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Why government can't stop big bonus payments

Robert Peston | 09:56 UK time, Friday, 7 January 2011

The third commitment in the coalition's programme for government is to

"bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector; in developing these proposals, we will ensure they are effective in reducing risk".

Has that happened since the general election in May?

Well as a result of new European Union rules and earlier action by the UK's Financial Services Authority, the way that bonuses will be paid has been significantly reformed.

At least half has to be paid in shares and between 40% and 60% can't be cashed in for years.

Also, it is highly likely that for the top earners at the UK's leading banks, more-or-less 100% of payments will be made in shares or in subordinated debt (IOUs from the banks that can incur losses if the bank gets into difficulty).

Which should remove two elements of risk from the bonus payments, namely that they would deplete banks' precious capital and liquid resources, and that they would encourage bankers to take crazy short term risks.

If bankers are forced to hold shares and subordinated debt in their banks for years, then they should have less of an incentive to make dangerous bets to maximise short term profits - in that they would suffer if the bets go wrong.

That's the theory - though it didn't work at Lehman Bros, where employee share ownership was higher than it will ever be at Royal Bank of Scotland or Barclays.

But many, especially Lib Dem supporters, will be infuriated by the huge absolute size of bonus payment - millions of pounds for some individuals. Whether they are paid in shares or cash, these bonuses are immensely valuable.

And even if the bonuses or variable payments fall a bit, there have been increases in fixed salaries of between 20% and 40% for many investment bankers over the past few months.

So at a time when the incomes of most British people are being squeezed by low nominal pay rises and inflation, some will doubtless argue that bankers' bonuses remain "unacceptable" (to quote the coalition agreement) - especially when all big banks benefit from a guarantee provided by taxpayers that they won't be allowed to fail.

Even the Bank of England takes the view that big bonuses are inappropriate at institutions in effect subsidised by the state (to the tune of £100bn or so in 2009, according to Bank of England calculations).

As a consequence, the thrust of government policy - via international negotiations on reforming the banking system and the work of the government's own Banking Commission - will be to remove that implicit subsidy and support provided by taxpayers.

As readers of this blog will know, that means allowing banks to fail, or putting in place arrangements such that when banks get into difficulties, huge losses fall on investors and institutional creditors, while depositors cash and the bits of banks vital to the economy are protected.

Easier said than done. It is by no means certain the implicit support of taxpayers can be completely removed.

Royal Bank of Scotland

 

Which begs the question why ministers haven't simply ordered banks to slash bonuses, especially at the largely nationalised Royal Bank of Scotland.

Well, it is because slashing bonuses in that way would be tantamount (the banks warn) to closing down the investment banking operations of Barclays, and RBS and HSBC - in that their internationally mobile banking superstars would simply move to overseas competitors.

That is not a risk the chancellor wishes to take, because investment banking (whether you like it or not) has over the years generated significant revenues for the Exchequer and creates a good deal of employment in the UK (even if some would also argue that the proliferation of highly paid bankers in London distorts the economy and housing market of the capital).

To state the obvious, the payment of billions of pounds in bonuses will cause something a headache for the Liberal Democrat Business Secretary Vince Cable and the Lib Dem Deputy Prime Minister Nick Clegg - both of whom put the banks on warning before Christmas that the payment of massive bonuses would be wrong, especially if the banks were perceived to be doing too little to support the UK's economic recovery.

That's why ministers are now pinning all their hopes on the second strand of negotiations with bank chief executives, which are aimed at persuading banks to provide more and cheaper credit to small businesses.

To be clear, even reaching agreement on business lending isn't easy. For example, shareholders in HSBC might well query why on earth that bank should allocate precious capital to what they would see as relatively risky and low-return lending to small British companies, when there are arguably far better opportunities for a bank with global reach in India, or China or the Middle East.

All that said, I would be staggered if the banks don't come up with promises of new finance for smaller businesses, perhaps as soon as the end of next week. Because if they failed to do so, the political pressure on ministers to punish them - perhaps through the implementation of a new tax - might become impossible to resist, even for the chancellor (who doesn't want a new bonus tax).

Comments

Page 1 of 6

  • Comment number 1.

    The bonus issue is a distraction.
    The real issue is how fractional reserve banking actually works.
    Debt = money
    No debt = no money

    And if there are any bloggers out there that need a further explanation try:
    http://www.positivemoney.org.uk/

    You want economic growth, then you need a growth in debt.
    You want people back in work earning money, then you need more people taking on more debt.

    That’s all the future’s got to offer.
    Unless someone has the guts to change the banking system.

  • Comment number 2.

    Tony Benn - Cabinet Minister in the 1964–1970 Labour Government

    "As a minister, I experienced the power of industrialists and bankers to get their way by use of the crudest form of economic pressure, even blackmail, against a Labour Government. Compared to this, the pressure brought to bear in industrial disputes is minuscule. This power was revealed even more clearly in 1976 when the IMF secured cuts in our public expenditure. These lessons led me to the conclusion that the UK is only superficially governed by MPs and the voters who elect them. Parliamentary democracy is, in truth, little more than a means of securing a periodical change in the management team, which is then allowed to preside over a system that remains in essence intact. If the British people were ever to ask themselves what power they truly enjoyed under our political system they would be amazed to discover how little it is, and some new Chartist agitation might be born and might quickly gather momentum."

    http://en.wikipedia.org/wiki/Tony_Benn#Move_to_the_Left

  • Comment number 3.

    If you are a builder, plumber, carpenter, electrician, glazier, plasterer (to name but a few) plying your trade in the south-east of England chances are these bank bonuses will be like rain after a drought. The sector has suffered hard the last two years. Maybe now business will start to pick up. (The only pity is that the bonuses won't be paid all in cash).

  • Comment number 4.

    To Robert Peston,

    Why are you letting the Government and the banks distract you from the overall pay of the bankers? These 'masters of the universe' who so recently stole the widows mite and destroyed the country!

    No one in the UK should get what they do - I nearly wrote 'earn', but that would be wrong. Paying these people these absurd incomes must be stopped (and I include footballers and, so called, entertainers!)

  • Comment number 5.

    Non boardroom level bonuses have only ever been paid to those members of staff who make money. Losing profitable people is not in the interests of shareholders (Of RBS for example, like my mum. How dare they not pay Steve Ashley properly and therefore lose him. Disgraceful.)

  • Comment number 6.

    So 'private sector' workers are on pay settlements of 3-4%. Public sector workers are on a pay freeze. In both cases rising levels of inflation mean they are effectively taking pay CUTS.

    Meanwhile bosses of large corporations are on 55% pay rises and spivs are 40% pay rises, even before the mulit-million pound bonusses.

    So this is what lord snooty means when he says 'we are all in it together' ?

    Excuse me if I laugh.

    The tories are back and taking up the agenda of transferring national wealth to their billionaire backers where they left off last time. It is every man for himself - lord snooty can work out for himself where to shove his 'big society' scam.

  • Comment number 7.

    3. At 10:23am on 7th Jan 2011, Damon in Horsham wrote:
    If you are a builder, plumber, carpenter, electrician, glazier, plasterer (to name but a few) plying your trade in the south-east of England chances are these bank bonuses will be like rain after a drought.
    =====================================

    If you are a builder, plumber, carpenter, electrician, glazier, plasterer then get ready to join lord snooty's chain gang picking up litter in some park for your benefit check.

    If the spivs want some plastering done they will be importing Polish, Czech etc workers at half the price you charge.

  • Comment number 8.

    It isn't tax payer support, it is support given to the banks by the elected government. Governments are not elected by tax payers, they are elected by citizens.

    And we can dump this industry.

    We were told Britain, the Empire depended on the slave trade. They threatened to leave, they whined France would take on all the lost business.

    On April 2nd, 1792 there was a debate in the House of Commons, that went on in to the early hours of the next morning.

    Pitt spoke at 4:00 am "How Sir! Is this enormous evil ever to be eradicated, if every nation is thus prudentially to wait till the concurrence of all the world shall have been obtained?...There is no nation in Europe that has, on the one hand, plunged so deeply into this guilt as Great Britain, or that is so likely, on the other hand, to be looked up to as an example"

    It's about time we had someone in that same place who had enough brains to think like that, who wasn't so scared of the vested interests, vested interests like the sugar plantation owners and the banks who financed them.

    Wehn Nobel Prize winning economists are smacking Osborne and his economics about as easily as I can swipe an ant, I don't think Osborne or his ConDem mates are capable of anything other than very poor marketing.

  • Comment number 9.

    I was never a supporter of Tony Benn, but I think his statement says it all. The Banks obviously rule the country, and if you're fortunate to be employed by one you must be laughing at the rest of the population. It's time they were taxed to the hilt, or heavens above, 100% nationalised!

  • Comment number 10.

    I completely agree with poster #1 that bonuses are a distraction. I personally find Dan Ariely's work on behavioral economics highly interesting, and it is obvious that nobody in banks or in government will ever question whether "banking superstars" are really doing anything useful apart from skimming whatever they can more efficiently than their competitors. Come on, if they are paid that much, especially compared to a nurse, a modest policeman who risks his life, to say nothing of the average Chinese miner, they deserve it, don't they? Otherwise they would go and hang themselves. They only can believe it's deserved, honestly earned money.
    But the real issue isn't whether a handful of morons will make Ferrari dealers happy.
    The real issue is that the economy of a country is something different. If they help the economy in a way or another - and nobody denies that banks have an important role - fine. If they are just parasites, get rid of them.
    I remember a discussion I have had two years ago with a Singaporean woman then working as a business analyst for RBS (she may still be with them). I was advising her to join a local retail bank. Her answer was that people in retail banks were dumb, and that people in investment banking were much brighter. They genuinely believe they are. I have spent much time (as an IT contractor) in an investment bank in the past. I can only speak for IT, but I have seen (much) brighter minds elsewhere.

  • Comment number 11.

    2. At 10:16am on 7th Jan 2011, DebtJuggler wrote:

    Aye


    I've een asking about that for years. This bank nonsense has given me the answer to my questions. We do not live in anything like a democracy - we just think we do.

  • Comment number 12.

    '6. At 10:37am on 7th Jan 2011, jon112dk wrote:
    So 'private sector' workers are on pay settlements of 3-4%. Public sector workers are on a pay freeze. In both cases rising levels of inflation mean they are effectively taking pay CUTS.'

    So the poor, the unemployed are really taking massive cuts then.

    The world is sick and twisted

  • Comment number 13.

    The time for appeasing the banks that relied so long on the unwritten guarantee of the taxpayer to raise cheap money for fuelling dodgy deals and huge bonuses is over. Politicians, please take note.

  • Comment number 14.

    "That's why ministers are now pinning all their hopes on the second strand of negotiations with bank chief executives, which are aimed at persuading banks to provide more and cheaper credit to small businesses."

    If ministers can only govern through hope, and not action, then democracy is nothing but a front for installing governments whose impotence allows predatory wolves to feast on the masses of sheep that are voters.

  • Comment number 15.

    My comments from the end of the previous blog

    I am biased towards Tory (as if you didn’t already know) but my bias is waning. They are forgetting that they need for me to feel that they are looking after my interests but I am now feeling that they are no better than nulabour.

    I believe in democracy because at present there is no better system available and therefore if the majority want, the majority gets. I will not march or demonstrate because of the idiots who come only to fight and destroy. I know of many others that think this way but democracy can work if we all pull together.

    In the past I have spoken about there being no fear factor so perhaps we Joe Public should introduce one, firstly to make the banks sit up but secondly to show the government clear intent. (I hope I am not turning French LOL). It’s been tried before but perhaps now there is a catalyst and should therefore be more successful.

    I am suggesting a run on the banks, a lets have a “withdraw our money out day” and “none use of card day” – is the 28th or 31st of Jan too early?

    Or are we just going to keep going round in circles on blogs like this, me disagreeing with you and you disagreeing with me, with some agreement, nice for the sole but getting nowhere slowly.

    Life is now not tomorrow.


  • Comment number 16.

    This kind of behaviour is what causes revolutions...

  • Comment number 17.

    => At 10:16am on 7th Jan 2011, DebtJuggler wrote:
    Tony Benn - Cabinet Minister in the 1964–1970 Labour Government

    "As a minister, I experienced the power of industrialists and bankers to get their way by use of the crudest form of economic pressure, even blackmail, against a Labour Government. Compared to this, the pressure brought to bear in industrial disputes is minuscule. This power was revealed even more clearly in 1976 when the IMF secured cuts in our public expenditure. These lessons led me to the conclusion that the UK is only superficially governed by MPs and the voters who elect them. Parliamentary democracy is, in truth, little more than a means of securing a periodical change in the management team, which is then allowed to preside over a system that remains in essence intact. If the British people were ever to ask themselves what power they truly enjoyed under our political system they would be amazed to discover how little it is, and some new Chartist agitation might be born and might quickly gather momentum." >=

    Exactly. Our parochial politics will control almost nothing of multinational finance and industry. The Condems can no more control the workings of international banking in a free market than a dud cheque can. They also can't control the world's industries, the motor transport world, the world steel industry, etc.

    Suprising they haven't learned that from the oil crisis that led to OPEC.

    Point is, they might as well tell the truth - they have almost no influence over these multinationals unless they want to screw the UK economy up for you completely, so stop bluffing with these churlish noises!!

  • Comment number 18.

    =>14. At 11:02am on 7th Jan 2011, verano wrote:
    "That's why ministers are now pinning all their hopes on the second strand of negotiations with bank chief executives, which are aimed at persuading banks to provide more and cheaper credit to small businesses."

    If ministers can only govern through hope, and not action, then democracy is nothing but a front for installing governments whose impotence allows predatory wolves to feast on the masses of sheep that are voters.
    = = = = = = = =

    At least the truth is starting to dawn for you and hopefully a few others!

  • Comment number 19.

    "Why government can't stop big bonus payments"

    .....because there is no reason to in a fascist state. Now that Government and corporations are in league with each other conspiring against the people they can stuff their faces in the trough until their hearts content.

    Fortunately the greed of the banks will be their ultimate downfall - I don't think the public will be as keen on bailing out the banks a second time now they have shown their utter distain for the assistance provided.

    The ratings agencies are going to downgrade most of the banks soon - which will cause jitters in the markets. They say it's merely a change in their ratings system - but what they're actually (trying) to do is account for all the off balance sheet and derivative products held by banks which were previously invisible to the agencies.

    I call it doing your job properly - and it will uncover the vast lie of stability in finance that we're currently being fed.

    All the public need to do is remember this.....most importantly when the banks come cap in hand for more taxpayer cash.

  • Comment number 20.

    3. At 10:23am on 7th Jan 2011, Damon in Horsham

    ...and what makes you think the bankers will be furnishing their house in the SE and not their pad in monaco?

    Gee - some people will clutch at any straw which indicates a benefit for the wider population won't they?

  • Comment number 21.

    Benn was right. But then he was also right to push through Concord and establish the British National Oil Company which Thatcher killed off and with it our chances of ever creating a substantial energy industry base. In fact the Norwegians are now streets ahead of us in energy technology companies.

    Anyway - back to the topic.

    Put bluntly - if the banks don't come up with an acceptable set of proposals not just for new finance for smaller businesses (loans) but genuine risk equity capital to kick off the proper rebalancing of the economy by creating and supporting a new generation of companies involved in high value adding product development and manufacturing then we have to force them to do it.

    It's up to them now.

  • Comment number 22.

    Since the banks are not going to voluntarily behave themselves then the only outcome has to be legislation.

    The issue is the taxpayer guarantee. Why should the taxpayer subsidise an industry which hands out bonus payments for its employees? Surely, if they are the capitalists they claim to be then they would be anxiously focused on accumulating the necessary capital to clear their liability to the taxpayer for fear of losing control of their businesses not handing out largesse to all and sundry.

    So we are essentially dealing with an industry that is either out of control or indifferent to their contractual obligations to the taxpayer. Time for government action: now!

    I have long argued for legislation that separates retail banking from the casinos. The taxpayer guarantee will then apply only to the retail banks as they are what most taxpayers require in a bank. The casinos can then do what they like which means they will probably go bust and good riddance!

    There will be those who will say this is all too complex, the EU won't allow it and the banks will leave the country. These are the weasel words of blackmailers and parasites. The government should cock the same deaf'un to the banks as the banks cock to the rest of us.

    If government does not do this then the bankers will have won; they will be the new government and everything will become subordinate to them. The banks are throwing down the gauntlet to the political class. They must not be allowed to undermine our nation, democracy and freedom.

    Mr. Cameron, you either do the necessary business or get off the pot thus allowing someone else to do what needs to be done.

  • Comment number 23.

    5. At 10:37am on 7th Jan 2011, Robin Joy wrote:

    "Non boardroom level bonuses have only ever been paid to those members of staff who make money."

    Make money? - please elaborate how a bank 'makes money' because there is no productive activity and therefore no wealth created - so how can anyone make money at a bank?

    You need to look into banking a little more before you leap to it's defence.

  • Comment number 24.

    "So at a time when the incomes of most British people are being squeezed by low nominal pay rises and inflation, some will doubtless argue that bankers' bonuses remain "unacceptable" (to quote the coalition agreement) - especially when all big banks benefit from a guarantee provided by taxpayers that they won't be allowed to fail."

    What "most British people" need to realise is that the top stars in international finance live in a world very different from our humdrum level. It's a little late to do something about it now.

    And it's starting to look like a trap - blackmail - the tax payers getting feet in the door with "bailouts", as if that would allow taxpayers some kind of control via the government. But it's a trap the banks failed to fall into.

    Considering the taxpayers collectively own RBS and much of Lloyds as shareholders, why aren't they/we DOING something about it, if we don't like the system?

  • Comment number 25.

    Is it just me or do the Con/Lib Coalition not understand the impact of this issue. Despite clear wording in the Coalition Agreement are they really going to do NOTHING?

    For the LibDems this coupled with tuition fees is a disaster of biblical proportions. Will seem like they have to wear all the sxxt but can't get any of the cream.

    For the Conservatives it will be the end of any pretence of One Nation Conservatism.

    I have said in previous comments what I think Labour and the Unions should do. Assuming what is said by Robert is correct my suggestions to Cameron, Osbourne, Clegg and Cable would be -

    1. Empathise with how people are feeling. Explain to them why you cannot do as much as you really really want to. Do NOT try to dress up a hopeless outcome as something it is not.

    2. The answer to dealing with the banks and the bankers is global regulation. Explain that to people and start to talk about what must be done at a global level. London is one of (if not the) financial capital of the world. We have every right (perhaps even a responsibility) to take a lead on these issues.

    3. I suspect not much will come of any such initiative (in the short term at least) but it is important to be seen to be really trying. And you have the high moral ground because this global regulation is in fact the only way to properly regulate global institutions. Asking the UK government to regulate global banks is like asking the Sheffield local council to regulate Sainsburys. Made even more difficult if you have become entirely dependant on the revenue they generate. The addiction to money generated in the City did not start with Cameron and Clegg - though it did pay for their education.

    4. I would also invite each of the heads of the 4 UK banks to Downing Street and have them give a press conference afterwards about being SORRY (it is not so difficult to say) and talking about the new era of [insert Coulson sticky phrase] banking. Unlikely to achieve much but the optics will be important.

    BTW I am beginning to wonder if the awful handling of the PR on this issue is in any way attributable to Mr Coulson being distracted by other matters.

  • Comment number 26.

    A very simple question but one that is never mentioned on Today etc - Whose money is being invested??

    Only this week, Barclays offered me a pre-approved £1000 loan to be paid back over one year at APR 20.9%. Our modest e-saving accounts are paid ca 0.1-0.5%, apart from first year bonuses (paid why?) there is very little that is better. These figures suggest Barclays Investment Bankers are using our money to make a return of 200 X - no wonder they are "successful" - thieves more like.

  • Comment number 27.

    It's all very well to claim that tying bonuses to some sort of longer term performance should reduce risk-taking but there is still a snag.

    If those receiving such bonuses have "infinite greed" then it may work since they are always wanting more and more wealth but if they have only "modest greed" they may be happy with one or two years of huge bonuses (a few million in the bank is all you need for a comfortable retirement) and then the long term view may have no influence again and welcome back to crazy risks just for amusement.

    Most people never see such large sums and have to work all their lives to make ends meet. For them, the long term propects for their employer remains important and crazy risks may mean having to seek another job.

  • Comment number 28.

    Robert

    Although I understand the politics, the conflation of government support for banks with bonuses is misleading. The fact that 80 per cent of bonuses are paid to foreign owned banks located in London is the real reason why serious unilateral action by the UK government is never going to happen.

  • Comment number 29.

    15. At 11:06am on 7th Jan 2011, common_man_123 wrote:

    "They are forgetting that they need for me to feel that they are looking after my interests"

    Ah diddums - are the little Tory boys forgetting you are the most important person in the world?
    Are you really that self centred - or is this a wind up? The government doesn't need your vote - there are a millions of mugs out there just waiting to replace you in the polling booth.

    "I believe in democracy because at present there is no better system available and therefore if the majority want, the majority gets."

    Not with a turnout of less than 50% you don't - this isn't even close to democracy as the majority appear to reject the system (and yet it remains)

    "Or are we just going to keep going round in circles on blogs like this, me disagreeing with you and you disagreeing with me, with some agreement, nice for the sole but getting nowhere slowly."

    No you're right here - the time is for action, whether it be boycotts, protests or simple rioting - the banks and the Government need to know that the people they are protecting are wealthy but weak and the people they are hurting are poor but numerous.
    The Government fears nothing more than losing control - show them they can lose it when and where the people desire and you will see a change in attitude.
    Already they are backtracking on student fees - is it because a good case was presented, or was it because they were concerned they would lose control entirely?

    I suggest the latter.

  • Comment number 30.

    You have to admire the bankers they are in a win win situation. No power on earth "certainly not the Condems" will ever stop them helping themselves to the biggist slice of the cake. Even if they mess it up again goverments accross the world will step in and support them because they have no choice in the matter.

    Don't worry about getting rid of the bankers; worry about getting rid of the people who said they would do something about it and have not. So much for Daves fairer society.

    Anyway its time the rest of us took a leaf out of the bankers book and started demanding more money. Lets face it if it works for them and we honistly beleave are equal or better than them then we should also be demanding more!!!!!

  • Comment number 31.

    Commenting on the whole issue related to Robert P’s blog 7/1/11 09:56 a.m.
    Hello,
    I am ‘Joe Public’, and I believe many people in the UK would agree with this:
    A PLEA TO BANKERS AND BUSINESS BOSSES
    I don’t want this to read like another ‘blame it all on the bankers’ tirade, but rather as a plea to those in top management in banks and wealthy businesses to make it obvious that you are willing to bear your share of the pain re the cuts needed to get this country back to financial health. Up to now, it seems that you are cleverly dodging any government curbs or moral pressure to do your part by cutting bonuses and cutting fat salaries, and the public aren’t stupid – but rather than aggravating an ‘us and them’ battle, my plea is that you would act as part of the bigger ‘us’ of everyone in the UK. You might just laugh off the following idea from a nobody among that bigger ‘us’, but I suggest that you could not only help matters practically but also boost morale and good feeling across the entire nation, if at least some of you would get together and agree to cap all your incomes to a maximum of £100,000 per annum for the next 4 years (the main ‘cuts period’), along with all staff you control the wages of who are getting over 100,000 p.a. at present, and also cap all bonuses to 20,000 p.a. max (and by the way, 20,000 is above my total annual income in care work). Then, others among bankers and business bosses would either follow your lead, or be seen to be as greedy as many ordinary people think they are. And if they all left the country to be greedy elsewhere, I believe banks and businesses would still thrive without them (despite theoretical fears that the ‘best’ high-fliers would join competitors and damage the UK financially), and the whole country would be much better off overall, due to the example and good feeling and motivation to overcome the ‘big cuts blues’ that you would produce, by voluntarily taking such a sacrificial (a comparative term) and brave step, for the good of all of ‘us’ and for your own long term quality of life (which is more than a matter of £).

  • Comment number 32.

    Robert wrote “As readers of this blog will know, that means allowing banks to fail, or putting in place arrangements such that when banks get into difficulties, huge losses fall on investors and institutional creditors, while depositors cash and the bits of banks vital to the economy are protected.”

    The trouble here is that a significant proportion of the institutional investors are you and me via our pension funds. So we take a hit in an already diminishing pension income. [Law of unexpected consequences comes to mind here]. This seems obvious to me – am I alone?

    Pension funds have to make investments, its why they exist. They have secure investments in Banks when they are owned by the Government. Take this away, and the Government can claim that as they are not Banks, they have no responsibility to these pension funds. However, this will just hurt all in the private sector and then there will be an even greater cry to reduce the pensions in the public sector; we will all suffer greatly. Our pensioners will live in penury and as they fail in health there will be an ever greater burden on the state [the exact opposite of what the ConDems say they want].

    Please think policies through and look for the other issues than just revenge.

  • Comment number 33.

    22. At 11:21am on 7th Jan 2011, stanilic wrote:

    "Since the banks are not going to voluntarily behave themselves then the only outcome has to be legislation."

    ...and if the Government are not prepared to legislate (which it looks like they aren't) the solution has to be.......?

    Great piece in the City Am this morning, the city feels it's been 'slapped in the face' because Cameron didn't mention the financial sector as one of the 'growth industries' of Britain in the future. Now don't think this means Cameron has found his left and right one - but read into it that the world of finance is getting paranoid about justifying it's existence.

    Quoting how much tax the industry pays is common place now - but not once does anyone ask how the profits are generated to produce that tax. It's all recycled productive activity - the more productive we become the wealthier the banks become - we don't work less now we are much more productive - we just produce more.

    It's an ever expanding cycle - it's required for the banks to cream off wealth and it also explains why GDP growth is so sought after by Governments.

    I'd say these are signs that the banks are starting to feel the pressure - not from a weak Government but from an ever strengthening populous.
    2011 will be a very interesting year.

  • Comment number 34.

    We should look at this as positive news.

    Thats around £7bn pounds that will enter the economy - wealth management consultancy, pension and investment management doesn't come free or cheap. As such, that money goes into circulation, and the virtuous circle is complete.

    Additionally, as many bankers have seen rises in basic salary to compensate for additional taxation, this will help to mitigate some of the risk from their activities, as the 'performance related' element no longer applies.

    Finally, being paid in shares is no bad thing - the worst case scenario is that when sold in a few years time, only capital gains tax will have to be paid. And by moving to another firm, those shares are bound to be bought in cash as part of a golden hello. Win win, as they say.

  • Comment number 35.

    Do you think the poor, living below the poverty line should also get a bonus for living on such meagre means ??

  • Comment number 36.

    24. At 11:22am on 7th Jan 2011, doctor bob wrote:

    "Considering the taxpayers collectively own RBS and much of Lloyds as shareholders, why aren't they/we DOING something about it, if we don't like the system?"

    We own the car, but the Government is driving - and they have a different destination to us.
    It's time to take control of the wheel - however I expect the people will want a few more tries at change through 'democracy' first before they realise that switching between parties makes 0 difference to overall policy - which is dictated by corporations and their lobbyists.

  • Comment number 37.

    I might be missing the obvious, but:

    1. bonuses are taxable income, certainly the cash part
    2. bonus is eventually spent on goods, houses, etc.

    All of which surely is good for the economy and Treasury in the long term?

  • Comment number 38.

    But the Government could win this one pretty easily , if it had the political will to do so.

    If the Government provided the ordinary people with an alternative provision to put their money in and make reasonable levels of interest, without all the fancy knobs and knockers, then people would take their money out of the existing banks and put it there.

    This alternative might take a range of shapes or forms, e.g. National Giro Bank II, or National Community Bank - in GP surgeries / clinics and community centres, or the National Retailers bank available in three or four of the major supermarket chains, or the UK (or perhaps Scottish or Welsh) Confederaton of Government-backed Cooperatives and Credit Unions.

    Whatever, the point would be to provide the basic banking functions of deposit accounts, current accounts, standing order and direct debit facilities, ATMs, online services, bill payments, etc., No - not investment banking or high-value loans - sensible overdrafts, perhaps

    As the traditional 'banks' lost custom, they would fight for it and stop this "all pals together" attitude. It's the old rule of divide and conquer. The banks currently get away with what they do only because they stick together. They stick together because the status quo of the current banking system means between them they have a monopoly pretty much on UK banking trade.

    If you want to stop a) the big bank bonuses and b) the banks waving two fingers and any and every incumbent UK Government, then change the whole ball game and give the British people better alternatives and then Jo Pulbic will vote with his/her feet.

    With other societal factors, the increasing level of demise of rural and suburban Post Office branches, the poor returns for savings offerred by banks, ever downward levels of customer service, increasingly hollow-sounding promises in advertising campaigns - such a move could be 'joined up thinking' which would help to resolve other issues too.

  • Comment number 39.

    23. At 11:21am on 7th Jan 2011, writingsonthewall wrote:
    5. At 10:37am on 7th Jan 2011, Robin Joy wrote:

    "Non boardroom level bonuses have only ever been paid to those members of staff who make money."

    Make money? - please elaborate how a bank 'makes money' because there is no productive activity and therefore no wealth created - so how can anyone make money at a bank?

    You need to look into banking a little more before you leap to it's defence.


    Sorry writingsonthewall, maybe I should have said "generate revenue", which I suppose is what almost all private sector employees are employed for. I think that the instance I cited almost amounts to negligence by RBS management.

  • Comment number 40.


    The Greed of the bankers and Impotence of the politicians needs to be rammed down the throat of the people.

    WAKE UP!

    This is nothing but a two fingered salute to the UK taxmug.

  • Comment number 41.

    26. At 11:26am on 7th Jan 2011, B Taylor

    Bob - your story must be all that 'wealth creation' the banks are always being applauded for by the sychophantic sympathisers.

    These bankers are so clever, no wonder they need all the talent to run them.....I mean it must take a lot of money to hire the best extortionists in the land.

    I see banking as a 'development tax' - if you want to develop a business idea, a property, a boat etc then not only must you pay a tax to the Government on any future gain, but you also have to pay a banking tax to the banks to be given the permission with which to complete the development.

    Unlike the Government though - they don't wait for you to make a profit before extracting it - they extratc it before you have even made one.

    ....now I wonder why there was a credit crunch......???

  • Comment number 42.

    Since the decision was taken by Gordon Brown to bail-out them out, the bankers now know that their actions are without consequences and so can act accordingly. All threats are meaningless and are simply to be ignored, although for the sake of PR they mouth the odd platitude every now and then to stop the natives getting restless.

  • Comment number 43.

    writingsonthewall #29

    Ok replace the word I and me with we and us; no sweat. But just remember there is always ‘I’ in team “I will always endeavour to do the best for the team” A hard buyer and a good seller be!


  • Comment number 44.

    I'm not an Economist or a Politician. Nor am I a fortune teller, but I could have told you this would have happened when all the detritus hit the provibial fan! The huff & puff from the then Chancellor about how 'lending' all 'our' money to them would lead to a major reform in the banking industry was just that... hot air.

    The bankers own the Government. Plain and simple.

    And whilst the tail wags the dog, we, the electrorate are held to ransom by both.

    And you know what? I reckon all this will happen again... And sooner than we all think...

  • Comment number 45.

    36. At 11:40am on 7th Jan 2011, writingsonthewall wrote:
    "We own the car, but the Government is driving - and they have a different destination to us.
    It's time to take control of the wheel - however I expect the people will want a few more tries at change through 'democracy' first before they realise that switching between parties makes 0 difference to overall policy - which is dictated by corporations and their lobbyists."

    Whereas if we all live in very small villages we can elect chieftains to rule over us and each village will have different rules and enforcement tactics. Or perhaps we can rule by committee, or perhaps we can have a dictator who will control everything we do

    Which would most people prefer? Current democracy is not perfect, but it is the best we have as I have not heard any of the people who constantly sleight it actually suggest anything else. BTW, they probably won't today either.

    Back on topic.

    Will people please stop being jealous and envious of those in the investment banking industry. If it is so simple to do, then apply for a job and do it. Or apply at least, you might be successful for, regardless of what is said on here, there is a wide ethnic, cultural and demographic spread of people on the trading floors. If you don't want to do the job, don't criticise those that do

  • Comment number 46.

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

  • Comment number 47.

    34. At 11:38am on 7th Jan 2011, RedStarBankdotcom wrote:

    "Thats around £7bn pounds that will enter the economy - wealth management consultancy, pension and investment management doesn't come free or cheap. As such, that money goes into circulation, and the virtuous circle is complete."

    First of all you make the assumption the bonuses will be spent, secondly they will be spent in Britain and thirdly that they will be spent in useful growth industries (and not fast cars and champagne) - which seems to indicate you don't know bankers too well.

    This does seem like an awful lot of effort for what is essentially recycling. If you cut the banks out of the picture the productive business could afford to pay more in tax which could be directly passed to the industries which a) need it most and b) are worthwhile investing in.

    Instead of the Government doing this where there is accountability and direction (well lets hope so) - you seem to think it's better to put this wealth in the hands of the private sector in the 'hope' it will be used to good effect.

    Say what you want about Government redistribution of wealth and it's failures - but it's a lot more reliable than this method of wealth distribution.

    The trickle down doesn't work - increasing poverty during times of increasing production, wealth and technology are testament to that.

    This is not good news (unless you are a banker) - I can only assume you are one because making the case for banks when you are not a banker makes no logical sense.

  • Comment number 48.

    Dempster #1 wrote
    "You want economic growth, then you need a growth in debt.
    You want people back in work earning money, then you need more people taking on more debt."

    An alternative is that the government takes on more debt, as automatically happens in a recession, even if it does not take on the banks' debts. This is the natural mechanism for recovery from a recession.

    For some reason governments, particularly the UK's , have decided to try prevent this mechanism doing its job by enforcing austerity. Perhaps they like recessions. After all high unemployment is great for the employer class, and if you can persuade naive electors that it is all the fault of the previous government, you may even get away with it politically.

    The argument that a large public debt will be a poor inheritance for our children is misleading. Remember that for every debtor there must be a creditor. So our children will be left not a large net debt, but a very uneven distribution of wealth.

    In 1945 there was a similar problem, as a result of the huge public debts incurred during World War 2. Fortunately at that time, we had a genuinely left wing government, who ignoring of the howls of anguish from the holders of the bonds, kept interest rates low and taxes on the wealthy high and the problem was solved after a few years.

  • Comment number 49.

    "25. At 11:25am on 7th Jan 2011, Cassandra wrote:
    Is it just me or do the Con/Lib Coalition not understand the impact of this issue. Despite clear wording in the Coalition Agreement are they really going to do NOTHING? "

    But what can they do? They aren't dealing with parochial British institutions?

    = = = = = =



    "1. Empathise with how people are feeling. Explain to them why you cannot do as much as you really really want to. Do NOT try to dress up a hopeless outcome as something it is not. "

    Hardly possible when most of the front benchers are millionaires and the outpourings of public schools who have never, ever had to worry about where the next meal is coming from, never had to worry about redundancy etc.

    = = = = = = = =


    "2. The answer to dealing with the banks and the bankers is global regulation. Explain that to people and start to talk about what must be done at a global level. London is one of (if not the) financial capital of the world. We have every right (perhaps even a responsibility) to take a lead on these issues."

    Never happen. The futility of the G20 and Basle jollies is all the evidence you need there. They can't even regulate trade or currency - and indeed, should they in a "free market"? Of course not. Markets rise and fall and take no account of the whimsies of individuals and their tragedies.

    I think we're all just waking up (about 50 years too late) to the affect global capitalism in a market allegedly free but distorted by a good number of factors is having on us all.

  • Comment number 50.

    This is all a bit deep to me. The only question that comes to mind is this.

    If Gordon Brown had let Northern Rock, Lloyds Tsb etc go to the wall what difference would it have made to small investors?

    Most savings for ordinary people would have been assured, the other financial institutions would have been falling over themselves to pick up the debt in order to profit from the misery.

    If Brown had not taken the action he did would the bankers have allowed the whole system to fall and plunge us all into a depression unseen for 80 years?

    Did Gordon do the Right thing for the country and were we all duped in to thinking things were worse than they really were to el;icit a change iof Government.

    It seems that cutting too big, too soon is already effecting the economy and I fear the High Interest rates and High Unemployment that are on the horizon.

    The austerity actions taken now reflect the austerity measures taken which led to the 1930's depression.

  • Comment number 51.

    Looks like there is a bit of horse trading going on between the Coalition and the banks, The government seem to be as powerless as the rest of us when it comes to globalization. O what a tangled web we weave.

  • Comment number 52.

    37. At 11:44am on 7th Jan 2011, The Silent Majority wrote:

    "I might be missing the obvious, but:

    1. bonuses are taxable income, certainly the cash part
    2. bonus is eventually spent on goods, houses, etc.

    All of which surely is good for the economy and Treasury in the long term?"

    Did the housing bubble mean nothing to you? It's all recycling - but without the certainty of what is going to happen.
    The bankers may just as easily decide a new yacht from Singapore is what they require rather than buying a lot of sweets from the local shop to stimulate the local Economy.
    Even that is a silly idea - all the bankers live together - so which local economies are going to see this 'stimulation' and which ones won't?

  • Comment number 53.

    Robert,

    You need to rephrase the title to:

    "Why government WON'T stop big bonus payments"

    If it really had the sphericals it would copy Ireland.

    No Bonus or No support - pick one!

  • Comment number 54.

    The government has no control over the banksters bonuses because the banksters control the government, not the other way around.

  • Comment number 55.

    39. At 11:53am on 7th Jan 2011, Robin Joy wrote:

    "Sorry writingsonthewall, maybe I should have said "generate revenue", which I suppose is what almost all private sector employees are employed for. I think that the instance I cited almost amounts to negligence by RBS management."

    ...but bankers who 'generate revenue' are similar to the pop stars and entertainers who pollute our lives.
    It's all about the hype you generate around yourself which makes you successful - not your actual contribution to society. bankers are no different - anyone who has associated with them knows the most important part of their lives is 'making the investments look good'.

    When you have worked in performance this is obvious by the various rows you see between spivs and the analysts where numbers are contested in order to up the bonus figures - to the point where the factsheet the investor recieves bares little relation to the actual investment performance.

    It's amazing what you can achieve with a few well placed cut off points.

  • Comment number 56.

    About this bonuses provide tax revenue to the Government argument. How come it is so good to rip £50Bn out of the economy from public spending reductions and imposed job losses on teachers, nurses, civil servants and other public sector workers. Surely the missing £50Bn will be bad for the economy?

    I would suggest the Banks do nothing to improve Uk productivty (they decrease it) and the tax revenue would be obained anyway from the busienss, households and peple who owned the money the bansk extracted fromt he through fees, interest etc. The "real" people would have paid the tax anyway.

    The rational provided by the Coalition for the cuts in public spending is that it needs to make these cuts to reduce the Governement deficit (this is not true but anyway). The reason the Governemnt has a defecit is becasue £100Bn of our money has been given to the Banks and has to appear on the National Accounts as a debt.

    Surely the banks should pay off the debt before they pay bonsues and huge salaries? This would save jobs for productive public sector workers instead of parasites who speculate, gamble, cause World wide depressions and cause oil and food prices to skyrocket.

    In effect the paying of bonsues is a direct transfer of money from poor public sector workers, future students and welfare recipients to overpaid vampires in the City.

  • Comment number 57.

    A suggestion for WOTW / Jacques Cartier / some of the other regulars on here who have such a low opinion of the finance industry.

    Post on here, in sensible fashion, your summary of what investment banks actually do on a daily basis. Pick a line of business in the markets (let's stay off M&A for now), say equities or fixed income, and explain what it is and why it is done. Explain how this is different from retail banking.

    In particular, please try to do this without the usual nonsense. We've heard the "all they do is steal from Joe Public" or "borrow from BoE at 0.5% and lend at 5%" or "charge me 20% on my credit card and give me 0.1% in my savings account". We've heard the "all they do is casino-vampire-gambling with other people's money".

    Now give an objective explanation of the industry about which you profess to know so much, without getting sidetracked onto how the revolution has already begun. I, and I am sure many other people, would be very interested to hear an assessment of exactly what, in your opinion, this industry actually does.


    PS: In case you missed it the first time, I said "without the usual nonsense".

  • Comment number 58.

    Will Robert please explain why these people are so brilliant that they 'deserve' such enormous sums of money. What makes them that much different from many other intelligent and qualified people? Perhaps you could even ask one to appear in public to answer questions that you might be prepared to put. As taxpayers we're already paying through the nose for their talent - let's call their bluff and let them go.

  • Comment number 59.

    @ 7...I work for a bank...I can tell you now....my wages are less than a teacher & I spent 4 years at University! (This is not a slant on teachers, I wanted to train as one as it's a more satisfying job, but getting into teaching is more competitive than banking at the moment!).

    Admittedly, I am a new starter but those on my grade earning the highest band of wage is still earning no more than an admin new starter at the Home Office!...As for bonuses...my boss jokes that he has to decide how to seperate up the bonus pool for the year, and it's difficult to work out what 3% of £0 is.

    So to say that all employees of banks are laughing is a sweeping overstatement, there are a small percentage of banking employees in the UK who may receive very healthy bonuses, as for the rest of us....well....we're in the same boat as the rest of you,

    AND

    if our employers did relocate to the developing eastern economies which you could argue that the conditions are very attractive at the moment, then you would be pulling the rug from a high amount of workers in the UK, and taking away a large amount of tax from Mr Osborne's income account!

  • Comment number 60.

    Support your Post Office! Support the Co-Operative movement!

    It's very easy for individuals to register their utter disgust at these banking villians: withdraw your support for them. Close your accounts and transfer all business to Post Offices or Co-Op Bank. Support organisations that don't mismanage your hard-earned cash.

  • Comment number 61.

    Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks Banks

    Are there no other business stories that matter?

    I am beginning to think that Robert's bonus is based on the number of hits his blogs receive. That would also explain the new structure which means you have to hit again and again to get posts 100 by 100.

  • Comment number 62.

    33 WOTW

    `...and if the Government are not prepared to legislate (which it looks like they aren't) the solution has to be.......?'

    I always advise my colleagues when dealing with heavy issues to take it a step at a time and not to cross bridges before they get to them - benefit of old age. This does not prevent you from having the full map of possible outcomes in your own head.

    The banks have whacked the ball back to the government, now what is Cameron going to do? This is the next interesting bit. Are the Tories men or mice? They will judge themselves and then all will know whose side they are really on. Will they allow themselves to be bought off for a mess of pottage? As you infer the public are now in an unforgiving mood at the moment.

  • Comment number 63.

    I maintain the view that the problem lies in our economy's over reliance on the financial services sector. So it's not just banks, it's other financial institutions such as insurance brokers, investment funds, asset management companies etc.

    But as we reside in such a small Island with limited resources, perhaps there is no alternative? No oil or gas reserves to fall back on like the OPEC nations. A manufacturing sector that cannot compete with out European neighbours. Manpower that is minuscule in comparison to the BRICs. Without the bankers and their business partners, do we have anything left?

    Others have touched on this already - the fact that politicians take such a short-termist view on proceedings can only hinder progress on reducing our dependence on financial services.

  • Comment number 64.

    BEWARE! - VULTURES FEEDING AREA

  • Comment number 65.

    32. At 11:36am on 7th Jan 2011, SleepyDormouse:
    You say Private Pensions require the Investment Banking sector to do well, if they don't do well then that means preassure is on to reduce Public Sector pensions resulting in great suffering and burden on the State.

    Preassure to reduce Public Sector Pensions has nothing to do with performance of the Private Sector...unless you subscribe to the view that the public sector has been spoilt for years and needs to be punished.

    The argument that We-Need-Private-Pensions-Therefore-We- Need-Investment-Banking is based on a false premise.

    What is the problem with the State funding ALL Pensions?

    The drive in the 80's and 90's to get everyone into Private Schemes was a strategy employed by the Financial Sector basking in the warm glow of Thatchers economics to 'make' money for themselves. You actualy believe that they did it because they were concerned about the state of this countrys pensioners in 30 years time? It's the same principal that runs through Finance Capitalism, that you extract value now on the assumption that you will be able to extract exponentialy more later.

  • Comment number 66.

    #38 Sutara

    Exactly....... We need new banks run by decent people and we could do that if the Govt had the will to make it happen.

  • Comment number 67.

    @ 3. At 10:23am on 7th Jan 2011, Damon in Horsham wrote:

    > If you are a builder, plumber, carpenter, electrician, glazier, plasterer (to name but
    > a few) plying your trade in the south-east of England chances are these bank
    > bonuses will be like rain after a drought.

    I'm sure their fellow tradesmen in the north-east of Scotland, north-west of Scotland, south-east of Scotland, south-west of Scotland, the middle of Scotland, north-east of Wales, north-west of Wales, south-east of Wales, south-west of Wales, the middle of Wales, north-east of England, north-west of England, south-west of England, the middle of England, and all parts of northern Ireland will be overjoyed for them!!!!

    But don't you think you might be a little “off-centre”, yourself, and perhaps somewhat biased? Did you confuse “London” with “Britain”, by any chance. Yes, I thought so.

  • Comment number 68.

    We keep writing about the banks as if something new is happening, but it's nothing new. The gradual stranglehold the banks have exerted on us has been going on for thirty years or more. Credit for all, standing orders and direct debits more or less compulsory, non account holders disallowed from receiving checks, computerised payroll, computers running our accounts and fining us for being a day late with the post, it goes on and on. Next no cheques and then after that no cash.

    The entire system is like an enemy of the people; if there has ever been a conspiracy it is this. Not a chance that Cameron and Klegg will do anything about it. I don't even think they get it.

  • Comment number 69.

    writingsonthewall wrote:
    "Make money? - please elaborate how a bank 'makes money' because there is no productive activity and therefore no wealth created - so how can anyone make money at a bank?"

    I think you probably poorly worded this one.

    Is it not the case that it is only banks that can make money by creating it at the point of debt creation?
    Is it not the case that all other organisations, individual, private or governmental, do not make any money, but simply pass it around the system. A profit is not money made, but money siphoned of the existing money supply.

    I believe the monetary system works like this:
    Someone obtains a loan to purchase an asset. The bank creates a credit in one account and debits the same value from another account. Money is created at the point of debt creation.
    The bank has now created a creditor and a debtor. It skims it's profit of the different in interest paid to the creditor compared to that of the debtor.
    The debtor has to eventually pay the creditor the principal back with interest. As soon as the first interest payment is paid, the debtors no longer have enough money to pay back the creditors. There was no money created to pay the interest.
    In order to pay back their debts, the debtors have to claw back the interest from the creditors by either working for them or selling their assets to them.
    If the creditors decide to stop employing people, the debtors will have to panic sell their assets to them.

    Money is like rainfall. It falls and it precipitates. Wealth floats to the top.

  • Comment number 70.

    Capitalism thus far demands that when a Government is faced with a choice between letting the Financial Sector fail or lowering the standard of living of a nation as a whole, it chooses the latter.
    Am I happy to be part of a system that confines such a large percentage of it's wealth within such a small portion of the community in order to call itself 'successful'. Uhm, no.

  • Comment number 71.

    "37. At 11:44am on 7th Jan 2011, The Silent Majority wrote:
    I might be missing the obvious, but:

    1. bonuses are taxable income, certainly the cash part
    2. bonus is eventually spent on goods, houses, etc.

    All of which surely is good for the economy and Treasury in the long term?"

    -------------------------------

    Sure, bonuses and bonus taxes help the economy but what are they really costing us?

    Every pound of bonus tax needs 2 or 3 pounds of bonus to be paid. Each bonus pound could have been used to back new lending, say ten times on a relatively modest gearing. That means each pound in bonus tax actually costs the economy 20-30 pounds of lending, ie real economic activity.

    Second, high financial pay slows the economy because the rich spend proportionately less in productive sectors than the poor, another unpleasant side effect of rising inequality.

    Third, much bank profit comes from excessively high fees and commissions on core financial activity such as asset management, equity raising and lending, that act as a tax on productive activity and savings. This reduces business returns and employment and lowers the spending power of savers and pensioners.

    Bank fees are not inherently bad but they need controlling. The financial system employs so many agents and middlemen that the market has lost its ability to keep costs down, hence all the headlines about exorbitant underwriting, advisory and fund management fees.

    Fourth, a fair amount of investment bank profits come from capital market activity that contributes little or nothing to the economy. For eg, high frequency trading, commodity speculation above the level needed by producers and manufacturers, highly geared takeovers etc all appropriate money but don’t help capital formation or employment.

    I take the point about bonuses having higher marginal tax rates, but overall excessive bonuses are a far bigger tax on society than the other way round.

  • Comment number 72.

    Dr Bob @ 49 - I suspect we are actually no so far apart.

    ##"But what can they do? They aren't dealing with parochial British institutions?"##

    Agreed but in that case why put it in the Coalition Agreement. Are you saying the Conservatives agreed to this knowing there was no chance on delivering a key part of the LibDem election policy?

    ##"Hardly possible when most of the front benchers are millionaires and the outpourings of public schools who have never, ever had to worry about where the next meal is coming from, never had to worry about redundancy etc."##

    I agree but I was only pointing out what I thought the Government should try to do.

    ##"Never happen. The futility of the G20 and Basle jollies is all the evidence you need there. They can't even regulate trade or currency - and indeed, should they in a "free market"? Of course not. Markets rise and fall and take no account of the whimsies of individuals and their tragedies."##

    There is no such thing as a free market. Every market is subject to some form of regulation. The question is how to design efficient and effective regulation. Unless you are positing some sort of revolution followed by world communism, facisim or anarchism.

    ## I think we're all just waking up (about 50 years too late) to the affect global capitalism in a market allegedly free but distorted by a good number of factors is having on us all.##

    If you really are such a pessimist why bother posting. My key point is that government and civil society has not kept up with the growth in global capitalism. How can any one country regulate an international institution?









  • Comment number 73.

    Bank profits a sign of economic sickness not health, writes Steve Keen:

    “I build models of financial instability, and in my models, one symptom of an economy that is headed for a Depression is a rise in bankers share of income at the expense of workers and capitalists.”

    http://www.debtdeflation.com/blogs/2010/08/11/bank-profits-a-sign-of-economic-sickness-not-health/

  • Comment number 74.

    Le Plonk @ 57 - instead of getting drawn into a pisssing competition with Jacques and WOTW why not answer your own question. Or tell us what, if any, changes you would propose to regulation of banks and bannkers?

  • Comment number 75.

    #57 LePlonk

    Here's an article on how modern banking works, and why it may be flawed. It's not so much about retail vs. investment banking in isolation, but the link between them (O2D). Your cogent comments would be welcome:

    http://forensicstatistician.wordpress.com/2010/11/19/is-modern-banking-fundamentally-flawed/

  • Comment number 76.

    57. At 12:20pm on 7th Jan 2011, LePlonk wrote:
    A suggestion for WOTW / Jacques Cartier / some of the other regulars on here who have such a low opinion of the finance industry.

    Post on here, in sensible fashion, your summary of what investment banks actually do on a daily basis. Pick a line of business in the markets (let's stay off M&A for now), say equities or fixed income, and explain what it is and why it is done. Explain how this is different from retail banking.

    In particular, please try to do this without the usual nonsense. We've heard the "all they do is steal from Joe Public" or "borrow from BoE at 0.5% and lend at 5%" or "charge me 20% on my credit card and give me 0.1% in my savings account". We've heard the "all they do is casino-vampire-gambling with other people's money".

    Now give an objective explanation of the industry about which you profess to know so much, without getting sidetracked onto how the revolution has already begun. I, and I am sure many other people, would be very interested to hear an assessment of exactly what, in your opinion, this industry actually does.


    PS: In case you missed it the first time, I said "without the usual nonsense".

    ...........................
    Hey Plonker!
    No no noo .... no NO NO no non nein
    The burden of proof is on the banking industry to be transparent disect and explain how a single executive banking bonus is calculated and thence how one might attempt to justify it.

    Until then ... its 'business as usual'


  • Comment number 77.

    If nothing is done then nothing will change. The argument that the best people are the ones who demand these high salaries and bonuses is silly. There is a lot of talent out there in many people, who if given the opportunities, could do just as well without needing these levels of pay and bonuses.

    The issue is the risk, all those currently in the financial sector and have a decent track record demand these salaries and bonuses because it's become part of the status quo to accept these ludicrously high figures.

    The other issue is the tax generated on these salaries and bonuses. It's like the government agenda on things, "If it's not considered to be a good thing for people then we'll simply add on taxes and pretend to take a hard line stance against the issue even though we'll most likely end up doing very little while we rake in the tax revenue generated from people who spend money on these items." Smoking being one of those issues.

    Anyway, to the point.

    As long as banks know that they are inextricably linked to all aspects of the economy then taxpayers will always be forced to take on the burden of failing banks. Therefore, there's nothing to stop bankers taking huge risks because the infrastructure of the system is connected to the very foundations of the country's economy. One false move and the entire economy of the country can be brought down.

    High salaries and bonuses has become embedded within the culture of the financial sector and this is the greatest problem to contend with. Once upon a time, the Earth was said to be flat and here we are today where the common perspective is that it's spherical. This change in thinking and belief doesn't simply just happen, it takes the right people to step forward and take a stand. The government are the ones in the position to do this but fear holds them back, the fear of the consequences.

    The banks need to learn a hard lesson and really, we should have let them fail to prove the point. The government should have then intervened to safeguard deposits and to take control of assets and operations completely to stabilise the effects on the economy. It may not have been an easy task for the government to have set up their own completely nationalised banking system integrating everything from all the failed banks that needed to be safeguarded but it could have been possible. The government would have attained all the control it needed and could have implemented a new banking system in its place. Well that's what I think but it didn't happen so I'll move on.

    I can't remember who said it but I read the other day on here somewhere that people looking in to the banking infrastructure stated that if they were going to design a system from scratch then it would look nothing like what is in operation today. This should be the starting point of discussions.

    And to start off, we should restrict salaries and bonuses. If these people want to move to competitors then let them. The next step is to hunt for suitable people with skills who would be willing to take on the jobs, so we would provide opportunities for people who would be capable but have never had the chance to show their stuff.

    It would take time but we need to develop these new banks in to stable and sustainable organisations that operate differently. Through government support, encouragement can be made for businesses to deal with the new banks. In time, we need to make the big banks that pay out huge bonuses and salaries realise that things don't have to be this way and that they can operate effectively without having to pay out such huge salaries. This will hopefully lead to a change in the market and will take some power away from the few people who are seen to be the best that demand such huge salary packages.

    Of course, this is all based on trying to change what people are accustomed to, taking on the challenge and preparing to take the risk. Change is never easy but change can provide benefits if we're prepared to walk down that path.

    Maybe it's a silly thought but I think it could be worth it in the long run to try. Money is central to everything and as long as the banks have all the powers and control while nobody is prepared to really challenge them and the status quo of the system then we may as well all sit back, stay silent and accept that the banks can do whatever they want while we simply wait for the next crisis to come along that will require the government to step up to the plate again with our money.

  • Comment number 78.

    45. At 12:05pm on 7th Jan 2011, yam yzf wrote:

    "Whereas if we all live in very small villages we can elect chieftains to rule over us and each village will have different rules and enforcement tactics."

    ...and you don't think regional variations in police funding aren't already producing that scenario? The law may be universal but the implmentation of it isn't. Maybe you have never heard of a confederation where common ground can be agreed on a voluntary basis (laws for example)

    "Or perhaps we can rule by committee, or perhaps we can have a dictator who will control everything we do"

    Rule? - who needs rule except minions and serfs? Only those who have no confidence in their own abilities crave a ruler to tell them what to do. The rest of us compromise and agree amongst ourselves and don't hide behind an authority to compenste for our lack of social interactive abilities.

    "Which would most people prefer? Current democracy is not perfect, but it is the best we have as I have not heard any of the people who constantly sleight it actually suggest anything else. BTW, they probably won't today either."

    I have just suggested a confederation of communities which would make up the UK - we can call the democratically elected bodies 'Soviets' - because I know that will set the alarm bells ringing in the angry yet mis-informed.

    When 2 parties combine with a combined vote of less than 40% of the population and then dictate their policies to the other 60% - how is this democratic again?
    it always makes me laugh when people talk of democracy in this country - I mean for starters we don't let anyone under 18 vote - and yet people under 18 are affected by the policies which are created - yeah - go democracy.
    It's time people stopped using the word for our system because it's not really reflective of any 'majority rule'.....and that's just the voting part - once they get to Government they only protect the interests of the rich and powerful - regardless of who or what voted for them.
    It's a shame some people actually call this a democracy - and to claim it's the best we can achieve is a silly argument because the only other type of system we have been able to enact is dictatorship - something we're all agreed is worse.
    Strangely the Spartans and Athenians managed to implement democracy - so where do you get this 'best we can achieve' from?

    "Will people please stop being jealous and envious of those in the investment banking industry. If it is so simple to do, then apply for a job and do it."

    ...oh it's simple to do alright - but you try getting a job ahead of snooty Lord ponsleby's third grandson. I mean I managed to get a job - but then I am outstanding in my field of work. I mean the lazy and feckless always need their workhorses to 'generate their wealth'.
    Sadly all the Capitalist can do is revert to the jealousy argument - it's not jealousy, it's about reality. The problem is the skimmers are not being paid the going rate for their 'contribution' to society - but for their criminality.
    Do you suppose jealousy is the reason why I don't like the drug dealer who drives a better car than me - or lives in a MTV style 'crib'? Maybe I should stop moaning and join in - the only difference between the banker and the drug dealer is the banker has already fixed the system so what they do is legal - the drug dealer (well not the small ones) haven't got that far yet.

    "Or apply at least, you might be successful for, regardless of what is said on here, there is a wide ethnic, cultural and demographic spread of people on the trading floors. If you don't want to do the job, don't criticise those that do"

    BUT THEY DIDN'T DO THEIR JOB DID THEY?????

    Have you forgotten? - let me remind you, part of their job was to safely manage the lending of the nation - AND THEY FAILED - BIG FAT F.

    .....and yet you think it's OK to pay them huge sums for this failure?

    Nice world you live in - does this mean the bus driver gets a bonus if he crashes the bus?
    Does a teacher get a bonus for every pupil failing?
    Does a Doctor get a bonus for every patient that dies?

    What a load of nonsense defending the bankers bonuses is - I mean it's all a good argument until you apply the same principal to any other job.

    Maybe we should apply for a banking job and all be bankers - I mean we don't need Doctors and Teachers we can all be bankers and simply 'buy in' everything we need.

    ....right?

  • Comment number 79.

    56. At 12:17pm on 7th Jan 2011, Payguy wrote:

    "About this bonuses provide tax revenue to the Government argument. How come it is so good to rip £50Bn out of the economy from public spending reductions and imposed job losses on teachers, nurses, civil servants and other public sector workers. Surely the missing £50Bn will be bad for the economy?"

    Very good point - and one lost on the sympathisers.

    In reality the best stimulus is a braod one - a pound in everyone's pocket. Large concentrations of wealth in a few hands is prone to individuals making bad decisions.
    The supporting cast refuse to see this - but this is exactly why passing £850 billion into the hands of a few banks did nothing for economic recovery.
    Had the money been distributed amongst us all then it could have been a different story. Instead a large part of that wealth is currently sitting idle as the BoE rests on the exchanged assets and the banks fear reducing their buffers in case of a future shock.

  • Comment number 80.

    I don't understand two market aspects of this.

    1) Why, if the banks are competitive, and compete sensibly with both other banks and other types of businesseses can they much such excessive amounts of profit (and thus pay such excessive bonuses). Surely, this level of return on investment should attract so much competition that it brings down the returns to a sensible amount whether or not there is an implicit tax-payers subsidy.

    2) Why, if bankers are paid so much, haven't so many talented people been attracted into the banking industry that the competition to become a top banker brings down the level of pay to the level which similarly talented people earn in other professions. (Today, of course, we "all hate bankers" so no young talented individuals will enter the proffesion and the pay will naturally increase! but yesterday, and maybe again tomorrow, it was a respected career choice, which ought to have attracted talent and reduced pay) - or is there some kind of hidden "old boys network" which artificially protects the lucky few?)

  • Comment number 81.

    Whether you like it or not, the financial services sector contributes substantial sums of revenue to UK Government. Estimates have put this at 70 billion per annum.

    My question to all of you is

    'what government service or payment would you give up, if that revenue were reduced by half or eliminated?'

    I ask for this reason. There has been plenty of bleating about increases in VAT. To raise £70 billion extra in VAT, all those that pay VAT would have to spend £350 billion more per annum before VAT. To raise £35 billion extra it would be £175 billion. Is that likely?

    We could increase basic tax rates. If there are 30 million workers and the average wage is 25,000, it would require an increase in base rates to 30% to make up for the loss of 70 billion or 25% to make up for the loss of 35 billion.

    These are simplistic calculations but they make a point, which is that whether you like it or not YOU and every member of your family benefits from the revenues the banks generate. You benefit from healthcare and education and social services and some benefit from little financial deals.

    So, I ask again, what services or payments are you prepared to give up or do without that are effectively funded by the various revenues that financial services generate. Lay into someone elses advantages if you like.

    Then ask yourself why governments need this sector.

  • Comment number 82.

    #25. Cassandra wrote:

    2. The answer to dealing with the banks and the bankers is global regulation ...

    Probably not.

    But global market-rigging (for want of a better term) would probably work.

    If you track back through history in most places, there have always been powerful and influential groups within society, from the Lords and Ladies of the Royal Courts, to newspaper barons, coal pit or mill owners.

    Each in turn lost its influence and power because the world changed and the political, social or economic systems that supported their dominance changed.

    Even the market place for music has changed over the years with different tastes, different products and different ways of buying them resulting in the once hugely important (in the field) chain record-shops having a very dodgy time economically now and with the once commonplace independent record shop being almost extinct.

    Owners of individual national newspapers once wielded huge influence upon society. Nowadays hardly anyone buys physical newspapers and the boss of a computer company is more likely to wield that sort of influence.

    Banks do this currently only because economic systems and marketplaces permit this. But such things are not static they are dynamic. They change and, furthermore, they can be helped to change.

    International regulation is not really a runner and rider, but certain key players causing a change in the market place so that banks have significantly greater competition from other providers of financial services, perhaps even nationalised or government-supported / government-sponsored ones, well that just might bring about the changes that many seemingly seek.

  • Comment number 83.

    The Government should put its own house in order regarding bonuses. The recent news that the MoD has paid out record bonuses to desk bound staff is both unbelievable and in many respects downright immoral (what about the troops putting their lives on the line).

    The Coalition would receive widespread plaudits if it implemented the following for public sector workers:
    1. within three years no public sector employee to be paid more than the Prime Minister (those that don't like it can leave and take their chances in the private sector)
    2. No bonuses (the generous pension is a major bonus already)
    3. A law limiting what % of GDP the Government can spend; any overspend has to be clawed back the following year or two (maximum)


  • Comment number 84.

    37. At 11:44am on 7th Jan 2011, The Silent Majority wrote:
    I might be missing the obvious, but:

    1. bonuses are taxable income, certainly the cash part
    2. bonus is eventually spent on goods, houses, etc.

    All of which surely is good for the economy and Treasury in the long term?
    =============================================================

    What you are missing is the fact that the majority of these cash bonuses- and I am referring only to the very large cash bonuses, say 100k plus- will be the subject of tax mitigation exercises which will result in very little being paid as tax. Most of the money will end up offshore, either invested there or spent there. Now how do you feel about it?

  • Comment number 85.

    Ok LePlonk @ 57, I’ll take up your challenge and try to throw some light on how investment banks make money.

    Let’s take a look at “DeltaOne” equity derivatives. What exactly do these do? Most banks have one, including RBS.

    This business line trades as agent and principle in equity derivatives. It buys and sells swaps, synthetic index contracts, futures and options that all derive from shares or indexes of shares. As a DeltaOne desk, it only trades instruments that move in perfect step with the underlying share, so if the shares go up 1%, so does the derivative (in jargon, the derivatives have a “delta” of 1). One of the key reasons for this desk is to get around rules that stop people from trading what they want to and for avoiding tax.

    And the most profitable type of DeltaOne trade? Dividend arbitrage. An example: a pension fund in France or Italy where dividends are subject to withholding tax, sells or swaps its shares for a few days to a hedge fund based offshore where no withholding tax applies, and buys them back at the same price after the dividend is paid.

    What is the outcome? The bank desk takes a cut of the tax that should have gone to the French treasury, the pension fund takes a cut which boosts its return so it can market itself as “yield enhanced” and justify a higher management fee, and the hedge fund takes a handsome cut.

    Everyone benefits apart from the French taxpayers. No one contributes any new money to the market or any research that might improve resource allocation in the wider economy or price discovery in the secondary market.

    This is just one business line from many (in my view one of the least defensible) but it illustrates the point that investment banking has long ago come away from its ethical moorings and from the days when a clear economic function and a sound outcome mattered.

    (by the way, this type of dividend arbitrage is illegal in the US after this report http://levin.senate.gov/newsroom/supporting/2008/091108DividendTaxAbuse.pdf, but is still legal and widespread in the UK, supporting hundreds of well-paid traders and intermediaries. Why? Partly because the UK has no dividend withholding tax so it’s OTHER COUNTRIES that pay)

  • Comment number 86.

    Light bulb moment... of course this is the same as the problems we experienced with the unions in the 60s and 70s thanks to whoever said that. We have a single interest group taking advantage of the rest of us. I didnt like the unions because they held up productivity, though I do think the unions motivation was better than the banks. Handbag time, full on reform of the banking system is now required.
    RE Mr Cable I dont think declaring war on R. Murdoch is a problem he is a big boy and I am sure Rupert can look after himself. It seems to me he already has. I think Mr Cable should be empowered to sort the banks out and not burdened with any other responsiblitys. Whats more we should back him up. Jenny

  • Comment number 87.

    As I been predicting for several months now, a few thousand bankers will yet again walk away with bonuses equivalent to about seven billion pounds (£7,000,000,000) in their back pockets, on top of their already inflated salaries. (Which are also up this year by 20%-40%)

    This is the equivalent of the entire GDP of a small country like Jamaica or Iceland being handed out in bonuses - to a few individuals in grey suits!

    THE MASS REDISTRIBUTION OF WEALTH FROM THE POOR TO THE RICH CONTINUES!

    And where, might you ask, did all this money come from? Well, a good proportion of it belongs, sorry belonged, to you and I the taxpayers of this country. We bailed out their failed companies which would not even exist today if we hadn't stepped in. Now those very same taxpayers are being made redundant, having their salaries slashed, taxes increased, houses repossessed etc. etc.

    And then the bankers have the absolute temerity to award themselves BONUSES, at OUR EXPENSE!!! In my line of work, they would all be summarily sacked for incompetence. Fury, rage, utter contempt are words which do not begin to describe how I feel about this.

    But it really must be time to stop blaming the bankers. After all, like a spoiled child, they are only doing what they are being allowed to get away with. My question is:

    WHAT ARE THE POLITICIANS DOING?

    We own 84% of RBS, so the politicians can at least dictate our terms to them, can't we? If not, why not? Who is running this country? Is it time for a nationalised bank?

    My message to politicians is: You have had 2 years to sort this out and nothing has happened. Be very, very careful, and show some leadership NOW, before the people of this country decide to take matters into their own hands. Believe me. I am 40 years old and I have never experienced such contempt for government or their institutions in my lifetime.

    People are disgusted with the performance of "the system" and are looking for wholesale changes. Now.

    I saw something yesterday I had never seen before. It was an A4 piece of paper stuck to the side of all the petrol pumps in our local Shell garage and it said:

    "Please ensure you have the means to pay for your fuel before filling up, as no credit can be given"

    This hints that a lot of people must have been filling up then attempting to withdraw cash from the cashline machine or pay by credit card, only to be refused credit.

    The day of reckoning is drawing nearer.

  • Comment number 88.

    58. At 12:21pm on 7th Jan 2011, JB_B

    My local GP has saved 4 lives in his career (by saved I mean actually ressucitated not prevented a future death)
    He gets paid £100,000 a year (I believe)

    How many lives does a banker save to earn a £1,000,000 bonus?

    The difference fundamentally is my GP saved those lives without question - whereas a banker would have negotiated his 'fee' with the patient - and taking advantage of the poor negotiating position of said patient - and charged a lot, lot more.

    This is essentially why there is a difference between bankers and doctors - I mean if we all acted like bankers and abused our 'market position' then Doctors would easily be the highest paid profession.

    The reason this isn't the case in a moral one - a Doctor would find it hard to let a patient die because a deal could not be reached - a banker never gets to see his victims as they are so far removed and therefore can blisfully complete his deal without pricking his conscience.

  • Comment number 89.

    33. At 11:38am on 7th Jan 2011, writingsonthewall wrote:

    The banks gave Obama a heard time when he condemned their bonuses. Gave the man a bit of a kicking. Prez immediately toed the line. As expected. With no shame in front of the electorate

  • Comment number 90.

    63. At 12:33pm on 7th Jan 2011, awyc24 wrote:

    I do agree with what you say but....

    "No oil or gas reserves to fall back on like the OPEC nations."

    We did have, we sold it to the private sector and we ditched our coal industry (even though we are on the verge of finding a way to burn it cleanly)

    "A manufacturing sector that cannot compete with out European neighbours."

    We did have - but it was neglected as all the money funneled into finance. I mean where did the capital the banks currently sit on come from? - well manufacturing is a good start as the extraction of wealth began sometime ago.

    "Manpower that is minuscule in comparison to the BRICs."

    Which is why you need quality not quantity - however as the Government has just sent future education up the swanee (except for the wealthy) - then I'm afraid this is not looking good.

    "Without the bankers and their business partners, do we have anything left?"

    It's the bankers and their business partners who are ensuring nothing is left - they think it will lead to grand profits - but actually it will only result in killing the host (the economy)

  • Comment number 91.

    So the model we have from the above blog entries is that multinationals are exceeding powerful and can choose which government is to be their landlord. The landlord my not like his tenant, but he has to balance that with the lucrative rent he gets.

    Welcome to the real World. Really, you guys should have learnt at school that "fairness" is something mainly aspired to by those towards the bottom of the pile; It is not a "natural" state nor pre-ordained objective.

    If you don't like it, you'll have to put your pens down and take to the streets. Before you do that, decide what you want as an end result and make sure your actions lead inevitably to that. In particular, decide if you are attacking the tenant or landlord, or both. None of this is particularly trivial.

    Almost any action you want to take will, as the government has discovered, will lead to the tenant finding another landlord. So your choices are...

    1. Drive out the banks and resolve to lead an impoverished, but purer, life in your newly-created third-world country. (Not many of your fellow citizens will vote for this. But voting has a different meaning in totalitarian states.)

    2. Force out the government on the basis that the next one will do something. Please explain the process - I can't see it. But if you do succeed, doesn't that lead to 1?

    3. Do nothing. Very popular with your fellow citizens.

    4. Apply for a job in a bank. (If you can't beat them, join them.) Most politicians seem to choose this option eventually.

    HTH


  • Comment number 92.

    #56 Payguy

    The UK National Debt is in excess of 993 Billion. The 100 Billion to shore up the banks was money well invested.

    Note that the UK National Debt figure excludes all of that financial engineering beloved of New Labour such as PFI. This 'wheeze' was portrayed as investment by the socialist crooks (Bliar and Clown)and then taken off of the UK PLC balance sheet by sleight of hand that makes Enron look like angels.

    If your idea is of a UK economy only being productive when something 'physical' is produced, then you show crass ignorance.

    If I own a ship or a truck or a bus and charge someone for shifting something or someone from A to B is that revenue not produced? Somehow not real?

    The money UK PLC makes from services - be they banking, insurance shipping or a whole host of others, positively contribute to the UK economy.

  • Comment number 93.

    Come on Robert how many more posts about bankers bonuses are you going to do ? I thought you were the business correspondent not the bankers bonus correspondent !

    How about some more serious articles, like migration to emerging markets, taxation levels, commodity shortages, workforce skill levels, etc. There's more to business than the bonuses of a couple of hundred very lucky chaps in London.

  • Comment number 94.

    #71 Southwark Guy
    "Every pound of bonus tax needs 2 or 3 pounds of bonus to be paid. Each bonus pound could have been used to back new lending, say ten times on a relatively modest gearing. That means each pound in bonus tax actually costs the economy 20-30 pounds of lending, ie real economic activity."

    Please explain your maths. I would strongly suspect that the monetary majority of the bonuses will be paid to those with a marginal tax rate of 40 or 50%.

    Also, do we REALLY want banks to get geared up and then just lend? Isn't that a major factor in how we got to this state?

  • Comment number 95.

    81 this is just silly. The £70Bn you quote is for all financial intermidiation, not just banks. YOur also ignoring the cost of recessnios/depressions and the hundreds of billions of pounds in bailouts, loans, subsidies, inflation casuign QE etc that taxpayers have to pay for.

    If banks ceased to exist in their current format the tax revenue would still be rasied by the government taxing the ordinairy businesses and households who retained the money the banks extort to make their profits from fees and interest.

    Thats why we are so angry. Thats why this won't stop until we get apologies, criminal charges, reform and limtis on remuneration.

    With 20% of the population (IPSO poll) supporting violent protest, I'd be worried if I was them.

  • Comment number 96.

    Regarding the amount of bonuses that are actually spent, if you take home a couple of million pounds, will it change your spending habits? One person can only consume so much so in general the effect on the general economy would be limited. Also the number of people taking this money is relatively few. Bear in mind that most of these people will probably have everything that they "need" and more, so they will look at other ways of securing their wealth.

    Ask yourself the question as to what you would do with a few million spare?

    - invest it in UK property? - detrimental to general population as increases housing inflation

    - Invest overseas, in which case the benefit to the UK is negligible, even harmful as sterling is sold

    The earners of such income will do anything possible to avoid paying UK taxation, the more you earn, the more choices are opened up to you. There is little the government can do about this in our society, apart from issue more debt to cover the taxation shortfalls.

    The case that rankles with me was Philip Green suggesting that the UK government was overspending in some departments, yet this is a man who has based himself overseas in order to save UK tax. That is sheer hypocrisy, and for a government to appoint such a person to undertake such a review is morally bankrupt. At least the overspending in UK government has more chance of being recycled into the UK economy.

  • Comment number 97.

    #85... Incredible description and analysis of how a branch of investment banking performs.

    Essentially.. it's theft.

    Is it any wonder why we the people are so angry?

  • Comment number 98.

    69. At 12:51pm on 7th Jan 2011, EcomonicSlave wrote:

    "Is it not the case that it is only banks that can make money by creating it at the point of debt creation?
    Is it not the case that all other organisations, individual, private or governmental, do not make any money, but simply pass it around the system. A profit is not money made, but money siphoned of the existing money supply."

    In this case money = wealth - I was following on from a previous usage of the term.
    Banks do create money - but not wealth. The wealth is the value placed on items which are required or desired by the people (demand) which have been created through a process - either assembly or construction.

    Banks lend the tools for the job (credit) and demand payment for it. This is not creating wealth but merely taxing the production which will occur.

    Apologies for the confusion - banks create money like water - but the lack of wealth creation means that money is devalued - hence the decline of the pound in real terms, the saving grace being other western currencies are all doing the same so it's not so obvious.

  • Comment number 99.

    Simplistic viewpoint - Why doesn't the government simply add the total of bonuses paid by a bank to the total amount that bank has to repay? (Or the percentage of the bonus - e.g. 50% gov't owned = 50% of the bonus added to the amount to be repaid). Bankers get their bonus. Taxman gets his cut. And when the banks finally repay the 'loan' the public are repaid. Oh, and the loan has to be fully repaid before shares are 'released'. None of this selling the shares to pay off the loan.....
    Simple - or is that just me?

  • Comment number 100.

    The government could make a good example of stopping the bonuses at ZERO in the banks we own the majority stake in.
    Prove that even if we lose these 'top executives' that the bank carries on anyway (and more profitably to boot)
    WE OWN THESE BANKS SO LETS STOP PRETENDING WE CAN'T STOP THEM!!!!!
    If I own a company I - yes I - make the decisions about bonus and pay. No one else. So the government on our behalf OWNS some of the banks so let them put a huge size 24 boot down and just say NO. Then adjust the pay so that NO ONE in the bank earns more than say twice the national average - and I mean NO ONE.

 

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