventually) of well over a trillion pounds and a generation of cuts and tax rises, £40,000 per family. That money will have gone to where? To pay bankers bonuses (an ingenious way of transferring money from the poor to the rich) and settle toxic debts. Is this really the best way?

  • Comment number 46.

    38. At 10:38pm on 10 Dec 2009, Dempster wrote:

    Who are you CD? -------

    Just an ordinary Josephine, with eyes, ears and a mouth I have great difficulty in keeping shut when I really should know better!

  • Comment number 47.

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

  • Comment number 48.

    @40 copperDolomite: "If education is a premium, then why are there thousands of graduates unemployed each year"

    You make a good point.

    The problem is really that our young people do not follow their ideals. We pressure them to pursue courses that we think will lead them to salaries.

    Young people should not shape themselves to fit into what older people conceit society to be. Young people create future society by being who they are. If they followed their own interests the new society they create may not need lawyers.


  • Comment number 49.

    26. At 8:56pm on 10 Dec 2009, copperDolomite wrote:
    4 Disnaymatter

    School fees! Aw, the wee lambs need money for school fees. I don't think so! There are free schools for everyone in England, so school fees are not needed.

    ---------
    I don't think

    Harriet Harman
    Dianne Abbot
    and Ruth Kelly would agree.

  • Comment number 50.

    'Goldman Sachs, the world's most successful investment bank' translated to 'Goldman Sachs, the world's most successful gambling bank'
    As are many UK bank at this desperate time.
    Unfortunately we are out of shades and wide open.
    How can 60 million people play against a super poker players?
    Well that's easy. There is always a chance so lets raise some more chips.
    How about having a bank in your corner?
    No problem.Keep the rates low.I can flush em out.
    I hope we have a good 'arm'

  • Comment number 51.

    Wow, 7 minutes for my comment at 49 to be referred to the Moderators, I didn't even see it hit the site - ok scrap my reference to the Man Gordon appointed to run RBS but then print the rest. Just say the Board. All I said was accurate, I got it off the City Profile Web site.

    or was my musing that the RBS threat 6 days before the Pre Budget report smacked of HMG calling in favours from the bankers too close to the truth?

    After all the whole UK is now banker Bashing, and the Pre Budget Report, Darlings Bash A Banker Bonus tax and MPs expenses have all passed any serious review. Gordon appointed the RBS man, so is it so far fetched to think that he was helping a mate have a happy peaceful Christmas?




  • Comment number 52.

    So, investment bankers created a bubble of imaginary wealth, which popped against the prick of reality, the scale of their deceit was so vast that politicians were blinded by the flash.

    We are left with years of higher taxes and diminished public services.

    It's bad enough that the people who caused this disaster are still employed. That that are in the same jobs doing the same damage all over again using money forcibly lent by us is an outrage. Now they are expecting us to admire them for restraint in keeping remuneration to just a few million dollars!

    Why is everyone so calm about this? Where is the outrage, the movement for change? Come on people, rise up!

  • Comment number 53.

  • Comment number 54.

    52. At 01:42am on 11 Dec 2009, Ken Appleby wrote:

    Why is everyone so calm about this? Where is the outrage, the movement for change? Come on people, rise up!

    I assume most people were asked to write an essay on the following, or some variant at school in the English class:

    Is TV the opiate of the masses?
    or
    Is Football the opiate of the masses?

    We weren't being asked to write an essay on these just to demonstrate spelling. It probably didn't do as intended (given the apparent popularity of supposed reality TV).

  • Comment number 55.

    12. At 7:25pm on 10 Dec 2009, writingsonthewall wrote:
    I'm sure many 'experts' said the way out of recession means a well educated workforce.

    Well, well, well.

    Only one in five new teachers has full-time job - reported here:
    http://news.bbc.co.uk/1/hi/scotland/8406960.stm

  • Comment number 56.

    @30 Dempster

    I share your views wholeheartedly, as do, I suspect, a great many others. None of the political parties offer any hope or even any change to the status quo. The 90's recession pushed me to find work ouside the UK, so see things from a slightly detached perspective. Now when I try to talk to people at home about things the reaction is "Well, it's all too late now. Nothing we can do." It doesn't matter what the subject is - banks, economy, immigration, money, housing etc. etc. It's truly depressing. There's no HOPE. Plenty of anger and resentment, but an almost total feeling of powerlessness, just that the UK is finished. To me, that is worse than the crimes perpetrated by the banksters and bean counters. We're supposed to be a democracy but the people have been systematically disenfranchised by the convergences of party policies and interests and crushed by the state. I feel angry at the entire political/financial setup. Darling's budget will do little to alleviate the UK's chronic economic position, and the tax on bonuses will just give more clever accountants a little more work looking for technical loopholes. After all, it's not as if the guys at the top pay tax anyway.

    Dempster, the UPF is badly needed. Do you accept overseas members?
    If you're ever in Tokyo, I'll buy the drinks.

  • Comment number 57.

    Wouldn't it be nice once in a while to remember that the problems we all face were caused by people borrowing too much and being unable to repay the debt. I'm struggling to understand why it's no longer shameful to default on a loan.

    All this banker bashing is a little bit like charging gun makers with murder every time someone get shot isn't it?

    It's also a little strange to bash every banker. How exactly is an equity/FX/commodity trader to blame for any of this? If punishing a group for one person's action is the way we do things, lets do it for all industries.

  • Comment number 58.

    #52

    Why is everyone so calm?

    Read through Nick Ross' latest blog, there is a post there from Mike (forget the number ) which explains it all really very well I think.

    My personal view of it is this:votes which is what politics is all about are counted up at elections but the basic unit of the vote is the Pound Sterling.

    People vote for those they think will make them personally better off and are guided in this by what they read or hear in the media.
    At the moment all people hear is it will cost me more money whoever I vote for so it matters not really - hence calm acceptance.

    Having a good old riot/revolution and wrecking the place further without a substantially better end solution on offer makes no sense - the alternatives proposed just seem the same or marginally better/worse.

    At present there is no significantly different social/economic model on offer.

  • Comment number 59.

    <RICHPOST>4. At 6:49pm on 10 Dec 2009, Disnaymatter wrote:<BR />>...do what most informed people would accept a bank is supposed to do - make loads of dosh.<BR />I just want to check DM, are you writing this with a tongue in your cheek, or are you actually being serious!?!<BR />People <i>expect</i> a bank to do the following: <br> 1) Take in savings from customers and keep them safe <br> 2) Lend out those savings, with interest etc <br> 3) Make a profit for themselves and their savers as a result<BR />What banks <i>actually</i> do is the following: <br> 1) Take in savings along with loans from other banks <br> 2) Use this as their minimum capital they require in order lend more money than they actually have (ie literally create money out of thin air) <br> 3) Make obscene profits for themselves, and pay almost nothing to their savers <br> 4) Expect the public to bail them out when the system collapses!<BR />>In most ways Goldman Sachs is a shining example of good investment banking.<BR />What investments? 90% or more of 'investment' banking is making money by buying cheap and selling high in the stock market. You can translate this to being at best gambling and at worst profiteering from others misery. Remember that no one can make money in this way unless soemone elses loses. Quid pro quo!<BR />>I don't accept anyone in the world needs a bonus of $60million, but the reality is that this is only for the guys at the very, very top of the business and who are genuine achievers. <BR />And what exactly have they achieved? Other than huge amounts of cash for their own vested interests?<BR />>However...if the government can change the law for bonuses, why didnt it do something similar to get some more money back from the pensions of former RBS bosses who bust their company?<BR />On that, at least, I agree with you!</RICHPOST>

  • Comment number 60.

    #11. "I can spare something from my 2.5% Pension increase"

    Good job that you can, because the 2.5% comes off of next year's increase.

    Robert - how about talking about why we should have any involvement with the "boutique" side of banking. Separate banks into "boring" banks to do savings and lending (Building Societies anyone?) and the "boutique" side, and then let the "boutique" banks succeed or fail as appropriate. They are of no benefit to society - they do not generate wealth for the world, but only cream off profits for themselves and their shareholders. Oh, and while we are at it, lets make the credit rating agencies responsible for their ratings in the future .......

  • Comment number 61.

    Sadly we didn't let the banks go bust. The ones running these across-the-board showers are all still there. All doing the same old things that got us here in the first place. Sure it could have caused real financial chaos to let them fail. But I doubt it would have looked as ugly as it does now. (Bankers paying themselves huge "compensation" etc, whilst taxpayer faces ruin for years to come! Even my kids will pay. Damn you Bankers and Damn you politicians who let it happen!

    And neither do I buy into the argument that we need the banks to provide tax income. We would have been better off if the banks had been closed the last ten years! Might have looked good for the first 8 years, doesn't look clever the last 2! Overall the picture is appalling.

    I don't care how hard the bankers from Gollom Sachs reckon (or claim) they work, or those at any other investment bank, for that matter. Fact is the longer these clowns stayed at work, the worse things got for taxpayers!

  • Comment number 62.

    #19

    Do you write things randomly or do you really have no idea?

    Concerning Warren Buffet, he does not invest in broke business but in business to make money. And actually he has already made a huge amount of money with his investment in GS. The reason is that GS has a sound business model.

    This brings to second point. It is totally idiotic to bag all the banks together. Providing liquidity and bailing out are two totally different things. Banks are providing liquidity to businesses all the time. However they do this for business with a good business model who will generate cash in the future. For a lot of banks it is what the government did but for a few it was a different story, they had a flawed business model and the government had to bail them out. These are two totally different things.

    Third concerning the banks with flawed business model, the like for NR, HBOS or RBS for the UK. Everybody knew that they had a flawed business model as their risk management, credit, market and liquidity, was pathetic. As it was not enough they were able to undercut their competitor creating a totally distorted market. Why the FSA/government did not intervene? Surely they were supposed to look at their risk management?

    Finally concerning the APS, there is not £850bn of asset but "only" £282bn, all from RBS, and RBS has a first loss tranche of £60bn, so basically not risk is transferred, just capital arbitrage and the government providing another implicit support to them.

    Mmmm thinking does not seem to be your forte!


  • Comment number 63.

    There are lots of comments here about frustration, and lots of comments about how it was really all our fault.

    These highlight the real problem in this country: we are not governed by our government. There is a basic administration, and then there is a 5 year cycle of power broking. No cross party strategic planning, no business plan, we just wander through the world.

    There are very large corporations out there (banks at the forefront at the moment), whose entire purpose is to rape this country's population and resources. Advertising works to make people want more, banks offer the means, government colludes.

    The only way forwards for this country is for it to be governed, working towards a plan for the benefit of all. This is a revolving 20 year plan, which no party is allowed to corrupt, and against which all parties are measured. For the benefit of this country only, not any corporations or individuals.

    Problem is all the major parties are only interested in power and retaining it - it really doesn't matter what colour they are. The only different views we see are from the Lib dems, because they understand that they aren't going to get the power, so they can try to be honest. If they ever got power, it would all change.

    The only way out of this is electoral reform.

    Fat chance hey?

  • Comment number 64.

    #62 darksurfer. You are correct Goldman Sachs has a sound business model. But why are you so coy? Why not tell us all what that business model is? Why not tell us:

    That Goldman Sachs received 100 cents on the $ to its exposure to AIG totalling some $12 billion. This when Goldman had already claimed to have hedged its full exposure to AIG. Just in case thinking is not your forte this means that Goldman got paid twice.

    That Sec of State Paulson arranged for the law to be changed in a matter of days so as to allow Goldman to convert into a retail bank and hence be entitled to further federal largesse by way of TARP funds.

    That US taxpayers provided funding of about $2 billion to CIT and Goldman immediately placed bets that CIT would fail. When CIT failed US taxpayers lost their approximately $2 billion of funding and Goldman made some $3 billion.

    There is more, much more, in the same vein.

  • Comment number 65.

    Leviticus, you are a shining example of the incompetence that is allowed to post comments on these blogs, it's tragic. Epitomising the British public that has no true conception of what "Investment Banking" is, and continues to regurgitate the tabloid's rubbish.

    Investment banking does not involve "buying low, selling high". Let me guess, investment banking simply consists of just government bonds and shares right?

    Goldman Sachs may not be the most flow (look it up) oriented bank on the street, however they do not stand around a roulette table waving 20 on black, trying to predict the future. Arbitrage, HFT, fundamental value analysis strategies all feed in to the effective running of any desk at any bank, and it's completely worrying that your entire knowledge of investment banking, let alone finance, stumbles at the very first hurdle.

    The younger generation leave from the top-10 universities with straight A's at A-Level onto the trading floor - most here would be unable to grasp the concept of an interest rate swap and how to price it, so yes, bonuses are an effective gauge of market-value of a given employee.

  • Comment number 66.

    I think most of us don't want anyone to forget that the banks and the bankers are not going to be paying for this recovery themselves.
    We are.

    They are taking monopoly-level fees and commission for their marginal efforts, they are charging excessive spreads on lending (borrowing at 0.5% and lending at 7.5%). And no sign of contrition or apology.

    We bailed them out with lump-sum cash from taxpayer's future earnings(that us), and we are going to keep paying for years to come. Every purchase you make from now on has a mark-up from the banks.
    The retailer has had his borrowing costs increased, the supplier has had his transport costs increase, the buyer has been taxed more to pay for government debt -so his disposable income is less, and the loan he has taken to buy the car, the hi-fi, the flat-screen, the fridge, the vegetables, is now at higher interest terms.

    We have every right to gripe.
    Probably our only privilege.

  • Comment number 67.

    46. At 00:05am on 11 Dec 2009, copperDolomite wrote:
    38. At 10:38pm on 10 Dec 2009, Dempster wrote:
    Who are you CD? -------
    Just an ordinary Josephine, with eyes, ears and a mouth I have great difficulty in keeping shut when I really should know better!

    If you keep it shut, then you really should no better.

  • Comment number 68.

    Here we go again, more of Robert Peston's mud slinging and playing to the crowd: So Bankers are to be blamed for causing the market to fail are they? How did a market mechanism fail due to the action of individual participants? How are the individuals responsible for the collective, unforseen outcome? (There's a totally separate question about how much people are paid and whether it is earned)
    Wouldn't public broadcasters be better employed explaining (if they know) why markets fail? (Hint: read Akerlof's nobel prize lecture) It's becoming like watching fake preachers reading the Bible in Latin in the middle ages: The speakers talk half truths, but the crowds can't tell because nobody taught them any Latin at school.

  • Comment number 69.

    Mr Peston

    How can you be so naive? Bank employees who receive stock as part of their compensation package may not be able to sell those shares directly for five years but are perfectly capable of a) opening up a spread-betting account and selling their shares short, thereby crystalising their bonus payment at the current share price, and/or b) using their shares as collateral to borrow against, thereby releasing the equity immediately.

    The only way to reign in the banks is to break them up and make them small enough to fail: go back to when you had 1. high street banks who took deposits and provided mortgages and 2. investment banks who are basically publically listed hedge funds. If these invesment banks know that they will not be bailed out I can assure you that their management will keep a much tighter grasp on risk.

  • Comment number 70.

    #57 said "Wouldn't it be nice once in a while to remember that the problems we all face were caused by people borrowing too much and being unable to repay the debt. I'm struggling to understand why it's no longer shameful to default on a loan."

    I never forget it.

    A lot of people, companies and governments have forced on me debt (and now even more taxes to help pay for the mess) that I have struggled for years to avoid.

    I'm now having to pay for their excesses, through lack of work and additional taxes, whilst watching others be excessively rewarded (a perpetuation of the greed cycle).

    I'm extremely frustrated because apart from 'getting on my bike' there is very little I can do to change this. I see how powerless our economic policy has made our government on the international stage, as we are held to ransom by globalisation and our fear of losing significant tax revenue and employment sources were we to reign in the excess.

    I know we need to cut government expenditure by amounts so vast the associated levels of unemployment would be devastating. But whilst I can understand the reticence, I cannot understand why it is not being broached at all.

    No party waiting for an election is going to do the necessary.
    (it would have been better if we had had our elections a year earlier, just to have stopped the posturing and delaying the inevitable in order to garner votes from the gullible)

    We also know from history that even a man/party who did the necessary (Churchill)may not get re-elected. So on that basis there is nothing for them to lose by going for it NOW. Those in power have names of mud. They will forever be remembered thus unless they are prepared to sacrifice their careers for the long-term good of the nation.


  • Comment number 71.

    #64

    Mmmm sorry just missed the part about your sources...Joe Bloke at nearest pub?

    It is certainly true that GS converted to a commercial bank, like most of the investment banks, and then benefited form liquidity support. But once again liquidity support is totally different from bailout. Actually the governments, if they were not totally stupid (ok forget UK!), should make money from liquidity support, the same way banks do (or Warren Buffet did). On the other hand it is much more hazardous how you make money from a bailout!

  • Comment number 72.

    #65 Objective

    Does an Objective analysis of recent performance really support your assertion that all investment bankers are geniuses?

    Forgive me for asking, but I am simply another incompetent fool who struggles to grasp how losing money in such vast quantities justifies huge rewards.

  • Comment number 73.

    Many comments posted above are rational, and considered, arguments for (and against) the banking elite, and the supposed good (and bad) that they do to support, and "nurture" our economic activity, but that is after all what they are here for, is it not?

    What seems to be overlooked, time and time again, is that as a society we are actively (and implicitly) allowing a small minority of privileged individuals, and powerful institutions, to continue to accrue vast wealth, and influence, at the expense of society as a whole.

    When, if ever, will this situation be fundamentally changed by our elected representatives?...obviously, taking aside the arguments that "they are all in it together".

    Humorous comments posted on the subject, whilst mostly refreshing, in most cases generally only serve to diffuse, and unfocus, these arguments (and ultimately will likely just contribute to the "spotlight on unfairness" moving on...as it tends to in any case).

  • Comment number 74.

    #65 Objective. Oh I think Goldman Sachs stand around the proverbial roulette table waving money (normally someone elses) around.

    How else would you account for the fact that Goldman is risking 9 times its capital base on exposure in the derivatives markets?

    Maybe the former CEO of the IPE epitomises the lack of understanding as to what Investment Banking is. He had some rather interesting theories in the role of Goldman Sachs in oil price movements.

    Maybe you remember Enron. They were also keen to smeer any critics as merely being too stupid to understand, they also believed that their unbroken success in the educational system entitled them to money without limit.

    Why don´t you help all us thicko´s out and explain to us Goldmans precise role in the bankruptcy of CIT. Why not explain how that was a good thing for taxpayers who were dragooned into funding both Goldman and CIT? Why not actually answer some real qustions, or is bluster and smear the only thing they teach at top 10 universities these days?

  • Comment number 75.

    Re objective #65

    I know nothing about investment banking, but I don't see that dissallows me from critising their bonus expectations.

    In my field, I am considering to be in the top 50 worldwide by my peers. I own my own business and work between 80 and 120 hours a week, yet because my industry is small beer, I manage an average wage. If I make a mistake I lose. If I make continual mistakes, I will be made bankcrupt, and my wife and kids will put on the street.

    I don't accept that just because they (investment bankers) are clever and work long hours, that they should be paid lots of money. It seems to me that it is a cosy club with little real competition, and is delivering very bad value to their clients: that is the job they do could be done as well for less money.

    This coupled with the acknowledged role that the mainly investment arms of banks have had in our current situation makes me angry.

    You must surely understand this...

  • Comment number 76.

    #71 darksurfer See this for an explanation of the Goldman role in CIT

    http://www.huffingtonpost.com/2009/11/01/cit-bankruptcy-filed-us-w_n_341567.html

    See this for a further series of articles concerning the Goldman/AIG relationship

    http://www.tavakolistructuredfinance.com/bloomberg40.html

    See this for current commentary on Goldman/AIG

    http://www.nytimes.com/2009/11/22/business/22gretside.html?_r=1

    See this for the thoughts of the former Chief Economist of the IMF as to how Goldman seeks to position itself. (Maybe he drinks in a pub and calls himself Joe Bloke, or maybe he doesn´t)

    http://baselinescenario.com/2009/11/25/aig-goldman-monoline-insurers/

    Seperately I note you have been well trained in the arts of sophistry and dissembling. So Goldman converted to a commercial bank like "most of the investment banks" - Well like Morgan Stanley as a point of fact, seeing as there were no other Investment Banks left standing. Still no doubt the star traders of Bear, Lehmans and Merrill were all well rewarded for destroying their firms - as that is evidentially what they did.

    Why do you bother trying to defend these institutions. They are destroying us all. Do you have a death wish?

  • Comment number 77.

    #75 Crookwood

    Don't clock up the hours you do, and don't rate myself particularly highly, but the customers keep coming back....

    Guess my economics is well dated, but I always thought that somewhere along the line somebody paid for somebody else's wealth. And generally those who pay the highest relative proportion are the less skilled.

    We've all seen the high level rewards for working in certain banking and media areas. People here can earn in an hour what the unskilled worker takes 1-5 years to accumulate.

    Furthermore these top earners have the ability to quickly return to generating income even when the original source has dried up.

    Conversely, the unskilled/niche skilled does not. They are reliant on others.

    Government policies for handling this assume a healthy employment market. There is no policy for markets of mass unemployment.

    I have no issue with people being able to receive large rewards provided they accept that it is their duty to pitch in at much higher levels in circumstances such as these - its short term thing - and that means some pretty tough measures way above those on the table. I am prepared to take the risk that some high earners will not want that commitment and leave the country, because they are not irreplaceable. The majority will accept the short term hit because they are confident enough to know they'll get it all back and more in the medium term.

    What I cannot accept is weak government with short-term thinking. I cannot accept government that is so costly it consumes 50%+ of Mr/Mrs AverageIncome's income. I cannot accept government that comprises petty fiefdoms wasting resources and failing to provide for the big picture. I cannot accept government that spends so much effort intervening that nothing actually gets done to benefit anybody. I cannot accept government that spends so much effort telling us what we cannot do because it unsafe or risky but at the same time develops economic policy and revenue streams on an inherently unsafe & risky model. I cannot accept government that constantly sings its own praises especially about things nobody wanted in the first place.

    apart from that life's good

  • Comment number 78.

    #76

    Sophistry? Mmm the master is talking!

    http://www.ft.com/cms/s/0/9170b5f2-b10f-11de-b06b-00144feabdc0.html

    Nothing to indicate that GS triggered CIT application for Chapter 11.

    http://www.tavakolistructuredfinance.com/bloomberg40.html

    Mmm good reference (not!), probably half of the traders on this planets have a book of Tavakoli on structured products, books showing poor understanding about risk in structured products, especially in term of volatility and correlation. Leaving this aside it does not claim anywhere that GS was totally hedged with respect to AIG.

    And actually I do not care about GS, my point is that some banks needed to be bailed out (at a cost) where other banks needed liquidity as direct results of the behaviour of the first ones. The bailout would have cost money to the tax payers whereas the liquidity support could have brought money to the tax payers. It seems that it was to much to ask people to think, hysteria and sheer stupidity is going to cost all of us dear!

  • Comment number 79.

    Crookwood, the role of investment banks in this financial crisis is as much as that of governments, central banks, regulators, ratings agencies, and last but not least, those who borrowed in the first place. Last time I checked it was the ratings agencies, not the banks, that were the ones rating some tranches with the same default risk as the German government.

    I said nothing of hours + ability = remuneration. Those in the industry are paid relative to what they earn. If you earned for your company £50m, you would expect adequate compensation - investment banking realises the value of offering such incentives for the very best performers, in turn rewarding traders themselves, the shareholders, and of course, yourself, given the upper tax-band moving to 50%.

    Your decision to run your own business if yours. The decision of others to enter the City is there's, however they don't criticise how much you earn, when they know nothing of what you do, and what you earn.


    Derivatives include anything from futures on exchanges to OTC knock-in/knock-out options. A simplistic example, such as futures positions are taken on margin, i.e. leveraged - not because of the intrinsic risk involved, but the impracticality of posting all value. x9 is hardly 'spectacular' - if you want a vague idea of their "risk", their VaR is what is important, not the amount they're leveraged out. Dare I say, anyone here can get access to x10 leverage on any spreadbetting website, but you'll be margin-called the second your insolvent.

  • Comment number 80.

    #78 darksurfer. It seems that you are a communist sophist. How lucky for you that Senaor McCarthy is no longer plying his trade.

    No-one apart from you has made the claim that Goldman triggered CIT´s application for Chapter 11 protection. I claimed, and claim, that taxpayers funded CIT and subsequently lost all their money. Meanwhile Goldman (also a recipient of taxpayer largesse) placed bets that CIT would file Chapter 11 and subsequently made money on these bets.

    You would need to go back to Goldman Sachs own pronouncements to find evidence that they claimed to be fully hedged against an AIG failure. I am not your research assistant.

    You want to bail out systemically bankrupt institutions and contribute to the further polarisation of wealth go ahead, why involve me? But I guess that is the nature of communists. Why not relocate to North Korea you might find their way of thinking more to your tastes.

  • Comment number 81.

    #80

    Ok I try using simpler terms...your ignorance and stupidity cost us money :-)

  • Comment number 82.

    What a lot of extreme/unthinking views on this blog. The truth is complicated and takes time and patience. I'd really be happy to see some tougher moderation. What about a limit of 3 posts each so those who want to pursue long bilateral squabbles can do so elsewhere?

    Ref 'all the Government's fault' - pls note that UK debt/GDP still in line with international averages. It's not Govt debt that brought Lehman down. Please.

    Dear Objective (not a great name choice?) I don't claim to understand investment banking thoroughly but I'd hazard a guess that I know more about it than you do about what I do, or than either of us know about what brain surgeons do (or maybe what Crookwood does). I choose surgeons because they and I are both in the public sector, and people sure as hell do criticise how much some of us earn or our pensions arrangements.

    Banks exist to make money. So do most businesses. The difference is that the business of banks IS money, it's their raw material. People in, say, the motor industry get good deals on buying cars, it's a perk of the job. The banks' version of that is - more money. Lots of it.

    This is why I hate the argument so much that this or that team made so much money for their bank, they're entitled to XX% of it, thats normal. Excuse me? Making money for their bank is their job. It's what their salary is for. Yes they should be incentivised to do it better, we can all use some incentivisation, but from there to say that these giant bonuses are normal is just the biggest non-sequitur. Brain surgeons don't get extra years on their lives for saving other peoples', nor great bonuses for only killing 10% of their patients. Think about it.

    And please don't tell me it's just the market working, the City jobs market is manifestly imperfect by economic standards.

    I'd also just pick up on post 4 and the "pretty average earners (in London terms)". Please don't forget that most 'London terms', in particular house prices, have been driven by City compensation in the last few years. So justifying the mass of City salaries and bonuses by 'London terms' comes over as pretty circular argument.

  • Comment number 83.

    Objective, you criticise my knowledge of the finance system by my generalising of the investent banks business models (rather than go into a discussion that could take days to write!), and state that it is "a shining example of the incompetence that is allowed to post comments on these blogs".
    You then follow up by rambling in your argument into vague and incoherent statements related to the education of the current youth as if it had some relevance to what I was saying. Or what you were saying for that matter. Maybe it does, but you failed to state it. And I seriously doubt people leave the top ten universities with A-Levels, I should hope they are leaving with degrees!
    I think you have amply demonstrated that it is yourself that is "a shining example of the incompetence that is allowed to post comments on these blogs"!

  • Comment number 84.

    24. At 8:55pm on 10 Dec 2009, mrsbloggs13c2 wrote:

    "I think you will find that most of the hospitals, schools and colleges were built under PPP/PFI schemes by private companies borrowing from banks and that these schemes are IN ADDITION TO the 850,000,000,000."

    ....does that include the failed PPP schemes which the taxpayer had to bailout? i.e. Metronet.

    Don't forget that PPP and PPI are both policies the Tories are keen to follow.

    You do try to put the blame for everything at Gordon's door - and yet Gordon wasn't even born when Capitalism was started. The increase in state debt is as a result of successive crises of Capitalism requiring state intervention to prevent social and Economic chaos.

    ...but I guess it's simpler to blame the man of the moment rather than actually tackle the root cause so many refuse to acknowledge. Would I be correct in saying that every government has increased the deficit since the war? - surely that can't all be Gordon's fault?

    I think it's the points you did not answer mrsbloggs13c2 which speak volumes about your irrational hatred.

    If you had blamed Gordon for persisting with a system proven to be out of human control - then I would not have argued, but to suggest he has single handedly brought down this country is a little short-sighted don't you think?

  • Comment number 85.

    34. At 10:31pm on 10 Dec 2009, byronkeats

    That you for that amatuer pshycoanalysis - and it's complete irrelevance.

    Once again the old 'your a Marxist' pathietic argument is brought out - despite you complete lack of an alternative explanation to the source of profits and mis-conception that Marx is 'political' when 95% of what he wrote was actually about the Economics of Capitalism.

    I don't suppose things are black and white, but I do know there is no credible alternative to the Marx's theories on Capitalism and the crises it faces - oh and if you look on the TV you can witness one right now (even though Governments claim to be in control)

    So you can go back to your beliefs because you do not seem to have any facts to back them up - whereas I do - and I have done consistently.

    If I appear to be concieted it might be the frustration I feel at constantly having to defeat random arguments such as you have presented that have no reason, nor sense behind them.

    Next you'll be shouting at me telling me I'm a Stalinist or Maoist or something through of your lack of understanding of the world in which we live.

    If you can provide credible rebuttals to my arguments - then please do - I am always prepared to be enlightened....

    However as the economist from yesterday went silent - I suspect you will too.

  • Comment number 86.

    40. At 10:47pm on 10 Dec 2009, copperDolomite wrote:

    "If education is a premium, then why are there thousands of graduates unemployed each year, even for the more traditional subjects such as Law - they have struggled for years and those not picked up usually undergo re-education in a different discipline."

    In law there is a requirement to complete a contract before you get your LLB which costs a lot of money. A lot of Law graduates simply cannot afford this extra cost - I know, I'm married to one of these people.

    The high graduate unemployment is often related to the lack of investment in industries which require those qualifications. However this is likely yo change if the 'green investing' actually happens. (just don't hold your breath)

  • Comment number 87.

    #81 More trash. Where is the evidence of my ignorance and stupidity? Did I cause the entire western banking system to collapse? The answer is no.

    Did I recommend the bailing out of the systemically insolvent? The answer is no.

    You may think it a bit of a laugh to demonise the victim. But I am no ones victim, and nothing has cost me money. If it has cost you money tough!

    The big problem is that people are going to lose a lot more than money. A lot of people wont make it through what is coming. You and your ilk have ensured that full spectrum meltdown is inevitable. Watch out for a lot more sovereign collapses topped off by the now inevitable collapse of the US itself.

    How can you possibly write such garbage when 1 in 8 Americans are reliant on food stamps and 1 in 50 US children are homeless. Meanwhile 500 individuals have aggregate wealth of US$ 5 trillion. Did you miss the class when the velocity of money theory was discussed.

  • Comment number 88.

    62. At 09:23am on 11 Dec 2009, darksurfer wrote:

    "Do you write things randomly or do you really have no idea?"

    Well lets see shall we?

    "Concerning Warren Buffet, he does not invest in broke business but in business to make money. And actually he has already made a huge amount of money with his investment in GS. The reason is that GS has a sound business model."

    You seem to have missed my point - why if it had such a good business model did WB get such favourable terms? Why did he lay down conditions of the bailout happening before investing? - you don't need people to spell it out - it's there in their actions. I'm 100% certain that if the crisis in capitalism had not occured at that time then WB would not have been investing in GS. It was a bailout to protect his existing holding.

    "This brings to second point. It is totally idiotic to bag all the banks together. Providing liquidity and bailing out are two totally different things."

    You demonstrate your lack of understanding, the bailouts were because of diminishing liquidity they are not seperate by any yard stick - they correlated. As the liquidity tightened more banks would have popped only the actions of Government to provide liquidity stemmed (or stopped) this from happening - Government provided cash for the whole system so private sector banks would stay afloat - what else constitutes a bailout?

    "Banks are providing liquidity to businesses all the time."

    Not at the moment they aren't - do you know what happens in a recession? Have you ever heard about 'flight to liquidity' - it's when the lenders get spooked and restrict their exposure due to dwindling expectations of Economic growth.

    "However they do this for business with a good business model who will generate cash in the future."

    That's not what they've been doing for the last decade - or are you choosing to forget about that?

    "For a lot of banks it is what the government did but for a few it was a different story, they had a flawed business model and the government had to bail them out. These are two totally different things."

    I cannot believe you actually truly believe that - the only difference between Northern Rock and any other surviving bank was that the Government intervention came before one failed and not the other. If the Government had believed that NR and HBOS could be allowed to fail and that it would have had no detriment to the market - then they would have let it fail - why? simply because it would have been a lot less hassle for them.
    It was the banks themselves (and I mean all of them) who were calling for a bailout of the system - they knew they could easily be next.

    "Third concerning the banks with flawed business model, the like for NR, HBOS or RBS for the UK. Everybody knew that they had a flawed business model as their risk management, credit, market and liquidity, was pathetic. As it was not enough they were able to undercut their competitor creating a totally distorted market. Why the FSA/government did not intervene? Surely they were supposed to look at their risk management?"

    So Governments are now responsible for managing banks risk models?

    Also when you say "Everybody knew that they had a flawed business model" - who are those everybodies? I presume no-one who had any savings in any of those banks, and no-one with shares either - that's a lot of people not in on it. I work in this industry and I didn't know NR was raising so much money from LIBOR and not from savings - they didn't exactly shout it from the rooftops now did they?

    "Finally concerning the APS, there is not £850bn of asset but "only" £282bn, all from RBS, and RBS has a first loss tranche of £60bn, so basically not risk is transferred, just capital arbitrage and the government providing another implicit support to them."

    It's been difficult to keep track of the APS as the Government is not making much noise about it, but originally there was room for £850bn. Since Lloyds rejection of the scheme you are correct this has been reduced - however didn't Northern Rock add funds into this scheme in the form of a 'bad bank'.

    I admit I cannot keep up with the BILLIONS AND BILLIONS being thrown into the system (although you claim it's just a few bad apples) but I am merely a member of the general public and not expected to worry about it because I should be more like you and bury my head in the sand - continuing to trust the endless lies coming from both Government and Banking.

    "Mmmm thinking does not seem to be your forte!"

    I think following this piece I would beg to differ - it is you who does not seem to be thinking and rather take the trust of those who have already broken it.

    Stil, they do say one is born every minute!

  • Comment number 89.

    65. At 09:49am on 11 Dec 2009, Objective

    Rather than complain about Leviticus - why don't you answer the questions I posed yesterday Objective?

    Do we have an Economist who doesn't answer Economic questions? - that would be a turn up for the books.

    "The younger generation leave from the top-10 universities with straight A's at A-Level onto the trading floor "

    As I work with these very people perhaps you can enlighten us as to the most common Degrees on the trading floor?

    Don't know - well I can tell you it's the classics, not Economics and not Business related degrees.

    Once again your lack of knowledge is the embarrassment.

  • Comment number 90.

    71. At 10:26am on 11 Dec 2009, darksurfer wrote:

    Define how providing liquidity to the system is different from a bailout please.

  • Comment number 91.

    75. At 10:40am on 11 Dec 2009, Crookwood wrote:

    "I know nothing about investment banking, but I don't see that dissallows me from critising their bonus expectations."

    Don't worry Crookwood - the investment bankers know how many bps make a whole - but they don't have a clue what that relates to in the real world.

    The pretence that Investment banking is complicated is generated by investment bankers in order to throw the ordinary folk off the scent.

    It's just like when a bad scientist doesn't know the answer to a simple question and will then attempt to blind you with science.

    Every investment banker can explain how a derivative works but very few of them realise that trading them for profit today is essentially extracting wealth from expected future profits. Great if those profits occur - but if they don't - well it's off the the tax payer I'm afraid.

    Do not be intimidated by the empty kettles of the Investment world. I nearly run 5 over a morning because they continue to cross the road whilst chattering on the phone and not looking - something a child of 5 could inform them about if they had time to listen.

  • Comment number 92.

    Stop waffling Robert.

    Your PM has just committed a serious crime. He has knowingly committed an act that is against your national interest in order to win some extra votes.

    Your currency is in very serious danger. If you lose your AAA rating the UK will not only have to make the very painful cuts any responsible government would already have done but extra avoidable ones to pay the additional interest costs that are associated with lower credit rating.

    Pull yourself together man - your like an excited puppy running round peeing on the curtains. The mess is not funny.

  • Comment number 93.

    Isn't it funny, when reading other people's comments, that you can see how we all accept the banking system as is, and somehow infer that it will continue verbatim, indefinitely. How wrong we all are!
    If indeed, banks can act and do as they are, then perhaps their power should be pulled, and money creation and the economy should be handed back to the people. Look at the value of any currency and its buying power, then compare it to the power it had 100 years ago. You see a massive change, in that a pound (or dollar or whatever) can only buy you what pennies would have a century ago. No great surprise, right? That's inflation! Well, look again to a previous 100 years before that, and something quite surprising comes to light. Currencies hardly devalued at all.

    If history is a teacher, then we've only to look at Germany's depression, and modern day Zimbabwe. The credit crunch has been handled in a very similar way to both these nations historical debt crisis- but look at the result. So, are we headed for disaster? Remember, we're following the same footsteps... Maybe it makes a difference that the financial powers of the world are doing it together - maybe not. But when you look at the true cost of derivatives, then you begin to wonder if there truly is anything more than the hot-air coming out of Al Gore's mouth - inflating the economic bubble we're in right now.

    What's next? Take your pick! Peak oil? Realestate crash? Credit-card-crash? Dubai has just defaulted, and trillions of dollars were pumped into that country in the last 10 years, building over 200 sky scrapers, and luxury islands!

    What's the real unemployment in the US? It's not 10%! Any school child could figure that out. Try doubling it, and you're closer to the truth. So, a Dollar crash is coming? Or already started? What will that mean? Ditch the dollar, and a new currency to start a new banking crises? (Amero, anyone?) So when you talk banks, think also about how they work. Do your history, and ask who funds the wars? It's not the tax-payer, but the banks! With debts handed to the tax payer to add to their national debt.. Who stands to make the greatest gains from wars? Sorry to say it, but not Iraq (illegal) or Afghanistan(illegal).
    Worse still, look to your history once more, and see who funded the American south, and their enemy, the north? Who? The same European banking institutions, I believe. Funny that. So basically, banks are not ethical, and don't really care for people. They care for debt, and more money. Enter derivatives, and the lies that surround that - and look what happened. Now. Look to Copenhagen, and listen to what they want to do. Even though ClimateGate proves it's all a bunch of lies, they're still going ahead. This means each signatory is committing treason against yours and my country! If Gordon Brown signs it - and he will - then he is guilty of treason against Britain! If Obama signs up, he's committing treason against the US! - But worse, - our police will be expected to uphold the law, and enforce peacefulness amonst the nation, and if we can't rise up against this treacherous treasonous act, and decree that we'll have nothing to do with it -- and if our police try to stop up, then they too are complicit in treason.

    But I digress. Copenhagen will setup a system of trading carbon credits as a form of derivatives. Who then stands to gain from this? The very institutions who control this fledgling new market, and its creators (conspirators?) such as Al Gore - and probably Goldman Sachs! But I honestly don't know about that. Maybe a little research for me?

    I must sound completely insane - but we live in insane times, and an insane world. Goldman Sachs may have some very lovely people working for them who indeed work very hard, and deserve a good income. But at what cost? The blood of innocent people in Afghanistan who are expected to praise us for freeing them whilst we bomb their children to bits? War=freedom? fighting=peace? That makes no sense to me.

    I'm sorry, but banks deserve no pitty, and if real market values mean the economy crashes down around us, then its a broken system, and should break. Not be perpetuated. We need something new! These systems were designed with growth in mind. Without growth, the system comes crashing down, people lose jobs, homes, their lives, etc.

    Who stands to gain from this? You guessed it. I'm tired of this game, let's play something else. Lets try again, and this time, keep it focusses on the people, and having everyone benefit. Greed is the wrong motivator. We're not all greedy. We can't bottle love, but if you truly believe that every person is in some way related to you, then you are to them - and you deserve to be treated with some respect, and dignity. Try telling that to the families losing their homes because they've lost their jobs, because of bankers playing with our money, and losing it all in derivatives, then coming to us, the people, and asking us to give them billions - so they don't lose their jobs? Come on, people! Time to wake up, and smell the coffee. Once bitten, twice shy. Well, we've been savaged in more ways than one. Its time for the bnks to prove they have some shread of decency. But I wouldn't hold your breath. Keep your head down, pay your taxes. Nothing to see here.

 

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