The questions for the former bank bosses
Here's the good news for the former bosses of Royal Bank of Scotland and HBOS who are being grilled this morning by the Treasury Select Committee.
There's so much really bad financial stuff happening in the world that perhaps their past mistakes won't be quite as humiliating for them as would otherwise be the case.
For example UBS, the former pride of Swiss banking, has just disclosed that its losses in 2008 were around £12bn - that's about 50% more than the eyewatering losses made by Royal Bank last year, during the last disastrous phase of Sir Fred Goodwin's reign.
And in Russia regional banks are talking to the government about how to reassure overseas banks that they can repay around $400bn of debts over the next few years.
Yuk.
To paraphrase Ed Balls, this financial mess is global and as bad as we've seen for 100 years (although to nitpick, the Governor of the Bank of England thinks it's the worst banking crisis since just before World War One, so not quite a century).
So what should the MPs ask the erstwhile heads of HBOS and Royal Bank about the extreme local difficulties they succeeded in engineering for themselves?
If I had one question for each bank, these would be them:
For Andy Hornby, former chief executive of HBOS, I would ask how on earth he allowed the bank to abandon tried and tested banking risk controls. What I mean by that is that he gave licence to his team to take stakes in big companies as well as lending to them.
That went against all traditional banking practice, because it meant that the banks' judgement about the credit-worthiness of companies wanting to borrow vast sums was clouded by the enticing prospect of making fat profits on shares held in those borrowers.
Or to put it another way, good banking judgement was overwhelmed by at least one of those seven deadly sins.
In the early 1990s, when I was banking editor of the Financial Times, it was regarded as almost a scandal when the so-called clearing banks held shares in corporate customers. Over the past few years, at HBOS and at other banks, this dangerous mixing of lending and investing became commonplace - with disastrous consequences.
So the question to Mr Hornby - who is not a banker by training and yet went on to run one of our biggest banks - is why he didn't spot this danger (among many other dangers - such as the bank's excessive reliance on unreliable sources of funding, inlcluding sales of mortgage-backed bonds).
As for Sir Fred Goodwin, who for years was the supremely confident CEO of Royal Bank, the big question is why, oh why, did he buy the bulk of the toxic giant Dutch bank ABN right at the top of the market.
This deal would have bankrupted RBS, were it not for the generosity of taxpayers. And he can't claim there were no serious voices arguing against this takeover. There were many asking the question whether this was a deal too far.
Doubtless he and Hornby and their respective chairmen will say sorry this morning. But they need to do more.
They need to give a convincing narrative of how they made their egregious errors, so that we can all learn from their mistakes - and make new mistakes next time, rather than repeating these particularly disastrous howlers.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~21~RS~)
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Please please do something to correct the impression that the problem in the banking industry is big bonuses, and if the politicians can somehow stop big bonuses then the bonus problem will be solved.
You have to think about why big bonuses are paid in the first place. Individual bankers generate huge quantities of revenue, and if they walk out the door they take the revenue with them. We - the taxpayer - own bank now, and our interests will not be served if the revenue generators walk out the door and take the business with them. The general impression appears to be that big bonuses exist because bankers are greedy and like paying themselves lots of money. As if people in other industries wouldn't pay themselves lavishly if they could! The difference between banking and other industries is the sums involved and the extent to which those sums are attributable to individuals. Other industries with the same dynamics also pay their stars lavishly - think of the media and the film industry.
Please do no confuse this with a "defense" of big bonuses - I'd love it if bankers were paid less. That would amount to an increase in productivity - more output at less cost. I would also love it if footballers were paid less - that would mean we'd have to pay less to attend games and to watch the games on television. But what popular opinion appears to be pressing for now is the equivalent of nationalising Manchester United and imposing a £500,000 annual salary cap. What do you think do you think would happen to Man U if we did that?
In your position as business editor of the BBC, couldn't you do something to explain this to the nation? Your discussion on the Today programme this morning did nothing to correct the impression that all we need to do is bring about the end of bonuses, and everything will be OK. In your post below, you write that demand for talent is thin on the ground. How long do you think that's going to last? Do you really think that, for example, well connected corporate bankers won't be able to leave RBS and set up their own M&A practise? That star analysts and traders won't be able to find work at other firms?
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Perhaps the question that should be asked is about risk management. The banks:-
must have known their exposure to the housing market;
must have known that the market was overheating;
must have known that self-assessment mortgages were reducing the quality of their mortage book.
How come they did nothing about it - and also bought large quantities of Mortgage backed securities?
Allowing banks to invest in and lend to companies is a question for the FSA/Brown.
Taking over another company is a risk - he may not have known it was the top of the market. Shares have not been overvalued in this particular fiasco - unlike previous ones.
So houses were overvalued and shares weren't - house prices have reduced by 20% and shares 40% - explain.
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I'll try this one again here.
I thought legal action could be taken against directors of companies if they were found 'Not to have acted in the best interest of the company'.
I delieve this was enhanced/brought in after the Maxwell scandal and to prevent directors from - well ripping off the company.
Is there not any scope here for getting something back from these misunderstood scoundrels?
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Sorry...?
Talk is cheap.
MAKE THEM GIVE THEIR MILLIONS BACK!
Return the bonuses. That will hurt!
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The real question is
Why aren't we putting them on trial and making them return the money they stole.
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Of course they will say sorry.
So that's all right then.
Well, no, it isn't all right.
And if they say "lessons have been learned" they should be put before the firing squad.
How many times have we heard that lame offering from failed senior managers?
These highly paid managers were not put in place to "learn" things at shareholders' and taxpayers' expense.
There are no excuses for these guys.
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I am sure it will be another great pantomime performance as the Select Committee lays into the hapless duo, giving them a severe seeing to on behalf of the nation. Sure mistakes were made but to lay the whole sorry episode at the door of the these two individuals is simplistic. We have to take into account the media's not insubstantial role in the undermining of the public's confidence in our banking system. The highly inflamatory coverage of the Northern Rock demise just set the ball rolling with other journos, short-sellers and analysts picking off bank after bank.
We have had the "talking heads" warble on and on about "financial tsunamis" and "holocausts" and have been told again again that the banks are not lending to each other. (This is not what the banks are telling us). We must not loose sight of some of the other issues such as the criminal behaviour of the rating agencies and the rediculous attitude of the accounting profession wrt to mark-to-market accounting. Sure, give these two a good public flogging, but lets not pretend that they were solely to blame for this mess. If we really want to learn from the mistakes that were made we should cast the net much much wider.
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Why did they buy American Mortgages ?
Are they going to sue the American Banks and Ratings Agencies for misrepresenting the Bonds they were selling ?
And finally why do they believe they should be entitled to help themselves to Shareholders funds (both Public and Private) whilst the Bank, they are employed by, is lossmaking ?
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I see Ed Balls has put his mouth in it again.
As ever gaffe prone as David Milliband.
Both always seem to be aiming at undermining the PM and any confidence in the markets.
One wonders if Ed Balls should be grilled by the same 'kangaroo court' committee that tried to shift blame (for Northern Rock) on to you Robert?
As for the Bankers, how about a 'credit crunch' recipe:
'skin and peel a few Bankers;
'season and lightly oil;
'skewer gently and roast slowly;
'over an environmentally unfriendly barbecue.
'Leave to cool and serve with a healthy dash of cynicsm, along with politicians and estate agents, to the newly unemployed.'
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my understanding was that if a trade makes a profit, you are liable for tax
even if the money is reinvested and makes a loss
so if you trade to make a billion profit and then lose a billion aren't you still liable for the tax on the original profit
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As I keep saying, the only way to inject demand back into the economy is to reverse decades of below Inflation pay rises given to the Public Sector.
Give them all a forty percent pay rise, and the consumer economy can start ticking over again.
Otherwise, we all face a long slide into Depression and poverty.
Has the Gov't made any effort to establish/encourage new Export businesses in Britain ?
If not why not ? (That is the long term solution).
Has the Gov't made any attempt to address the undervaluation of certain foreign currencies ? (That permit the UK to be flooded with cheap Imports).
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I took out an endowment mortgage to provide for myself in future, not to provide for the Bankers...
As we know, the Banking world was booming, but returns on endowment policies were pathetic.
Why did the Bankers think it was appropriate to reward themselves excessively, instead of passing the profits to customers with profits related policies, such as endowment mortgages ?
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How does a lawyer with no finance qualifications get to be head of one of the largest banks in the UK? Is this a man we can trust? Would you trust a lawyer to do brain surgery? then Why, oh why? do we trust lawyers to run a bank???
"That thought-out approach has characterised Varley?s rise through Barclays. The only son of a Coventry solicitor, he qualified as a lawyer in London before joining Barclays as a merchant banker in 1982. Since then he has worked in every corner of the organisation, recently as finance director, an extraordinary feat for someone with no accounting qualifications."
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Why is RBS acting against the interests of British taxpayers?
Cabinet minister Ed Balls, a former economic adviser to Gordon Brown, says the current global recession is "the most serious for over 100 years" and "more extreme and more serious than that of the 1930s", he said these were "seismic events that are going to change the political landscape".
Meanwhile, that well known taxpayer owned bank, RBS, is busy exporting jobs to Asia. These are not fat cat bankers but modestly paid backroom clerical jobs.
When unemployment is soaring it is crazy to throw British workers on to the dole to send the money to Asia!! Less money in our country = less tax revenues, even more unemployed and a worse balance of trade.
Is there any way at all this makes sense for Britain??
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Allowing retail banks to borrow money is the real culprit here. A banker wants to lend, that's how he makes profit, that's his business. When cheap money floods an economy, asset prices rise and corporate profits increase, giving the false impression that all is well. The retail banks then borrow more money, so they can lend more money, and the artificial cycle continues.
It was Bill Clinton's administration which in 1999 abolished the Glass-Steagall Act of 1933. This allowed retail banks to borrow for the first time. Tony Blair's government then copied this approach, allowing British retail banks to begin borrowing in 2001. The BoE failed to control the money multiplier, causing massive asset price inflation..........and the worst recession since World War One.
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2:
The Bank Shareholders, whom have lost between 100 and 85 percent of the value of their investments, would not consider that there are any STARS in the Banking Industry !
Destroying other peoples Companies and then expecting to be paid a bonus for it, would be a joke, if it wasn't so staggeringly arrogant.
Let these so called STARS go.
Let them take their Toxic derivatives, and fraudulent confidence tricks with them.
The Shareholders will be better off in the long run without them.
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Robert
As we keep being told you've all seen it coming, why did you not ask those questions a couple of years ago when many news headlines were going on about the levels of debts
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How much will that committee is going to cost, as nothing will change should we put the money somewhere else?
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If I recall Barlays and RBS were making take-over bids for Dutch ABN. Look at the trouble Barclays would have been in trouble if it had won. They were both daft as it was way over valued buy.
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I would ask these two bank chiefs what happened that made them decide to shift the internal balance of power away from the prudent credit departments staffed by traditional bankers to the investment bankers and traders - and challenge them if they claim that it was not just greed for the enormous short term gains promised by the high earners - all of which have of course now been written off in subsequent losses. If the market is now forcing banks to return to traditional conservative banking strategies, why are they so afraid of seeing their big earners walk out of the door?
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I don't mind paying more tax but how can I make sure that it goes to bankers?
I don't want is squandered on OAPs, schools or hospitals.
No banker left behind.
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Dear Peston,
Please, you are still following the government's red herring (bankers for scape goats). Please concentrate on what matters: the expansion of the monetary base = printing money = inflation coming. (Stephanie Flanders is right: "follow the money!")
The most important questions are: Are we going to have inflation? When? How much? For how long?
It is possible to construct a few (3?) scenarios, using econometrics. You must know a good econometrist. Or ask/pester the IFS!
We need 3 charts, with 3 inflationary curves: a best case scenario, a worst case, and the middle one.
Hard? Maybe, but let the academics do their job. We pay them for it.
Cheers, Laura
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I wonder if the PM’s reluctance to take some decisive action with the banks has something to do with his future job prospects?
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Why ask those questions Robert?
In your article, you mentioned Hornby was not a trained banker so was hardly likely to follow established banking practice. Surely the question in his case should be who allowed him to take charge.
As for Goodwin, you said it yourself, despite numerous voices telling him this was a mistake, he carried on. Why were the other board members so ineffective? Or had they reached the Nick Leeson stage - all or nothing on the next deal.
My plumber doesn't come to fix my electrics, so why put a grocer in charge of a bank?
Don't buy an old decrepit building and expect to turn it into a palace without it costing almost everything you have.
Common Sense IS common, just some people think they're too clever and the normal rules don't apply to them
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Short of total revolution the exclusive club of the wealthy and powerful will remain in control, with minimal lip service to lesser interests.
Whatever wealth and materials can be extract from the world at large will continue to be converted into gravy-trains and yachts.
So let we, the people, use the mighty power of the democratic process to act decisively and bring about major change by ..........
Voting in the Tories!
Boy oh boy! I feel so much better for that.
Blue skies all the way now.
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I thought Hornby came on the scene late when all the damage was done at HBoS. He certainly was the first to break ranks and say the problem was profound. Whatever he has done I wouldnt lump him in with with the RBS raving banker who spent money as though it was going out of fashion, well it was, so he got that bit right, just he forgot the debt bit.
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How can RBS be expected to make an announcement of a LOSS of 28bn GBP later this month and still be paying out bonuses of 500m - 1bn GBP?
What are they based on, worst performance?
If some of these bonuses are part of legally binding contracts, then who on earth negotiated these contracts?
Surely there was a clause that the company had to actually be solvent before they were obliged to honour them?
If not, no wonder they ran it off the end of a cliff... They knew they'd get paid, whatever -
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There is only one question thread they need answer:
Given that it is now clear the 'profits' upon which your previous bonuses were based were in fact not real, will you be paying these bonuses back or relinquishing the shares awarded ?
If not, why do you think you are entitled to keep them?
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18 supercalmdown
I'm getting worried - you are on thread and not asking for a public sector pay rise of 40 percent. Is everthing all right in calmdowntown.
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#2 - LuisEnriqueUK
It would do nothing to Man U if all other clubs were doing the same?
If no one is hiring, they'll stay where they are for less money or be unemployed.
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Fine let the banks pay as much bonus as they like.
But impose a windfall tax on the bonuses paid to city workers (no exemption for non-doms) for the last five years.
I would suggest a retrospective rate of 80% less whatever tax they have already paid.
Perhaps the anti-Terror leglislation might help?
(reference to Iceland!)
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So the former top 4 men from RBS and HBOS have apologized this morning.
I can't say that does much for me and my family or my small business as we struggle on in the mess they helped create.
Even more disgusted to think they can all ride off into the sun set now with the millions they have already banked for their so called outstanding performance of recent years.
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Balls... is living up to his name.
How on Earth can the current economic mess, be compared to the economy of 100 years ago.
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Sorry if this is off topic, but a barrel of Crude Oil is now worth $40 - so why is a litre at the pump still nearly 90p?! I know the pound is weak (@$1.48 at the mo), but still, the oil companies are making a killing here.
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Dear Sir,
I have been putting some thought to the current global financial crisis and would like to put forward to you a hypothesis for consideration, if it is a viable solution to the increasingly catastrophic situation the global financial system is currently experiencing.
It is about time that someone came up with some constructive thoughts and started to look at the 'credit crunch / recession /depression) as an entirely global problem that is not going to improve in anything like the near future.
Global problems require global solutions and the only REAL solution is to tackle the problem on a global scale.
Consider this hypothesis - the only way to revive the world economy is to instill confidence in the public mind, give investors something to invest in!
Banks and bankers cannot do this anymore nobody trusts them
The answer is to respond to the masses in such a way that they have the power to bring the world economy back on track.
Bring confidence back and it will turn around very quickly, the burning question is HOW?
A simple solution is available, provided that the world financial systems and all governments work as one entity for one goal.
THE SOLUTION IS SIMPLE IN CONCEPT BUT DIFFICULT TO RESOLVE WITHOUT 100% GLOBAL COOPERATION AND METICULOUS PLANNING TO IMPLEMENT THE CHANGEOVER TO REVALUED CURRENCIES AND ALL FINANCIAL TRANSACTIONS ADJUSTED TO THE NEW LEVEL.
Close down all financial dealings for 48 hours
The concept is to take all global assets, everything but hard cash and reduce the value to one tenth
Next take all cash assets and multiply value by ten
(this would require revaluation of every world currency) yes print new money
This would create wealth for every man and women in the world overnight and create a differential of 100 times between asset values and cash values globally and therefore will not have any inflationary impact whatsoever.
after 48 hours all transactions would recommence with all assets a tenth of what they were before, but cash assets having being multiplied by ten they would be worth 100 times more. However the status quo of assets, wages, prices, etc., relatively, will remain the same.
The windfall from the change gives revenue back to the people to spend but have 100 times more spending power. Costs of assets are slashed and the cash assets allow people to buy houses and spend while still maintaining the original differential as the revaluation is totally global therefore there will be no difference in the relative values of assets compared to incomes.
If such a plan was considered and published globally it would almost certainly create confidence, in fact ity may even improve the world economy before it is applied. Just the knowledge of global improvement may give the kick-start the banking bail-out strategy has not.
I am an engineer, not an economist, I look for solutions to problems every day.
Regards,
CG London
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Former top dogs have apologized and admitted to mistakes. That only leaves one person left -
When are you going to finally hold your hand up Mr. Brown and admit you have let the British people down???
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The horrible losses at Northern Rock this morning (45.9m GBP on repossessed homes) are worse when you look at the comparables.
It had lost 10.2m GBP in the preceding SIX YEARS, so an average of 1.7m GBP per year. For this to mushroom by 35.7m GBP IN A YEAR is a staggering decline!
As it has redeemed it's better customers and now begins to aggressively lend to anyone the government says it has to (the worst risks, or they'd get finance elsewhere), I wonder how long this lame duck has left?
People talk of getting "all there ducks in a row". If they did that here, it would be duck season -
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Perhaps a major reason why HBOS strayed so far from normal banking prudence is that its Chairman and Chief Executive had no formal banking background. Lord Stevenson can best be described as a "professional" chairman without any knowledge of banking let alone risk management before he joined the Halifax. His CEO, Andy Hornby, although an intelligent man owes his success to running retail stores for Asda and I do not believe he, or most of the HBOS board, had any real knowledge of the risks they were running for both depositors and shareholders. To hear that Hornby is now being paid a consultancy fee of £60k per month to help Lloyds Banking Group beggars belief. He should donate this to the NSPCC - one of the unknowing beneficiaries of a charitable trust established by HBOS to shelter about £47bn of securitised loans!
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#2 LuisEnriqueUK
Sorry but your light weight thinking doesn’t need “explaining” to the Nation thank you very much!!!!
The bonus culture within banking and the whole financial services sector is an issue (admittedly a lot of the resentment is driven by jealousy)
The stars in your media and film industry example are never going to bring the economy to its knees, or see ordinary people lose their life savings, or cost people their jobs...... in that particular area you reward selfishness and it works for you...
Scale isn’t a multiplier either – we turn over approx 5 million and our FD is rewarded for the role he plays in managing our finances. If turn over increases by 10 his salary doesn’t! Just because the numbers get bigger doesn’t mean the reward increases at the same rate.
Also we are talking about a “bonus culture” here, not specific bonuses. If the individual bankers that you refer to are responsible for “generating huge quantities of revenue” AND it is sustainable AND isn’t going to bring their bank to its knees, all well and good. But I, along with others know that buried away within these huge bonus payments, justified because of the huge responsibility that goes with generating huge profits are people that seem to have generated huge losses.
By all means Name and Pay the successful
But Name and Shame the others please....... this seems like one big game of Hide & Seek
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In his comments published today Mr Balls seems to be saying that this is the worst recession since The Federal Reserve Act-which was 1910 I believe.
That was when the big central banks in the US found a way to hide behind the taxpayer. Balls is actually right for a change because this scam -the results of which are now emerging-started then, and has gone on ever since.
This time they went too far.
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Can someone please tell me how in todays world if you want ( as a company ) to borrow you need to put up assets at market prices or 100% yet banks are still speculating with depositors moneys on terms of 40-1 leverage?
What the hell is the Bank of England, The Government and the absolutely useless FSA doing about that ?
At what point is their tiny little minds to they pick up what everyone at street level sees daily?
We have a system in place that can't work yet no one is doing a thing to stop the damage. To many of those who could do something have their noses so deep in the trough they cant see the wood from the trees.
The onlky way to make things happen is to get a change of Government and Leadershio at the FSA. Until that happens UK plc will continue to sink and we will just look on as blind leadership lead blind regulators.
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Post 2
You are wrong to liken bankers earnings with other high earners. Bankers do not have totally exceptional gifts, they should not earn so excessively (this is proven as there are thousands and thousands of bankers who have peen paid million pound plus bonuses).
The other highest earners are few and far between in their feilds.
They have been paid because they earn the banks so much - but their employers forgot it was a one way bet for the employee - hence the mess we are in. Hence it HAS to change!
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We all need scapegoats; its the human condition - the Bankers are as good as any. But we were all complicit from the Gov over borrowing and promoting the boom, to businesses over leveraging to us buying £100 hair cuts and Plasma TVs for the bathroom.
Its easy now with the rear view mirror but few voices of reason were heard at the time as we all talked up the boom; our infactuation with house price growth; chancellors unending growth figures; and economists Goldilocks model.
History is littered with calamitious population decisions and trends that in hindsight seem crazy. But they were not at the time. As humans we are extremely susceptible to such group think and momentum thinking. We tend only to look for confimatory evidence.
I don't blame the Bankers, most of us would have done the same and contributed in our own small ways with our own debt and consumption decisions. I like the last piece of your article which focuses on the situational variables and conditions that allowed all of us, not just fat bonused bankers, but businesses, Govt and citizens to be sucked in. Bring in Sir Fred not for public humiliation but for an honest discourse on decisions and how and when they were made. Do the same for representatives of business, Gov (Gordon) and the citizenry. Then we may learn the lessons.
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'grilled' ?
Don't make me laugh, they knew the questions before hand, not only that its a big show put on for joe public.
We are slaves / peasants
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Dear Robert
"hens Gordon Brown going to give evidence and say sorry?2
AFTER ALL THIS IS ALL HIS DOING AS WELL AS THE BANKERS.
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Dear Robert
"whens Gordon Brown going to give evidence and say sorry?2
AFTER ALL THIS IS ALL HIS DOING AS WELL AS THE BANKERS.
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#13 - supercalmdown
Public sector workers now recieve bonuses and in many cases are better renumerated than their private sector comparable.
Don't get me started on their pensions!
Let's just leave them as is, eh?
Or ban the practice of giving bonus to civil servants for doing their jobs!
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Why don't the government simply impose a 90% income tax rate on all bonuses paid by banks in which they have a stake.
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Why not expose the detail of banking shareholding in failing industry. Company chairmen are bleating about liquidity: give us money the say, the national debt must come to our rescue, the government must fund the banks who must then fund us.
The smoke needs cleared, the mirror made true. No more bailing out of tycoons. Nationalise and plan the economy on the basis of collective need.
We will see an economy of grovelling today and in the coming weeks and months. Greedy capitalists will proclaim, we are the saviours, the beneficient employers of the masses, give us the money. If our companies fall, it won't be our fault, after all, we only did what the banks allowed us to do.........
Come on Robert, cut to the chase, reveal the hidden thoughts of the knights of capital.
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"Off with their Heads"
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@32.
Right. So, do you think that's the case? Do you think other banks will stop hiring individuals that can bring millions in revenue with them? And they don't just have to move to existing competitors: new brokers and M&A shops get set up all the time.
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With apologies (and due reference) to Lloyds List this morning:
IMAGINE a Scottish bank which suffers liquidity problems after questionable management decisions and is forced to seek a bail out.
Yes, we are discussing the City of Glasgow Bank in 1878, a key lender to Clydeside shipbuilding.
Unfortunately, it also extended speculative and poorly secured loans, particularly in the US. Then recession struck, sparking a wave of defaults.
No longer able to provide even trade credit, it turned to the Bank of England for an emergency injection of funds. But the plea was rejected, the bank collapsed, and all directors were jailed after the discovery that the bank had been purchasing its own stock to prop up the share price.
Some 130 years later, and we find the Royal Bank of Scotland has been rather better treated. Gordon Brown, with great political fanfare - 'It can be said that I alone have truly saved the world!' - presented its Board with his personal gift of £20bn.
And what did the Board choose to do with our money? Line its collective back pockets with huge pay-offs and bonuses safe in the knowledge that, as long as the aforementioned Mr Brown is in power, they'll always be plenty more taxpayers' cash to keep the gravy train rolling with no danger of anyone doing time in Barlinnie for gross corporate negligence notwithstanding the law today is fundamentally no different to what it was 130 years ago.
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bread and circuses
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There have been calls on these pages for Chinese justice and even American justice.
At the moment I would like to see some traditional Japanese justice.
McKillop shold be invited to commit Seppuku. His haiku upon departing should be something like this:
The money vanished
like the drifting snow.
It was all an illusion.
Fred the Shred, however, whose lack of shame has thus far been totally dishonourable, should suffer the fate of Ishida Mitsunari. Who will be Tokugawa?
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Here are the answers that Hornby and/or Goodwin should provide:
"I was a big swinging dick in the City; I was lapping up the trappings of my power and wealth; I loved being seen to be at the top of my profession; my fellow board members were poodles and we were operating on "groupthink" (http://tinyurl.com/62fxo ); I was more interested in my own status and earnings than pretty much anything else; I wasn't interested in looking for or asking about emerging alarm signals in the wider, global financial environment; I thought the good times would never end; I was pleasing the Labour Government who, with the Financial Services Authority, were all colluding with me to create a monumental debt bubble ... which has now burst; sorry about that".
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The money melted
like the drifting snow.
Was it ever really there?
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Question 1 - In 2007 what were your estimates for average house prices in 2012?
Question 2 - What were your estimates for average salary in 2012?
Question 3 - I paid 87p for 3 apples and 2 oranges. If apples cost 17p each how much are oranges?
Question 3 - Are you an idiot?
Question 4 - Can we have our money back?
Question 5 - Did you intend retiring off the back of the huge bonuses and pension pot before 2012?
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#2 LuisEnriqueUK
'Do you really think that, for example, well connected corporate bankers won't be able to leave RBS and set up their own M&A practise? That star analysts and traders won't be able to find work at other firms? '
++
Are these the same 'Stars' who got us into this mess?
These 'stars' are not wanted now, some have already gone and I very much doubt anyone else wants them.
We should have another comittee, The Comittee For Public Safety.
Can I drive the Tumbril?
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Robert
Tough questions - Ha Ha Ha - Don't make me laugh - the questions are almost as shallow/soft/mis-prioritised inappropriate/as your recent 'snooze' before a similar committee.
Apart from the chair and the Lady member (forgive me - don't have her name right now) - the questioning is poor and too hypothetical - no wonder these guys are laughing all the way to the bank.
Only one female member of the Committee asking good questions - shame - there are thousands of good female tax and financial lawyers who would ask more appropriate and revealing questions!
What is Graham Brady doing on there - his second question of the morning was inappropriate and mis-timed - he knows even less about finance than he does about education. He should stick to testing David Cameron's patience.
Bonus/remuneration should be discussed last - any fool can see that - he's just after a sound bite and has lost the momentum of the chair's first question.
I can think of a few GCE level teenage discussion groups which would ask far better questions and with agreement on a proper structure.
It must be difficult to be grovel apologetic and still sound arrogant but some of these guys have achieved it.
No wonder the country's in such a mess!
Total YAWN!
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Are you prepared to apologise to the British public and your shareholders for the now dyer state of the banks you were in charge of?
Hey, with the many millions I have pocketted over the last few years safely stowed in my government deposit guaranteed bank account, well, I'll apologise to whomever you ask me to.
I can afford to, and since I don't need the bank anymore as I am well set for the future, it really makes no difference, but, hey, you want an apology ... here you go.
Sorry. Smirk, conceipted downbeat demeaner.
(apologies for any typos).
Laughing all the way to the bank.
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#37 piper247
Sort of missed the point of Money in your thinking Piper!
It is a mobile representation of asset value
"I am an engineer, not an economist" - you certainly are....
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When I worked at HBOS quite a few of the professional accountants and actuaries were at best sidelined and at worst marginalised from the top level decision making process and formulating strategy. Hence prudent banking was thrown out of the window in favour of rash "punts" which if they came off woud be highly profitable, but conversely this was also risky.
Secondly the prevailing culture within the group promoted a being positive mood. Any dissent from the company line brought censure and accusations that you were not a team player. Consequently the culture generated a "brown nosing" attitude by staff towards senior management as a means of currying favour and the rewards were promotion and salary rises.
That the regulators did not carry out due diligence only compounded the problem. One thing that acts in mitigation to the directors, is that HBOS was just too big to manage properly. The being positive attitude also meant that it aws very easy to cover up bad news. On top of that there was the simmering resentment of the merger between Halifax and Bank of Scotland - it was very tribal and your identity was defined as by what side you were on.
How Lloyds Bank Group will fare is anyone's guess. The comments made by Gordon Brown a few months ago about protecting Scottish jobs at the expense of English ones was unhelpful. Both RBS and HBOS employ tens of thousands of people in the West Yorkshire/Manchester corridor where Ed Balls and Yvette Cooper are MPs.
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so these four top ex-bank bosses have no banking qualifications !
they were chancers who played a high tech game of poker and lost leaving millions to pay their tab.
they walk off with obscene payments and now they are sorry.
what more do we need to know about the "free" market.
it is not a market but a casino played with other peoples money where they win, we lose is the main rule.
as for the "tax" paid on bonuses, I will believe it if it ever gets paid and not spirited away to a tax haven.
bankers used to be boring and need to return to their core role, not explore other areas !
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This comment was removed because the moderators found it broke the House Rules.
#17 MrTweedy - correct!
I would ask these guys whether lending long and borrowing short is a strategy they would repeat, and;
Which of their previous employers subsidiary businesses they would sell to re-capitalise.
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#53 LuisEnriqueUK:
"@32.
Right. So, do you think that's the case? Do you think other banks will stop hiring individuals that can bring millions in revenue with them? And they don't just have to move to existing competitors: new brokers and M&A shops get set up all the time."
++
The millions in revenue were not brought in. It was just a house of cards. The money was never there!
All the nonsense has to stop. One more time: It cannot continue as before.
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Can someone explain to me why these people are not being investigated by the serious Fraud Office.There actions and those of their Boards have been criminally negligent.
There was uproar when a certain Mr Leeson was gambling with money he didn't have but i do believe he went to prison for what he did,is this situation any different,apart from the sums involved and the scale of the recession it will cause.?
At some point in the past a decision was made at Board level to start malpractice in lending,all bonus's from that time onwards should be recovered from all board members involved unless they can prove they spoke out against the measures at the time,and i dont care whether they have to become bankrupt to pay them back.
This so called "expertise" myth has be blown out of the water we need people at the top who have the ability to add up !!!
In days gone by they would have all been dangling at Tyburn,a project that if resurrected would give a much needed boost to the construction industry.
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Comment 10 bysupercalm is a question I've longed to hear the answer on.
Either there was corruption or the rating agencies were simply not up to the job - why is it they are still given the same credance?
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No Robert the question isn't for Hornby, it is for the current Cheif Exec of HBOS, and it is this:
"Why are you paying (taxpayers money) GBP 60,000 per MONTH right now to Hornby for his "consultancy" services?"
Robert, you are devoting time to "bonuses" but say little about these other less visible misdeeds.
The taxpayer needs to know that Hornby despite his failed leadership is STILL BEING PAID by HBOS, why do you not ask the Prime Minister to justify this?
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finally mr peston has come back to the burning issue of financial mismangement by the 2 companies who created a moutain out of molehill in the uk banking industry.
forget northern rock and braford and bingley for a secong,both companies business models were a accident wating to happen and everyone in the know knew it.
what the average financial joe blogs didnt know what HBOS AND RBS had a even worse business model for lending then the 2 companies mentioned above.
rbs woes are not just down to dutch bank abn amro(how barclays were lucky on that one!!)
they are also down to bad purchasing/lending practices aswell in my eyes.
as mr peston mentioned hbos had the worsed business model for lending of the two and quite rightly have fallen flat on their backside begging to be bailed out.
i hope the treasury select commitee give them a DAM GOOD THRASHING!!
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posts #5 and #6
Fred Goodwin did not receive a bonus for 2008.
Andy Hornby has never received a cash bonus, prefering instead to take shares instead.
I'm afraid you are just further examples of individuals who are jumping on the badwagon to lampoon banks and bankers without the slightest understanding of how banks work and why they are essential to the capitalist system.
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15
Have we not had a barrister in charge of the country?
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Mr Preston You should not just skirt around
Ed balls comments;
really need a far greater analysis . as he fears quit rightly that there will be a massive turn to the right, which might well be a good thing too. With some of this turned onto the BBC and its biased non reporting over the last 10 years.
Saw 2 Jag on Newsnight still spinning it was nothing to do with labour, they should get all the credit for the Boom/bubble and bear no responsibility for the Bust on there watch. Yet where was paxman and the grilling that the Tory home secretary (later leader got)
On BBC R4 the long view somebody was talking about the irrespnsible fiscal position by the Current regime over the last 10 years that fuelled the Bubble.
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(I'm Sorry)
It's like I missed a shot,
It's like I dropped the ball.
(Damn I'm Sorry)
It's like I'm on stage,
and I forgot the words.
(Damn, I'm sorry)
It's like building a new house,
with no roof and no doors.
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Just been watching Stevenson and Hornby. A couple of amateurs out of their depth. Blaming it all on the wholesale markets. Not on the pumping up of the asset value/debt bubble.
In the end, they don't understand the principles or history of economics. That is if asset values or debt are out of all proportion to the productive capacity of the economy there will be a crisis. It's always happened in the past. It will happen again in similar conditions. It's as fundamental to real economics as the law of gravity.
From what I've seen of Hornby, Stevenson, and Shred, they all all economic flat-earthers.
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Supercalmdown You are on the right track but ALL public sector workers getting a 40% percent pay rise? Some of them are on a damn good whack.
No what would work though is - as some posters have suggested - taxing the hell out of the bankers (and management consultants and auditors) who earn over say 150k. Then re-distribute that wealth (in the words of John Stewart on a memorable today show - 'make it rain beeatch') to ALL the lowest paid workers - anyone on minimum wage, also up benefits for the unemployed (tories might not like this one but be cool headed here - economically it WILL work) then also up the basic rate pension for anyone with no private pension income. These people WILL spend they do not have the luxury of saving.
As for the idea that people who oppose this bonus culture are envious. Maybe - maybe not. I for one have a friend whose father is a multi-millionairre - he has a very sucessful business that (get this) MAKES THINGS and EMPLOYEES people. He really does create wealth - therefore I presume many do not mind his wealth.
Many do not hate the wealthy per se - just those that are parasites on society and do no good.
In fact we do not need a stock market at all - lets just get rid of it - forever. Capitalism used to work without it I am sure it could do so again.
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Off with their heads !
Off with their heads !
Come shouts from the public gallery
And MP’s
As former bank chiefs are led
Into a Court of Evidence
Before the Treasury Select Committee
Guilty for stealing all the tarts
And playing their parts
In the economy’s downfall
But it’s all too late
To call a debate
The credit crunch bites on
With no appease
Mercilessly swallowing its victims
While banks swallow up each other
Up and down
Boom and bust
Who CAN we trust ?
( work in progress - From Cheshire Cats, Fat Pigs...)
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Dear Mr Peston,
It is long past time that the media stopped repeating the self serving whine of bank chief executives that huge bonuses are necessary to retain the brightest personnel. It should now be obvious to all that huge bonuses are only necessary to retain the greediest personnel.
The brightest people would not involve themselves in an industry that over the past decade has become nothing less than Government Approved racketeering, for which the people will now have to pay the price.
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Nice and biting. Keep going.
I've just joined the blog and haven't read many of your past posts: have you already commented on WHERE all the 'bad debts' have gone, re banking, sub-prime etc?
Are we looking a world where a great many people are gleefully looking at their free or very cheap house; where companies and institutions have simply run off with the cash they have received as loans. Do debtors have the money or an asset as the result of a defaulted loan? Money, like matter itself, surely doesn't disappear, but ends up in a pocket somewhere, doesn't it? To be returned to circulation in due course?
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So the two big boysa say sorry to the committee. I would like to say sorry to RBS that this month I will not be paying my mortgage....does it wash?
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Goodwin should return his bonus payment for 2007. he should also return his salary for 2008. he says that he "lost £5m in the value of his shares" He NEVER paid for them they were given free as part of his contract!!! So those should also be returned.
All the Executives of RBS should return their bonus for last year. They made the errors that led to this debacle. The ordinary staff in branches especially should be paid theirs for 2008 as they had targets to meet and I know the majority had to work damn hard to reach them. The losses are NOTHING to do with the people in the branches and to punish them is just not fair.
Finally I want to see the law of the country held up. The executives should all be brought to court for not complying with Company law insofar as the two banks RBS and HBOS were broke and the executive should have notified the FSA that they were insolvent and stopped trading.
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It's easy to say your sorry! *
Andy Hornby still has a massive consultancy.
This was November, a reported 60K per month,
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/3382068/HBOSs-Hornby-lands-60000-a-month-consultancy.html
On BBC last night, he was reported as receiving 40K per month.
No doubt he is one of the "best and brightest" but I would be interested to know exactly what he does for this money.**
The Nov report suggests that it is to tide him over while he looks for a new job. Evidently he hasn't been snapped up yet.
*I recognise that some very arrogant people are incapable of saying sorry even when it is in their own best interests.
** I have heard some bad people say that he knows relatively little about banking. I am sure this cannot be true.
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Is it just me who queries why 'Sir' James Crosby is nowhere near the firing line and instead is some sort of lauded consultant for the Government? How ridiculous is that? Instead pick on the boy Hornby...tut tut...not even trained as a banker...blah blah...when those that have been trained as bankers or whatever form of training exists for politicians, have proved themselves to be just as culpable.
My point being that if the government was really taking any of this seriously instead of dressing up a show to attempt to appease the masses, then I would have expected a different way of addressing things.
Having a few bankers turn up to say their rehearsed apologies is all very well and a start but no-one actually has a plan beyond that to kick-start wholesale markets, bank lending etc. All of them, governmment, board members of banks and their so-called consultants...are fairly clueless.
bw
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"The big question is why, oh why, did he (Goodwin) buy the BULK of the giant toxic Dutch bank ABN right at the top of the market?"
Actually, only 10 billion worth. Loose change, for these guys.
A REALLY big question is why, oh why, did Varley and his crew at Barclays want to take on ALL of the "giant toxic Dutch bank ABN" at the same time, not as part of a consortium (RBS, Fortis, Santander), but as a complete deal, "worth" 60 billion plus?
And, bearing that in mind, why are Varley and the rest of the Barclays comedians currently being lauded as the embodiment of good banking practice. No apology needed from these guys, apparently.
They got SOOOOOO lucky. But don't let us confuse that with competence. Had they got their way with ABN, Barclays would have gone to the wall.
Let us view their recent 6-billion plus of "proits"with a due pinch of salt.
Although Mr Varley does sound reassuringly plausible. Shouldn't he be knighted?
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BY the way...what exactly is the point of the Treasury Select Committee??
Of the numerous grillings of various great and good so far, what tangible and constructive wonders have actually come out of the 'work' of the committee?
Frankly I think any of its members should themsleves be put up to the light and examined as to what they are actually achieving.
bw
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At least one of your correspondents is still arguing for high pay for bankers as they made high profits for their banks. The problem is that they did not- they thought they did which is the real nub of the problem. The ex CEO of A&L summed it up well on newsnight when he said bankers had got themselves mixed up between banking and trading- with trading using the capital in banking to take bigger and bigger risks.
In terms of questions I would ask the RBS people to admit that they went into ABN for vanity only- it did not make sense and really only served some ego that wanted a bank to challenge the US giants. The problem with this deal is that the downside was so huge- after all I think RBS put up 13 billion euro to get a bit and would then carve the group up with Fortis and Santander- I am sure it looked good on paper but what was the upside? The downside has turned out to be £20bn write off this year and goodness knows what else will come out of the woodwork.
That was vanity but with HBoS it is worse because they went astray in their banking big time- in a typical transaction they would over lend to a frightening extent with huge fees payable on doing the deal that they then got bonuses on- and I am talking about hugely distorted amounts- so a £200m deal might involve £8m of fees for the bank- let alone the other parasites in the transaction- and the company would then be working to pay the bank extortionate rates of interest- often well in excess of 10%- and the bank would then try to lay off the risk to other banks who would all have their snout in the trough and charge fees for taking part of it on. So the immorality of it is that on a £200m deal- the cash generated by the business would have been £20-25m- so where would the return be to shareholders or money available to for investment? That is why the bank took shares- nobody else in their right mind would and of course that way the bank staff could still get their bonus. If it had been a sensible deal the amount lent would be less and the fees less and the interest rate less- who were the sellers who made all this money- normally of course other banks or private equity houses- so that they in turn got their bonuses. That is why the bonus culture is so evil. And we have not even looked at the encouragement given to those who cannot afford it to borrow money- how many people on low incomes have ended up with a mortgage that took up 30% of their income and loans that probably equalled their annual earnings and that got recycled through credit card companies and so on. The greed of these bankers was not just at the top, they were rotten to the core.
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This is nothing short of a "Publicity Stunt"
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Robert, please get your facts right. ABN AMRO was not toxic. RBS was toxic. What was a grotesque mistake by RBS management was the timing and price of the transaction. However, the bulk of the toxic waste sat within RBS by virtue of their US exposure (ABN had negligible exposure) and their market share in leveraged loans. RBS executives are conveniently attributing their own write-offs to the business thy acquired. Nothing could be further from the truth.
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IMO the reason that Bankers got into this positon is simply avarice and the human instinct to herd. The same thing which enabled Madoff to run his scam.
It's just like people queuing in the sales, they are desparate to get there before anyone else, in case they miss out on a bargain.
The Bankers saw others making vast amounts of what they thought were profits which enabled them to receive much larger bonuses and so they wanted a piece of the action. Their fellow Bankers would have laughed at them had they not taken the opportunity to be 'part of it'. Almost fever-like they 'jumped in' and enjoyed the water!
It's a natural re-action when all around your fellow Bankers are making millions, so you want to bask in the 'cred' of being able to do it too. They are, after all, only human. It was a 'money fest'!
I don't think you can learn from these mistakes long term. We will see caution initially but eventually some other 'type' of investment will appear - and off we go again!
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I think this inquiry must also look for evidence of criminality in banks.
Is the paying of vast bonuses (including yourself) against non-existant profits a criminal offence?
Is the paying of vast bonuses (including yourself) when you KNEW the bank was in serious trouble a criminal offence?
Let's hope they find out.
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Where were the NE Directors in all of this ? Picking up 50K a year for a couple of days work - their job was to protect the shareholders.
Of course in reality the NE Directors just scratch the backs of the executives. Anyone shouting any form of dissent gets kicked off the board.
Finally, it is my understanding that as a Director there are two things that are impossible to indemnify yourself against under English Law. One is negligence. The other is fraudulent trading. Time for Mr. Brown to show us what he's made of ...
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Why are we bothering to question these monkeys? Talk to the organ-grinder!
If anybody needs to answer our Treasury Select Committee's questions, it's America!
That's right, let's drag the whole bloody lot of them in to be questioned. It's their fault!
We're facing a depression that will last 100 years, I heard, and it's because of them doing something or other. Let's ask them exactly what they did and how come they made us copy them!
I can't believe we're wasting our MPs precious time in this manner! It's just not good enough. I mean, they had these bloody reporters in the other day, asking them whether they had caused this great economic crisis, and whether they could have done anything different.
What was the point in that? I mean, are we questioning from the bottom up in this fiasco?
The other day an MP came round to my office and asked me whether he thought that I could have provided more of a fiscal stimulus to the economy. He suggested that I buy a car. Apparently he was suggesting it to everyone, but I felt pretty pressured for a bit there.
In the end I told him to get lost, if anybody should be buying British cars right now, it's America. They should be buying our cars as an apology for doing whatever it is they did. That's what I told him.
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Nick Leeson got what ?
5 to 7 years?
Therefore as a leveraged multiple these guys should be getting 999 years.
Less time off for saying
'I am very very sorry'
Net effect - erm, sorry for taking your time up Mr SuperBankers
Have a nice day y'all now
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This comment was removed because the moderators found it broke the House Rules.
69 - Yes it is about time the serious fraud office got involved if only to try and recoup some of the money.
Am watching the panto on TV, they're all Sir, Lords and it's not their fault, but they're sorry.
Can't wait for Bremner Bird and Fortune version of it, may be they could try for Comic Relief too
62 Surely you mean laughing all the way from the bank!!
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It's easy to get round the issue of contractual bonuses.
Make everyone redundant and then re-hire them on different terms.
I doubt in the current climate there'll be much in the way of dissent.
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77 May be they should try football management, they'll get sacked faster and more spectacularly
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#42, 60, 68
Much of what you say is correct, and I am not trying to defend what these people did. You must remember that while some parts of the banking industry made what you might call illusory profits, many other parts make real money, and now we, the taxpayer, own some of these banks we need them to keep making real money otherwise we, the taxpayers, will suffer and all the profitable activity will move to elsewhere. It would be great if we could co-ordinate new payment structures across the industry, but unless we do that, all I'm doing is pointing out that unilateral salary & bonus caps can backfire on us - the taxpayers. Even if a law was brought in to limit salaries and bonuses across the industry, brokers etc. could, for example, just quit, start up partnerships, conform to the new laws and take the money they make as dividends. My ideal world would not feature super-rich bankers either, but I don't want to cut of my nose to spite my face.
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The critisism of the Bank Bosses is fully justified as is the outcry over excessive bonuses.
However one should not loose sight of the FSA'S role in this matter. For example, more effective supervision would not have allowed Norther Rock to rely so heavilly on Short Term deposits to fund the business. Equally it is clear that they had no idea what the Investment banking side of the Bank's were doing and didn't understand the products or the Risks. The Bankers simply forgot the basic rules of lending and the Supervisors didn't understand what was happening.
Not aware that individuals who failed at the FSA are being slated in the same way.
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So far, only McKillop has acquitted himself with any dignity. I was going to say "with a Shred of dignity", but thought better of it.
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The only sorry they have said is to themselves and the shareholders,
breathtaking arrogance in the extreme.
and now they are trying to blame the FSA, and good old Hornby, keeps wittering on about how it all started before he became the Boss!!
Customers should withdraw all their monies from these banks who are intent on paying obscene bonuses, and close down their accounts then we might see some action towards this travesty of justice.
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Robert,
I will remind everyone that GB/AD knew since October 2008 that the banks we the taxpayers were about to hand £37 billion were going to pay Bonuses to bank staff other than the directors because they told us in press conferences that they had got the 'directors not to take cash bonuses in 2008'.
They were very precise in their statements and it has stuck in my mind.
They are just totally incompetent and the worse types of politicians to now pretend the are s'saving our tax money by inisting that bonuses are not paid they should have made sure before they parted with the £37 billion.
I am sure that all those 'masters of the universe would have accepted forgoing their bonuses in return for having the next months salary.
They, the 'masters' know they are not 'wealth creaters for the UK they are 'wealth rearrangers' as their prime activity is a 'zero sum game'.
Just spivs with fancy titles betting with our money.
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Lord Stevenson started of by referring to the "S" word. Eventually he said the word "sorry".
But it came out as "....I think I would say unreservedly sorry...."
Not good enough....bring out the firing squad.
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The questions need to be asked of Brown and Blair who not only presided knowingly over the wild west style banking system but positively worshiped the men and their free wheeling ways of playing around with the nation's finances.
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The madness of crowds.
No one who reaches the pinnacle of their company does so without pride, even arrogance. One CEO does it and makes money. The next CEO takes up the challenge and wins again. The system feeds on itself.
As you pointed out running a company without having very strict guidelines as to what you will or will not pursue in the search for additional growth is essential. Otherwise egos takeover and we get what we got.
The sums are staggering, incomprehensible even. There does not appear to have been the basic diversification among asset classes and long and short positions that you might expect from a prudent policy. I am confused - how did the banks all end up on the losing side of transactions?
What was missed in large measure was that we do not have a set of independent decisions producing diversity. The decisions were correlated - everyone seemed to think the same way at the same time, at least in the banking industry.
The problems are obviously complicated by the feedback mechanisms reinforcing the downturn. The asset values forming the security for refinancing loans have plummeted. This puts more assets on the market, further reducing the values. Layoffs cause additional people to fear layoffs causing them to slow their rate of spending and causing additional layoffs. The lack of confidence breeds more lack of confidence.
Our business leaders have failed us and now we do not know where to turn.
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Its fairly obvious that the current meme is that of bonuses. Its an important question for sure, but hardly the most critical.
It is clearly an orchestrated media campaign, as it pervades most mainstream outlets. Is it perchance to avoid the bigger questions facing the world and the financial sector? Like how do we unwind a $500 Trillion derivitave market?
It would be nice if the media would tackle that hot potato with a little more gusto.
Bonuses=Smokescreen
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I do of course agree completely with the posts highlighting the sheer ineptitude and greed of these people. But I do feel that all this suits the politicians. John Mc Fall is an uber loyal New Labour man and will do all in his power to divert blaim from the PM and others. Lots of smoke and mirrors here.
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I like post number 81 by philbarker.
I think there were winners in this equation, as well as losers. Despite the massive sums they were investing, the losers appear to have been exclusively on the losing side of the transactions. Who were the winners and where is their money? When will they decide to put it back into circulation?
If there were only losers in this, we can simply reinflate the economy. But there are winners as well and the threat of massive inflation lurks in the background.
I see very little choice but to do what is being done, but there are very real threats in addition to the threat of deflation.
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Who gave these guys knighthoods and for sevices to what?
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Its funny how MP's bash the Bankers and say they shouldn't get a bonus - but the MP's have in the time of the labour govt taken billions from everyone's pension funds in tax (something that the average person still hasn't realised and likely blame insurance companies for just 'performing' badly) and at the same time the MP's have voted gold plated improvements to their own pension scheme! MP's are not the people to throw stones in this glass house!
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A law should be introduced preventing Directors of failed PLC's from holding any other PLC Directorships after the failure of their first Company, whether or not negligence is proved.
Consideration should be given as to placing a limit on the number of executive Directorships any one person holds simultaneously.
Likewise, qualification for Non executive Directorships (for PLC's) should perhaps be established (ie that Non Execs should have some proven qualities).
One would hope that the new Directors have some kind of Banking Qualification ?
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This is absolutely iffuriating.
In the words of that great modern songsmith, Jarvis Cocker....
!Well did you hear, there's a natural order?
Those most deserving will end up with the most?
That the cream cannot help but always rise up to the top,
Well I say,... Sh*t floats"
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#36
It's not the oil companies making a killing on petrol, it's the government. Taxes account for by far the largest part of the price you pay at the pump (between 60 and 70p I believe), margins for the oil companies and retailers are not that great. Oil companies make more of their profits elsewhere.
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Robert,
A question that needs to be put to the Barclays bank goys, eg Varley:
'Why is the 'profit' of £1.7 billion on the 'mark to market' valuation of Barclays Bank plc. bonds been allocated to Baclays Capital is it so that those in that division can receive larger bonuses there appears no other logical explanation?'
(it is really a devaluation of these bonds to junk status, but hey this is banking where 'assets are liabilities' and 'leverage' is good for them and 'toxic' for their would be borrowers)
If this 'unreal' profit had not been parked in Barclays Capital then that division would have made a loss.
A bizarre alternative explanation is that the directors of Barclay Bank plc have decided to award this profit to that division as maybe Barclays Capital (where the proprietory trading goes on) was shorting Barclays stock and bonds to drive its value down and thus create a 'profit' in the bonds this could happen in the wonderful world of financial engineering!
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A Plague upon their Houses
with fumigation from sulphur...
"Come thou daimon, Mammon, who stalks the City Mile,
With dollar signs for pupils, a noxious gap-toothed smile,
Turn thy poxy neck full round to face True Acolytes,
Those who first invoked thee, in sychophantic bytes,
The Masters and the Players, who toy with pixel coin,
Faustian Financial Wizards, who want thee as their doyen,
Wreak the vengeance cried for, when summoned by us - the populo minuto -
We call them out as liars.
May toxic fumes of false transactions burn acid thru' pinstripe trews,
Let them know the pain of the man in the street, who has nothing left to lose.
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These bankers are financial predators. I here feeble stories that we should pay for talent and intelect.
I am a doctor and I have met members of my profession who have intellects that these
fools could barely record yet an international medical professor clears just over 100k per year while an international financial fool clears up to 40 million.
Is that right and proper. I am asking the financial geniuses out there?
Next time I treat any financial expert well medically, I SHALL BE EXPECTING A MASSIVE BONUS FOR MY MEDICAL EXPERTISE and list of qualifications longer than the white lies of financiers, OK!!
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I'm not happy with any of this, the fake apologies, the fake questions and the notion that this is some sort of justice.
Robert, there's more than one question to be answered, there's a multitude because we are seeing a corruption of the system that has brought us to our knees. Surely this simplistic hearing is itself a part of the problem? The Treasury Select Committee can go to hell for all I care!
At the very least we should ask why a financial system has been created that's so opaque? Is it deliberate? Where was the real scrutiny? From the FSA and the Bank of England? Who but the very few can access and understand the figures hidden in their documents? Why has this government got away with this for so long?
When are we going to get to the facts?
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On listening to radio 5live this morning the commentator was questioning whether the discredited bank managers had sufficient qualifications for the job.
I would suggest that qualifications are of little importance in this case. It was in moral integrity that the bankers failed!The inability to resist the attraction of fat bonuses being dangled before them. This led them to take on risky contracts with no thought of the consequences.
If greed blinds the judgement of those people to such an extent that it impairs their judgement bonuses should be discontinued forthwith. As the taxpayer owns 70% of some of the banks legislation to effect this should be possible. Honesty and integrity should be far above academic qualifications as a criteria for selecting bank managers.
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Twice I have got into these blogs first and made claim to a bonus for being first.
Entry was bounced: "Your posting appears to be off-topic, in that it does not appear to relate to the subject of this blog"
OK, here goes:
"I am a banker and am in no small way responsible for untold hardship to bank shareholders, customers, taxpayers and for damaging the reputation of UK plc. Right, now can I have a bonus?"
There, that should be acceptable.
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Having watched part of the 'grilling' of the bankers I would like to see MPs names put in a hat and a subsequent grilling members of the governing party.
The government were asleep at the wheel and with all the expensive quangos and management consultants how did they not see any of it coming? I read the papers and certainly saw it coming, so what were they doing? They should fir e all these so called experts and that would go part way to getting the books in better shape.
MPs taking the high moral ground right now should look at how they are perceived. Those who abuse the expenses loophole excuse themselves and say it is allowed by the rules, CHANGE THE RULES. It is still immoral. The fact that they do not want us to have access to the detail says it all. They should have to provide receipts, be accountable and then we might trust them.
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Did you see Andy Hornbys face when he was asked about the JSA (job seekers allowance)?
For a second he panicked as he mentally shifted through his misdemeanours.....maybe he thought he had been found out... was the JSA another dodgy scheme he was involved in. His relief was palpable when he realised it was a question about the plebs.
Of course he had NO IDEA that a job seeker would earn £60 pounds a week. He and his pals would spend more than that on his silken tie.
what a banker.
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#73 stanchartsteven
It seems they have as much ideal of how banking works as Hornby and Goodwin!
They are essential to the capitalist system and they broke it... and their banks
Didn't the bank report in Sept that Hornby bought 92,000 shares with his Annual Cash Bonus? Just because he made another bad choice doen't mean he didn't have the cash option......
... and you are right S F Goodwin didn't receive a bonus in 2008 - when the Bank was on its knees - but I think he'll be OK as he must have some of the 2.8 million of his bonus for 2007 left
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#37 Piper247
Respectfully, I think your idea would start the 3rd World War!!! It probably is a non-starter, so we can thankfully all sleep at at night.
Some people own property as a major part of their assets, others don't own property but just have large savings deposits - or smaller if you like.
Under your system the property owner will immediately experience a 90% loss of value in his property. Something like a severe inheritance tax before he even passes away!
Those with the cash will rush to buy property, ultimately pushing up the property values once again. We will then have property price inflation again.
The cash society will end up occupying/owning much more of the property, whilst the initial sellers will have to continue working again to save to buy a house again.
The rate of inflation will shoot up, as too much money will be chasing all existing goods and chasing after more goods. We will import more and more until the money runs out.
There will be searing anger in the group of people who owned the assets, and much profligacy by the group of cash owners, and mixtures of the two.
Your scheme will create such a distortion of relative values and dissatisfaction with those in power that the dispossessed may organise a rising with cheaply acquired military goods and - well, I don't know the consequences of that!
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I find it odd how I suggested everyone should monitor the Treasury Select Committee a while back and was told they're toothless wonders. Still, this bunch are so soft they can be gummed to death.
The first canard to lay is the thought the bankers can take it with them. A banker is only as good as his credit, and if that's pulled, then nothing can set them back up in business. It's time to start naming names, declaring people not fit and proper to continue to practice in the UK, and pursuing them throughout Europe. It's time this bankrupt blackmail blagging finishes, and to cast them into the kind of ignominy they so very richly deserve. There's any number of jobs still on the dole boards, assign one chosen not at random, but with deliberate malevolence, to teach them humility, we've had a bellyfully more than enough and it's time for them to repay.
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a complete farce for public consumption. what happened to real ACCOUNTABILITY. seize the banksters assets. they cannot be allowed to keep their ill gotten gains lets see some justice for a change,sorry aint good enough!!!..
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There is a worrying parallel in the UK population's mentality between alcohol and finance. When explaining the UK's chronic obsession with alcohol, people blame the pubs and bars for selling cheap booze. When wondering why they are over-burdened with debt and in in recession they solely blame bankers. How about looking in the mirror at one's own behaviour and accepting it's strong contribution to both hangovers?
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Animal House
As Delta House faces disciplinary action from the student council, frat-brother "Otter" (Tim Matheson) makes a speech in defense of the fraternity.
http://www.whysanity.net/monos/ahouse3.html
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they have all said they have lost a lot of money as they took their bonuses in shares....well correct me if i am wrong but you only lose money if you buy at one price and sell at a lower price.....firstly they did not buy the shares they were given to them..and secondly surely they havent sold the shares at these prices? (if so they are more stupid than i thought) So at this time they have lost nothing! the clever politicians didnt pick them up on this..!
this charade of a treasury select committee serves no purpose apart from making it look like parliament is 'doing something'.....
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It is a little unfair to heap all the blame on the bankers - they were swimming in an unregulated, shark infested ocean - just where were the regulators and central Banks when they should have been reining in the excesses of the credit bubble? Our democratic politicians were enjoying the ride every bit as much as these bankers and they must be called to account as well - if sensible banking had been insisted upon by the authorities, then we would never have seen such idiotic instruments as 125% mortgages - but they all wanted to keep the carousel spinning and didn't know how to get off until it crashed!
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#37
If you multiply cash by ten, then asset prices will also be multiplied by ten.
With ten times as much money in the bank, I can afford to pay ten times as much for that house, car etc, and the builders, carmakers etc will demand wages of ten times as much.
Unfortunately it doesn't work.
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what have the donations to the labour party been over the last 12 years from these institutions and people on large amounts of money ie they are able to make large donations unlike the rest of us ?
Some Supermarket bosses have made large donations. Maybe its time to break up the Banks and Supermarkets into smaller entities like what happened to the pubs back in thatchers time. Then they would not have so much infleuence. Maybe not more than 3-5% market share per organisation
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i wonder what will happen now? will we have a review or learn from our mistakes , i wish i could make a million+pounds or be an m.p. and make just as much as that is the only answer that i would have to come up with . No m.p. or banker seems to be able to tell the truth never mind what went wrong with the system they are all eating out of the same trough
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The famous 'grilling' (in really more of a gentle defrosting) is a complete sham.
Brown is panick-stricken and wants to divert attention away from himself as fast as he can. Hi solution? Blame it all on the bankers.
Sure some of them seem to be less than scrupulous, other seem to be clueless and yet more appear to have been decent hard-working people. But, Gordon, having scented some public outrage, has hung 'em all out to dry.
Make no mistake - Brown could have prevented a large part of this but he was too busy lapping up the praise and wooing Prudence. Where is she now?
Anyone could see that the property market was evolving into a catastrophic bubble and the fall out would be horrendous - everyone that is except Gordon.
I'm not an accountant or a banker, but in the Spring of 2007 I started to get concerned about house prices. I did a little research, noting down the last sales price for all the houses in the street I lived in, calculating the average mortgage ratio and estimating the amount of money borrowed against that one street. The total came to more than £30million.
I don't live in Chelsea or Kensington or Hampstead. At the time I lived in a very ordinary street in Wandsworth with two storey terraced houses.
There are literally hundreds of identical streets round there, with identical houses. Add this up and you soon get to some staggering numbers. I sold my house, very quickly and for a very good price. Then I rented for the next 2 years whilst the prices came down again.
Similar properties are now around 25% less than what I received in April 2007.
The money I received I put into an high-interest account in (you guessed it) an Icelandic Bank.
In the Spring of 2008 I started doing a little more research and wondered how Iceland could support all that borrowing. I delved a little deeper and decided that Iceland was a seriously dodgy proposition, so took all my money out again and back into a boring High Street bank over here a couple of months before Iceland sank without trace.
What's my point, I hear you ask. Well, as I said before, I'm an ordinary guy. I work in an ordinary office for an ordinary wage. I have one A-level and no university degree. I have no financial training and own no stocks and shares, and have never worked in the finance industry.
So my point is this - if a muppet like me can spot the problems and dodge the bullets, what the heck has Gordon Brown been doing for the last 10 years?
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I think it was said by General De gaulle that Cemeteries are full of indispensible men. The myth that paying big salaries gets big talent is exposed for all to see by the performance of these Bankers. Yet people fall for it all the time, not just in banking but in other fields. If anyone says I want more money or I'm leaving, then let them go. If they were really able to get significnatly more money elsewehere they would have gone already. Ont hting Robert Peston should ask. A few years ago the then head of the FSA was ousted because he was opposed to relaxation of the rules governing the banks and city instutions. You know who I mean. Who was responsible for that, and where are they now?
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#82 "Is it just me who queries why 'Sir' James Crosby is nowhere near the firing line"
He's now deputy chairman of the FSA, and reputedly a favourite of Gordon Brown. In November he advised the government to allow resumption of trading in securitised mortgages.
#73".....how banks work and why they are essential to the capitalist system."
In fact, every major economic crisis of the last 100+ years has been caused by banks creating debt for speculation rather than investment. Read Galbraith: "A Short History of Financial Euphoria".
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That's UBS, where the supposedly independant member of the Boad of UKFI Lucinda Riches was Head of the Global Equity Capital Markets division, is it?
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Sampson points out in 'Who Runs This place' that it is the same elite group which is constantly shifting from boardroom to boardroom in search of the best remuneration deals. Interestingly many of these men (and nearly all of them are MEN of course-sexism rules in the big boardrooms) are Scots like the unelected great one.
They aren't there for their expertise, they are there for money: that's the whole deal, and it is called the 'establishment'.
Read Sampson and Edward Griffin, and weep.
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Robert,
Another question for Barclays:
'Are or have Barclays going to pay/paid the Lehman staff they hired any bonuses for work done in 2008, if yes how much?'
I think this question needs asking as their seems to be mixed sums as to what the "2.3 billion negative goodwill" profit related to Lehman is all about and is it 'real' profits (surely Barclays have not got someone ready to by those assets so that they can actually realise that profit )or is it all a figment of their febrile imaginations?)
Their was an article at the weekend that spoke of $1.7 billion bonus and lehman
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Company law states that a directors role is "to prepare an annual profit and loss account, a balance sheet that shows a 'true and fair' view of events, and a directors report and to make these available to all shareholders and the public at large" They have clearly broken the law and failed to do what they were mandated to do, their balance sheets did not give a 'true and fair view' of their company's financial position. They therefore deserve to be penalised beyond losing their bonuses.
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It is assumed that the top business leaders and experts have some great knowledge the rest of us do not.
Wrong.
Most of their success is down to taking excessive risks and luck, not competence.
A competent business leader will be cautious and therefore less successful (not usually popular), but on the other hand he/she will lose a great deal less when thing go wrong.
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Ok
It's clear the bailout hasn't worked or driven the right behaviour so..
1. The banks should return the taxpayers funds given to them (with interest)
2. The banks can then pay themselves as big a bonus as they like.
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I'm speaking as a former Royal Bank of Scotland Employee from Edinburgh, who now lives in California. I can say with confidence that the strength and the ability of this great bank to recover from its current difficulties has more to do with the outstanding quality of the over-whelming number of employees, which make the bank what it was, not one just the figure heads who signs the bank notes etc. Having said that, however, I question the wisodom of the people who were responsible for appointing the arrogant, incompotent executives who made the decison to buy ABN Amro for example. Those excutives who did so need to lose their over-inflated egos (as well as their bonuses).
As somoene also who has who has worked all over the world since leaving RBOS, in several different businesses, environents and cultures, and been fairly succesful at founding and continuing to run various corporations around he world, in my opinion, money/bonuses are NOT the ultimate motivator that most people seem to think. I question therefore the logic, that there will be any sort of mass exodus of talent from the UK's banking industry if executve salaries or bonuses get capped. The recession is world-wide !
One last point, as majority shareholders of RBOS and other financial instiutions that have been bailed out, the British tax payer shoold have voting rights as well as dividends (when the banks are in aposition to pay them).
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I wodner what the average bank emlpoyee actually earns? Forget traders and CEOs jsut the average staff who make up 99% of the workforce.
Maybe £25,000, around the national average?
What about FSA staff? probably around the £60,000 mark before benfeits. in 2004 their average salary figure was £56,000 and so it must be close to this mark now
http://www.fsa.gov.uk/Pages/About/Media/Facts/index.shtml
I can see the high earners in banks leaving the industry if there isn't much money to be made. i can even imagine many going to public sector employers where salaries of £100,000+ with bonuses are not totally uncommon. don't even get me into public sector pensions.....
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The irony...
People are writing to complain that the big bosses had no banking experience, hence the banking industry failed, then in the same sentance they are offering advice how to solve the problems...
The fact is that many highly successful lawyers, bankers, economists and business people do not know how to solve the problem but people on this board does... and that it usually involves making scapegoats out of investment bankers and all bank workers!
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73. stanchartsteven
''I'm afraid you are just further examples of individuals who are jumping on the badwagon to lampoon banks and bankers without the slightest understanding of how banks work and why they are essential to the capitalist system.''
Yes of course. The banks are working, just the small matter of -28Bil at just one of them. Yes of course this sort of performance is absolutely essential to capitalism. That is why some of the banks are bust. I take it you live on Planet Bank and talk Banktalk, commonly known as gibberish. Goodness what did we do for trade before we had people who could acheive this, like in the last millenium, not very long ago.
As for daft comments from Hornby like I have lost a lot more than I have earned. What a load of twaddle. He still has his cash salary. If his shares went pop whos fault is that, could it be at least partly the CEO, who was that then. No wonder there is a problem if he does not understand an asset only is given value when made liquid.
Please note no banks who make a profit have been damaged in the making of this comment. And thank goodness we no longer have to suffer those ads with the smiling banker and the sun always shining.
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What is the difference between these bankers and criminals?
Is it the suit or the amount or the friends in high places ?
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All the bankers need to do is to rebrand their 6-figure bonuses and call them "expenses". Then I'm sure all the MPs will instantly understand that they are in fact necessary and stop giving them such a hard time.
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I am personally sick of these scroungers living off the back of taxpayers, whinging about not getting bonuses. They should get jobs with proper companies, if they cant get enough living off state handouts - oh I forgot - there are no jobs left due to their incompetence.
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#121
In my banker's dissertation I meant to include the "S" word ("sorry" in more humble speak) to demonstrate my , I think, unreserved apology.
Oh, and I forgot to add that valuable lessons have been learned.
"S" about that as well.
Anyway, they're only words.
Right, now I've got that out of the way, I'm off to spend my filthy lucre.
Cheerio you plebs.
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What was the point in this 'show trial' other than to make it look like the government is actually doing something worthwhile in curbing the excesses of the city fat cats?
I would like to know why this motley mob wasn't joined by the head of the FSA - a government official whose department acquiesed in the greed of the financial sector so long as times were good. Yet the FSA never saw fit to take these banks to task when it was blatantly obvious they were taking far too many risks.
Sure blame the banks and get someone to tell us how 'sorry' they are whislt they live in the lap of luxury at our (the taxpayer's) expense but it doesn't excuse the UK government of gross economic mismanagement. They too thought they could borrow money like there was no tomorrow - the only difference now is that the government's attitude still hasn't changed an iota.
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Update From Cheshire Cats, Fat Pigs, Rabbit Holes and Tea Parties…
Off with their heads !
Off with their heads !
Come shouts from the public gallery
Demonstrators and MP’s
As former bank chiefs are led
Into a ‘live’ Court of Evidence
Before the Treasury Select Committee
Billed to be grilled over
Recklessly risky deals - why or why ?
Gambling and dicing with stakes so high
Guilty for stealing all the tarts
Now forced to eat humble pie
But it’s all too, too late
To call a debate
The credit crunch bites on
Mercilessly swallowing its victims
While banks swallow up each other
Up and down
Boom and bust
Who CAN we trust ?
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If the consensus of opinion is that Directors of certain companies have not acted in good faith cannot a legal case be brought against such individuals under Companies Act legislation? We can then let the legal system decide who acted in good faith/exercised reasonable care, skill and diligence etc rather than various do-gooder committees just extracting hollow apologies.
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#120 Billbhy
Like so many others you appear to have no understanding of the matter at hand. Both HBOS and RBS were fully compliant with FSA and government regulations and were audited on an annual basis by respected external auditors. There is nothing to suggest that they acted in a fraudulent or deceptive manner. Furthermore, Andy Hornby did not receive a cash bonus throughout his entire time on the HBOS board then subsequently as its CEO.
You are simply another example of the tranch of society that has no understanding of how the financial services industry works but are jealous of those that have been rewarded for their intellect and hardwork.
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A lot of focus rightly on bonuses in banks, especially those bailed out by tax payers money. I also think it is time for a review of other ways that taxpayers money is used.
Mr Peston - you seem to know a lot and have a lot to say about other peoples pay / bonuses but we rarely hear a mention of your own, or those of your BBC colleagues such as newsreaders & DJ's which is 100% funded by taxpayers. This might be an interesting comparison so we can put the bankers situation into perspective.
Hmmmm pot kettle black methinks
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meanwhile...the former ABN AMRO offices in Amsterdam are being expensively rebranded. Millions spent on painting grey doors blue, replacing grey carpet tiles with blue, swapping brown chairs with orange ones, painting white walls whiter. Logical and necessary that millions are spent on integrating the systems etc, but millions spent on paint..?! Good grief.
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Rudyard Kipling can provide suitable guidance
"I keep six honest serving-men
(They taught me all I knew);
Their names are What and Why and When
And How and Where and Who."
No closed questions here.
Then when you get the answers to these, address the closed questions so they are answerable yes or no.
Then prosecute accordingly
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"But Sir Fred said if bankers felt they were not paid enough, they would leave. " and this would be a bad thing because!!!!
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#118 DrDavos
Some people would suggest you are overpaid.
Mind you, with your wonderful spelling and grammar you could well get paid that £100k as a sub-editor at a national newspaper.
People get paid their market-worth. These people were worth it at the time.
Turns out they weren't really worth the money. I've had doctors like that.
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The problems in the banking industry are widespread throught all or most industries. Buddy buddy networks ensure that the sly and deceitful are heading these companies.
They have little or no moral basis for their positions within these companies, and apparently, have no formal qualifications to run these entities.
When truths are determind by democratic processes, how can it possibly be surprising that the sly, most incompetent people find themselves heading these companies.
ONCE again, any knowledge of fractal economics would have raised these concerns WELL before these problems happened.
Generally, the more someone is paid, the less competent thay have to be. This is quite apparent from these sly conmen and their huge salaries.
If we were in China, these people would be executed. If Al-Kaida would have engineered this, we would be calling them the most vile people under the sun.
However, when the buddy buddy network fails (or did it?) these carbon forms walk away nicely rewarded!
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#124 thinkb4
I am not suggesting that Hornby and Goodwin did not fail. What i protest against is the comments made from people who have zero understanding of the way in which RBS / HBOS conducted business. The idiots calling for criminal charges / hangings / repayment of bonuses / repayment of salary are as well informed as those religious zealots that call for fundamentalism. Ranting loudly and jumping on the bandwagon does not constitute informed and intellectual opinion.
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All of this is becoming a waste of time.
Do we really expect anything more than sorry ?
The person to be held to account is Gordon Brown, - period.
The last few blogs that that RP has posted have done nothing more than convince me that they are posted to distract people from the real problems that we are all faced with.
We should be spending more time and effort in getting shut of GB rather than posting views on bonuses etc.
Wakeupbritain called for a march in march to Westminster, I think we could do better than that.
What about a concerted run on an individual bank or building society, followed a few weeks later by another ? He can't nationalise them all can he ?
OK, that might not work but we have to do something to get rid of him. Although the odds are stacked against it, I just can't stand the thought of him getting back in next year and having to listen and watch him for another few years !!
Suggestions, please
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The majority of people at the top of banks worldwide, for the last 15 or so years, have been non-traditional bankers. As a "traditional" banker for 36 years with Bank of Scotland, I left the organisation as Halifax stepped in. It was obvious to myself and many others who took a similar step to myself at that time, that it was the beginning of the end for BoS. Traditional bankers would have had some perception of what was in the wind many many months ago. Those nearer the bottom of the ladder saw it, so why didn't the people at the top listen? No, they knew best, in their minds. They were so blind, so niaive and so focussed on their big bonuses. Bring in the traditionalists. Well, that is, if they haven't all gone by now.
Apologies? Words are easy. Too little, too late and what a slap in the face to Scotland who gave the Scottish Banks so much support - staff, customers, suppliers, The Scottish Government.
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The way the media reports this stuff its as though one man personally bought ABN Amro and that it was his mistake. An interesting fact here is that in order to purchase ABN Amro, the Board of RBS had to convene an EGM in order to seek approval from shareholders - most of them big city institutions or pension funds. The EGM vote on ABN Amro was passed with a majority in favour of the acquisition being 94%. So whilst the Board's plans for ABN may have been flawed, the shareholders also believed that the acquisition was the right thing for the bank to do - presumably the same people who are not leading the outcry about what happened next.
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The BBC is challenging these four Bankers because they do not have formal Banking qualifications. As they carefully explained they all have top accounting, legal, and Master of Business Administration training, supplemented by very senior experience before taking their board roles.
In other words, the board members of these banks have EXACTLY the same sort of qualifications as the people who run all the world's major banks.
Would someone like to provide details of the technical Broadcasting qualifications possessed by the Board of the BBC?
Or the government and political theory qualifications of the Prime Minister? Or the finance qualifications of the Chancellor?
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Sorry really isn't good enough - these people should, at the very least, be stripped of the assets that they acquired through their spectacular mismanagement. After all, the state can confiscate the assets of drug dealers so why can't we go after these guys who have done far more harm?
I believe there should be a line drawn and the directors (including non-execs) of any bank that has had to be bailed out should be investigated to determine how they personally benefited benefitted and we, the people, should recover this from them by all possible legal means.
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To comment 2 - LuisEnrique
What you fail to take into account, in my view, is that highh cash bonuses were not justified because they were paid on the basis of illusory gains, i.e. gains which have now been proven to be the result of a bubble.
In short, the profits generated by individual 'star' traders and analysts were not real, but now this fact has been exposed they still have the cash bonuses.
Its the equivalent of Manchester United payers baing paid a bonus for winning the league and champions league, only for it subsequently to be revealed that they hadn't actually won either of those competitions.
Surely the way to resolve the entire bonus issue would be to make all bonuses payable in shares. Wouldn't that encourage individuals to better manage risk, as there remuneration would be tied to the future performance of the company.
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Perhaps there is a valid excuse for poor bankers!! They believed what everyone has been told.
They have repeatedly been told that our financial system was on a sustainable growth pattern.
I would like to know if future bank bonuses are to be based on the same level of sustainibility.
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I'd be very interested to know why Barclays was allowed to buy part of Lehmans, then come running to taxpayer to underwrite some of their debt. Surely they should be told to sell Lehmans and other assets to increase their liquidity to allow them to cover their bad debt.
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To supercalmdown and others advocating a public sector payrise -
The public sector is a millstone around the neck of the real economy. It doesn't generate any income, doesn't export anything, it lives on the back of the private sector like a parasite.
Some of the services are essential (health, education, police). Many others are simply unnecessary and are a drain on the country's finances.
The public sector can have a 40% pay rise when it cuts 60% of its workforce, and sets the rest of us, that actually bring money into the country, free. On top of that, the other economic stimulus the government could give us would be to scrap it's apparatus of surveillance and the burgeoning police state. We don't want it and it's costing tens of billions. These two measures combined would mean we could stimulate our economy not by getting into further debt, but by actually reducing the size of government and reducing tax.
I realise that none of this will happen in my lifetime (which is why I'm leaving the UK)
On bonuses - surely it would be competitive for banks to be able to offer lower bonuses? Give better profit for the business and their customers?
Or is that too much like common sense? I also don't believe for a second that any of these big risk takers are in any way uniquely talented. They just know how to fit into the city mould.
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Bankers and politicians.... they share an important commonality.
The type of person who wants to become a politician, is probably not the sort of person who should become one.
The type of person who wants to become a banker, is probably not the sort of person who should become one.
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#137
Like I said, essential to the capitalist system.
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#35
Well done, however, nobody likes a smart arse!!
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I should have thought that just about the most important question to ask these specific bankers is:-
On the assumption that you had had reservations about the wisdom of the developments that led to this financial crisis, how able would you have been, as individuals, to prevent these developments from occurring?
We're supposedly in the process of seeking the causes of the crisis, but what we're actually doing is desperately looking to point the finger at anyone, anywhere, that doesn't involve us shouldering any of the responsibility. We'll actually get nowhere unless we allow every aspect of the human development of recent years to be investigated, without prejudice, as to it's contribution, if any, to this breakdown.
The resolution of a problem requires clear understanding of its causes. This one is far, far wider than banks and a few of their employees.
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#147
Guessing you are another individual with no understanding. Also, can you read? I did not state that the banks are working, although, the fact remains that only a fraction of the worlds banks have had to be bailed out so the fact remains that most banks are working. What I protest about is the manner in which banks and bankers are singled out for criticism by people who have no idea how the financial services industry work i.e. people like you.
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Hi there,
Can someone please please tell me where the hell all this money is? It cannot just disappear into thin air surely?
I just don't get it....billions gone...where?
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They have apologised.
All they have to do now is resign.
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Here we go again,bank bank bank.
Anyhow the obvious question to those folk would be...
What the hell gave you the impression that you had the first idea of how a bank worked when you were slid into the job of running one.
Highest paid novices ever...what was that Brown was saying about "not the time...."
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Robert,
You are being far too generous.
Only ONE deadly sin. I could add at least a couple more, and that is without any knowledge of the personal lives and peccadillo's of those despicable charlatans.
What a pity we do not have a Gulag Archipelago equivalent available to Britain, preferably somewhere in the southern Atlantic!
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Robert Peston says he'd ask Mr Hornby why he let his team take stakes in big companies as well as lending to them. Before asking this question, Robert Peston surely needs to tell us why he - and a couple of dozen other leading financial journalists - didn't spot this problem himself. It sounds to me as if the media are leaping on the bandwagon by playing the hindsight card (if I may mix my metaphors).
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Today i have had a first hand experiance to how bad the banks are operating
We are renewing our corporate banking facility. We have a Mortgage 250k and have an average of £200k on deposit. Our Mortgage rate was taken out at 2% above bank base rate over the term of the mortgage. We have been told that the bank are going to raise that rate to 2.75. Their reasoning is that they are currently borrowing on Libor rate and lending on Bank base rate
I only assume that basic bank principles have been ingnore due to the amount of profits being made during the period when the Libor was lower than the Bank Base.
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#108 altrrdst8:
"..... Is it perchance to avoid the bigger questions facing the world and the financial sector? Like how do we unwind a $500 Trillion derivitave market?"
++
This poster is right. The real problem is not bonuses. They are incidental.
Come on RP.
Give us an insight into this multi Trillion unwind problem, please.
Anyone see any elephants?
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I believe that there are two very simple reasons why the bank bosses made these very bad decisions:
1) They were incentivised to do so
2) They were incompetent as they allowed themselves to be influenced by the more corrupt influences that were (and still are) operating in the market.
A much more serious question is how and why they were allowed to get away with this.
Because regulators and governors will not be admitting their own mistakes just now, this instils a culture of denial in others too. This is very worrying as changes are needed today for the UK to be a credible player in the Global market.
Without credibility there's no trust. And without trust there's no lending to the UK from overseas. And without that, we're in deep trouble.
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It took 2 days for Sir Fred to earn what I earn in a year (and I don't get a bonus this year - but I guess I am lucky to still have a job) and whilst I accept that there is a lot of responsibility to generate income for the country - there has to be a point where we ask what happens if £12 billion gets lost? I can't even begin to imagine what it would be like to have £12 billion (well I can imagine) but to lose it and be blase and say give them bonuses just incase we lose their expertise - expertise in what? losing £12 billion? Somewhere along the line the banks were not managed and this has to be addressed. The public have paid, be it in tax-payer's money to prevent banks collapsing or increased bank charges. When to the tax payers receive their bonuses?
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We need tangible responsibility. If the bankers took action that caused losses to others then they need to provide compensation... Yes they are asking for bonuses!
To resolve this really needs a revolution and bankers to face the firing squad in the process. The odds of this happening are on the up-tick...
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Put them on trial for gross negligence irresponsible conduct and see what evidence comes forth. "Sorry" is nowhere near enough for the misery and poverty which they (although not alone) appear to have contributed to millions of people. If found guilty by a jury of 12 ordinary men and women (not an inner circle of cronies hearing) then strip them of their knighthoods or other gongs. Fine them their entire earnings whilst at the helm (salaries and bonuses).
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It is the vast scale of the gross external debt of our banks that is crippling them, and we are not being told it is so. For the facts about this debt see Comment 73 to Robert Peston’s article Fixing Banks’ Boards.
The bankers should be asked, one by one:
(1) What is the size of your bank’s gross external debt?
(2) What is the annual interest on this debt?
(3) How do you propose to pay the interest and repay the capital?
If they say, as they might, that there exist back-to-back loans with the lenders, then they should asked about the realistic probability of these loans being repaid, and any differences in interest rates charged by each counterpart. They should also be asked whether they are paying any interest due by them, and receiving any interest due to them.
At an interest rate of 5% p.a. the banks would have to pay interest on their gross external debt to the tune of £237.5bn p.a. At even half that rate of interest (only 2.5%) the annual interest bill is £118.5bn. And if we reduce the interest rate to 1.5%, the annual interest payment comes in at £71.26bn. The simple fact of the matter is that this level of debt is unsustainable. It also means that the banks are, effectively, insolvent. Their liabilities exceed their assets and all that keeps them afloat at the moment is the fact that the government and the BoE provide them with liquidity. The horror of that is that the guarantees by the Government could effectively bankrupt the UK.
An important point to realise is that this is not a problem that has been imported from America; it is the result of gross financial mismanagement and incompetence on the part of the bankers, compounded by like government failure to oversee and regulate banking appropriately. In particular it is the result of divorcing the BoE from responsibility for the banking system. It is also the signal failure of the FSA (Financial Services Authority).
Another important point is to attempt to grasp the terror of these figures. The Gross Domestic Product (GDP) of the UK is a mere $2,700bn (£1,850bn). That means the external debt of our banks is more than 380% of the UK’s GDP. Remember that our GDP is the total market value of goods and services produced in a year (in this case 2007, the latest year for which reliable figures are available) after deducting the cost of goods utilised in the process of production.
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Bankers would currently seem to be big generators of toxic losses rather than revenues at the moment. It would seem to me as a embattled bailer out, for them to go and ply there trade somewhere else, preferably another country, would see the burden on us reduced a little. To compare the analagy with premership footballers is a bit banal. We can choose to pay to go and watch them or subscribe to Sky to indulge there large paydays, I do neither because i have the choice. I had no choice in bailing out the bankers. Perhaps Sky could oblige here and save us a bob or two.
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#135 I'm into buy to let BUT stopped buying in 2000 as it did not make any sort of finanical sense in a PRUDENT manner. something that GB should have followed his own advice. You can tell when he is not telling the truth , he is speaking, (bet that get moderated) just loved just loved Mr Clarkson's Comments about him just loved it
Thats when they became divorced from reality way back then. Still have the houses as it was a long term measure, I brough them of friends that could not sell them and have been a very good landlord to my tennants too.
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Bankers bonuses - surely the way to avoid short termism is to pay all bonuses 5 years after the decision to grant them and to include a provision that the companys financial position has not deteriated in the meantime!
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I thought that the questions these politicians asked were stupid. None of them have any banking background or have passed banking exams. Yet we expect them to come with answers,not likely. A case of the blind leading the blind.
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At least Gordon Brown is saving the hard pressed bankers (sorry, families)
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172, Bang on the money (Pardon the pun)!
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I haven't seen such slippery evasion of simple questioning since Paxman tried to get a straight answer out of Michael Howard on that Parkhurst Prison affair.
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I have watched the select committee for three riveting hours.If I were able to ask a question it would be:
Why do top bankers expect remuneration packages (basic + bonus(cash or shares))
many times more than the great majority of other top professionals?The answer should not include the phrase'because that was the market rate'
My view is that remuneration packages of any employee should be limited to twice the salary of the prime minister.That includes footballers,media people,etc.
The only exception I would make is for those entrepeneurs who build up a business that makes something tangible.(i.e.not a hedge fund manager who becomes rich at little or no personal risk)
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#186
I've been suggesting for a couple of days that a colleague has family who can supply some professional headhunters for us to use - Dyaks, to whit. I'm afraid I must now withdraw the offer because they point out they have to withdraw the brains before transforming them into shrunken heads, and these jokers clearly have no brains there to remove. Or hearts. Or guts. Or bottom. In fact, I think we've just written the next Doctor Who script.
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#128
Whilst I have to agree with you the general borrowing habits have pushed many to the brink, and yes, they should not have done so, but they were ever so slightly encouraged along this route by advertising, cold calling, mailing to the hilt etc., etc.
Even the Banks and mortgage brokers had a hand in this. I can remember calling at my Bank to make a deposit and being asked by the cashier if I wanted a loan!
This, in itself would have caused a recession. But the problem this time round, is that, hey, ho, the Banks were doing something even worse. They were buying and selling CDS's etc (or peices of paper with numbers on, if you like) which had sub-prime mortgages packaged up together with other valueable assets in it as well - so it's going to be 100 times worse because they are sitting on unknown quantities of debt themselves.
The question to ask is do we really need Banks at all ?
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What could be the mens rea - guilty mind, in this episode supposing the crisis resulted from a situation where there was no malicious intent. If it was reasonable for these CEOs to undertake the ventures you raise in each of your one questions for each bank, Robert, then they will not have liability. But if much capital was risked and adverse conditions were predictable, they might well be found liable by a jury. The courts should be watching this one quite closely.
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I think you just had to watch and listen to Mr Hornby and his denials to see where the whole problem has manifested itself
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Right. What are you going to do about it, then? Wait for a vote so you can blame someone else? There's an election looming and now's the time to get your bums in gear.
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Another day...another banking crisis....only this time UK companies and jobs are being permanently wiped out on a scale not seen since the 1930s.
So, while it is right to ask questions about the causes of this crisis, it is equally pressing to ask what needs to be done next.
In my view even a normal banking system is always likely to come off the rails at the downturn part of the economic cycle.
OK, we have an economic downturn now.The problem is that it is not the reason for the banking crash. Instead it is the excessive greed and incompetence of our banking system that has actually caused this economic winter!
In my view the questions now should recognize the instability of our banking system and identify what needs to be done to insulate as much a possible of the rest of our economy from the inevitable crashes.
For example, what lunatic legislators allowed our domestic retail banks to merge with global market traders?
What complacent legislators allowed our High Street retail banks and mutual societies to be plundered by bonus-driven mergers?
What complacent legislators allowed the new "banks" such as RBS to hoover up more and more companies in their vanity-driven quest to grow their balance sheets?
Who was allowed to create the tradeable bundles of fictitious assets that helped grow the balance sheets?
Why were these fictitious assets given an AAA rating?
Who audited them as valid assets?
Who did not show due diligence in adding these fictitious assets to their balance sheets?
So, congratulations, legislators! Your complacency and gullibility have landed us in huge debts, company failures and massive unemployment.
What worries me is that despite the
evidence that the marriage of retail banks and market traders has been a disaster in the UK, the PR wheels are already spinning to convince us that all is needed is to change a few deckchairs on the Titanic.
So, game, set and match to the "bankers"!
(Plus they keep their bonuses, a blank cheque from the taxpayer and, most important of all, no change - banking in 2009 is much too complicated for us little people to understand)
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This whole situation is getting very timesome as all the various guilty parties look to cover themselves. Leaders are meant to lead and take responsibility. Today we have a govt that has no leaders, regulators and captain's of industry who are so far out of their depth it is painful to watch, who in turn are being fed by large consultancies and accountancy firms that are there just to earn fees and not to rock the boat. The way forward is to go back to how we were managed in the 50-60s, when leaders lead and took responsibility, and resigned as a matter of prinicpal when something went wrong instead of just looking after number one. Just having pointless witch-hunts months after the event is just a waste of time as nothing will result in it. To hit greedy people you have to hit them in the wallet
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#177 Danjo
"Hi there,
Can someone please please tell me where the hell all this money is? It cannot just disappear into thin air surely?
I just don't get it....billions gone...where?"
The money is where it always was. Just like a good magic trick.
It never existed.
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Seems to me the whole problem has been caused by these huge corporate bodies swallowing up more and more well run smaller banks and building societies all in the name of shareholder interest.
Well it hasn't done the shareholders much good so perhaps it might be a better idea to disentangle once again what is left of the more profitable sides of these corporates and give the savers and borrowers more choice and competition.
Take away the meglamaniacs at the top and replace them with proper business people who know how to run them at a profit.
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A banker's fundamental responsibilty is to assess risk before undertaking any activity and make sure that overall risk doe not end up being unacceptable.
That is something these two jokers forgot! Their greed made them act as if they were each in charge of some little start-up enterprise where the risk didn't matter because they had nothing to lose and everything to gain.
And initially when everything seemed to be going ok they patted themselves on the back and helped themselves to their "justly earned" share of the pot.
Unfortunately time has shown that rather than being the wise financial wizards that they thought they were they were no better than the ordinary man in the street. They had no idea what they had created and what the end result was going to be.
The question has got to be asked how were they allowed to get away with it? What about their peers, and about responsible regulation? Problem is either everyone was at it or benefitting from it so there was no one to point out that the emporer was not wearing any clothes!
Noone can argue against the fact that a much slower rate of economic growth would be infinitely preferable to the global economic strait jacket we find ourselves in.
As for the fate of Goodwin and Hornby I hope that their reputations are in such tatters that no self respecting business would ever look at them again. Let them keep their bonuses. They have paid for it by letting themselves become objects of ridicule for the rest of us.
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For Goodness Sake. This whole issue has moved on from what the greedy bankers did or did not do.
The economy is in a mess - I mean the 'real' economy. What are we going to do about that?
World trade is reducing at a staggering amount - so how are we going to export our way out of this?
Sarkozy has just fired the first real protectionist shot with his French car bail-out. What does that mean ultimately for the Euro and even the EU?
The latest Blue Chip Survey in the US is still trying to forecast growth (0.8%) in the third quarter 2009 - whilst other major indicators portray a deepening crisis. What does that mean for our ability to even forecast what might happen?
Savers are being battered whilst borrowers (apart from mortgage) are still being charged high rates. Where does that leave us?
So once again let's start looking at the wider picture!
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Each bank purports to have separate divisions judged on balanced business scorecards and with their own balance sheets.
Simple solution.
Break them all up into their constituent parts.
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People want the bankers to be hung drawn and quartered for causing the crisis.
This is in no small part down the spin being put on events at the Treasury Select Committee.
The government is determined to avoid taking any responsibility for the current mess. We've been repeatedly told 'it' started in America. So are our bankers just unfortunate, and have found themselves in the path of 'it'? Or are they, the bankers, really to blame for 'it’? The government needs to make its mind up.
Is no-one going to ask Gordon Brown why he, as Chancellor in the years running up to the mess, did nothing to regulate the banks? Why were people allowed to commit fraud when applying for a mortgage (i.e. self cert)? Why did the Chancellor think that it was prudent for homeowners to borrow up to 125% of the value of the property they were purchasing? Why were they even allowed to borrow 100% of the value of the property? Why didn’t the Chancellor manage these risks through regulation?
Further, it’s all very well for the public to now be outraged at bankers and their appetite for risk. Where is the outrage at people who actually borrowed the money? Should they not shoulder some of the responsibility? Were they not taking undue risk? They weren’t complaining when the bankers were lending them the money.
“We have no savings and no deposit. But with today’s interest rate, two salaries, and safe jobs we can afford the house of our dreams. We may need to borrow six or seven times our salaries. Maybe more. And if we use the right channel, we might even be able to say we earn more than we really do. This means we can put an offer in on that place we really like before someone else snaps it up. Actually, if we borrow another £x thousand pounds more than we need, we can even treat ourselves to a few luxuries like a new car or nice holiday.”
What happens if/when interest rates go up, houses go down or unemployment goes up?
No. It’s far easier to blame the bankers.
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re: comment #2
the bankers are not walking out of the door into new jobs because the jobs are not there.
Stop repeating the fallacies that were true a couple of years back.
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#163 gonzomuppet
Yes, excellent idea - I can't think of a better idea myself - maybe someone else on here can suggest something.
But we shall soon see whether Gordon Brown can, in fact, ride this one out. I understand that the next few weeks are going to be a bit 'bumpy'.
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unreservEDly BALLS
As many other posters have surmised, this whole feeding-frenzy relating to bankers' bonuses, including Robert's constant posting on the issue for the last week, and culminating in today's Treasury Select Committee appearance by 4 of the banksters, is nothing more than a SHAM.
But very useful in taking the spotlight away from our govt's growing uncertainty about what to do, if only for a few days.
So 4 bankers have said that they 'think' they are sorry. They clearly said they were most sorry for the losses of their colleagues though, not us civilians. Having taken the rap (sort of) they now hope to walk away from the train wreck and avoid any future prosecutions, with the active connivance of the regulators and govt no doubt.
They will all benefit from burying this now - until the so-called Independent Enquiry reports in a year's time.
And did anyone hear the Big 4's other answers (to what were very soft questions)? They came across as being clueless about how their own organisations work. And their vagueness about the accounts ..... precious!
All providing further proof, if anyone needs it, of how the UK continues to be run by a small, unrepresentative and elite group that smoothly moves back and forth between elected positions to unelected posts in private business, at regulators, in quangos etc. Rotten to the core.
We will only start to get down to the truth when the US begins bringing prosecutions of leading bankers and banks, as RBS, Barclays etc were equally active over there. And the US will see prosecutions, as the new administration will force the SEC to grow some teeth!
RBS is apparently set to announce 2,000 job losses in their 'back office' operations; of course giving a bonus to the deserving and more senior staff is more important...... the govt (ie us) are majority owners, so these unethical decisions are now being made in our name
ENOUGH
Oh and Robert now that you've done your bit to portray the bankers as lepers and help out your new Labour friends, could you move on to discuss some of the bigger questions about our collapsing economy!
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209
To get GB to answer ANY question with a straight answer is impossible.
Try nailing a jelly to the ceiling.
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Never mind the 'golden rule', I'm a devotee of Micawber's rule: Income $100.00; expenditure $95.00, result joy. Income $100.00; expenditure $105.00, result misery. Deja vu?
Plus ca change, plus c'est la meme chose....Slainte!
ed
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212
The US may well be the source of answers as well as the instigator of many of the problems.
The big cheeses had better start consulting their extradition lawyers because the US has a very long arm and will not hesitate to use it; ask those Natwest financiers.
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This comment was removed because the moderators found it broke the House Rules.
£2.4b profits against Lehman Bros purchase..... Are we supposed to believe this this? Barclay's unique way of accounting needs to be called into question immediately.... this is the big story of the past week, not bonuses.....
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To 117 groundivy
Thank you for speaking on behalf of us, the populo minuto, in such elegant prose - indeed, poetry. More please.
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# 215 sosraboc
that's a good point
heh our guys at RBS, Lloyds and Barclays might have to spend all their bonus money on expensive lawyers to defend themselves in the US courts
now wouldn't that be a shame!
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219 Mr Pirate
Better ensure they are all made redundant immediately so they cannot claim on their D&O liability and BBB policies.
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#215 and #219
Surely we would be extraditing Americans?
The credit crunch is, after all, their fault entirely.
On the other hand, the depression started in the UK. Gordon Brown said it first.
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#115 Rupert_Tarquinson
I think that you'll find most oil companied split into 2 - The part that pumps it out of the ground and refines... and the part that sells....
This way they just blame the market price increases when they sell it to themselves
Not a lot of profit on the forecourt - massive profits in the "back office"
Watch as they trottle back production over the next few months to reinflate their own market...... if only I could control my sell price so easily.... I night even consider paying myself a bonus!
#130 jolo13
You are forgetting these guys don't live in the real world, it is all about virtual money.... and they are virtually upset about it
#146 noorwich
If you took your car into the garage and it didn't work when you got it back would you complain - or can you only do that if you are a qualified mechanic
I’m guessing from some of the phrases used on here there are some people with more than a little knowledge of finance!
Unfortunately its Politicians that are trying to get us out of this mess and their number 1 objective is to stay in power, so you know one option won’t be “short term pain for long term gain” – it’s buy votes and drag it out.....
#155 stanchartsteven
You seem to have a very deep understanding of what has happened at HBOS and RBS and the responsibilities of company directors.
Unfortunately Andy Hornby WAS awarded cash bonuses, he just chose to spend it on shares, but he had the choice!!! Listen to the words used, don’t just watch his lips!!!! He NEVER RECEIVED the cash!!!
Like I said earlier there is jealousy surrounding the bonuses but that isn’t the issue. The issue here is whether the level of bonus corrupts the thinking of people. And in the Financial Industry you have people dealing with people dealing with people who are all on 7 figure bonuses....
You really are naive if you think the someone with the a decision that results in a lot of people suffering but he gets a multi million pound bonus or the people are OK and he gets nothing is going to fall the way of the people.....
These are sums people have murdered for.......
& #162 stanchartsteven
Mighty fine pay and bonus Bandwagon those banks were running for the past 10yrs.. and it was a Bandwagon, because it doesn’t seem to have benefitted anyone other than the people on it.
I think it’s patently obvious how RBS and HBOS ran their businesses - badley........ and as I mentioned earlier – I think the issue is most people think a bonus of 2.8 million pounds may be enough to cloud some ones judgment
#118 DrDavos
Was Dr Harold Shipman on the same pay as you?
#165 mh74red
... and the representative of these Big City Institutions and Pension Funds were themselves on huge bonuses for short term gains – you think they cared if the share price dropped in a couple of years!
#177 danjo54321
It’s locked up in your mortgage or loans. It never existed today – they had come up with clever way of pulling all the profit from a 25yr mortgage forward and shifting the liability onto someone else...... but they forgot how flakey they were and started reinvesting in them!!!
We have no choice guys, we dig in, cut public spending, bail the banks out with the minimum cash and put the rest behind building a base in manufacturing stuff we can export - we cannot become the country that borrows everyone elses money ever again.........
Anything else is just smoke and mirrors, the stupid Keynesian approach will not work, it's based on the money circulating within a closed economy and ours is far from closed
It will hurt in the sort term and cost Labour an election (so it will be interesting to see what comes first, Country or Party)....
You want to been seen as a Staesman Brown.... do the right thing - throw yourself on the grenade.....
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The four senior UK bankers who this morning appeared before the Treasury Select Committee still appear to be unable to offer any genuine explanation as to why they failed, so spectacularly, to notice that the banks they were supposed to be managing were in danger of becoming insolvent before it was too late for anyone to take the necessary corrective action/s. My bigger worry is that they did know but are afraid to admit it because the situation is much worse and more serious than any of us would dare to contemplate.
That suggests they were either incompetent insofar as they did not properly understand that the complex mathmatical formulas the banks were using were so inherrently flawed or, they abrogated their responsibilities to employees lower down the chain of command who they thought knew and better understood how the those formulas were supposed to work or, they were just plain greedy and prepared to take silly risks with the banks money and run off with their bonus payments before they were found out.
Whichever of the above scenarios best summarises what went wrong it none the less means that since these complex formulas were first used, these people have been (grossly) overpaid to do a job that was beyond their individual capabilities. For that reson alone I believe that all senior bankers should be required to pay back a major portion of the saleries and bonuses paid to them over the past five years.
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I think the dawn is coming for the majority of citizens in this country.
The realisation that the Economic system we employ promotes greed, selfishness and destroys human social relations.
The men (and they are mostly men) at the top are no exception. They are just greedier and more ruthless than the rest of us are prepared to be.
So you can all bang on about bonuses being unfair, how annoying it is that your pensions have collapsed - but the majority of people in this country (and this blog) think this is the best system to use.
The argument seems to be boiling down to one about 'the rules of the game'.
No-one seems to be asking why we're playing this game to start with, whether it's the right game to play and whether there are other games we could all be playing.
...no you all keep moaning about the rules - Peston keeps asking about the rules - but I don't actually care about the rules.
...it's the game I object to - for me the rules are irrelevant. Even if everyone sticks to the most stringent of rules laid down by the hardest of authorities - we will still get greed, bankers will still take more than their fair share and the little man will still get screwed over.
It's all in the game folks.
Has anyone considered that if we weren't all wasting our time finding more and more ingeneuos ways of "making a buck" or "screwing someone" we might have actually come up with a new game that does work?
Think of all the intelligent people who used their brains to make CDO's and SIV's and similar products - what could they have done instead?
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209. plb_plb wrote:
''People want the bankers to be hung drawn and quartered for causing the crisis. etc etc''
This sort of comment comes around every so often. Please can you advise how a Uk mortgage holder who gets in trouble costs the any bank anything.
The UK mortgage holder has to pay a insurance policy such that if they have repo then the bank collects from the insurance company. Correct? This covers all costs incurred by the bank. The insurance company then has the option of pursuing the ex housholder for any loss and making them bankrupt. Correct? So please explain to me how the bank loses.
Now if you are talking about unsecured loans then so what. That is, or should be based on assessing the borrower. To turn to your related issue of the mortgage borrower asking for more than they can repay, ie self assessment and by implication fraud. In that case there is clear negligence on the part of the bank in that they have failed to verify the data presented. That is no differnt than any other sort of fraud. Security procedures are required to be in place for responsible trading.
So I have asked before and I ask again. Where have these bank losses come from. My guess is they have been shipped in from abroad. In what way should the Uk taxpayer be propping up a bank that has lost money abroad through being stupid. Please answer or shut up. because I am getting tired of asking for an answer and instead being told how marvelous bankers are. My guess is like all other bank sector posters that you will not answer.
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I have been listening to Robert Preston on radio and television and I'm sorry for making what must seem like a banal point when the content of what he says is so good and important right now. But I must say it!!
Robert. If you are going to be a media commentator on anything you must work on your delivery. Your current style appears arrogant and casual - I'm sure you are not - but you should work out what your going to say before you start and deliver it smoothly and without all these slurred words and odd asides. You are giving the impression of making it up as you go along and not giving a damn. So, prepare it before and concentrate while you deliver it. On the salary you are getting it will not seem 'swattish' to deliver it properly.
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Total greed and anonymity given to them by the great gordo, Banks should be treated like any other business and have the threat of bankruptcy for failure, and job losses not the spoilt little boy apology.
Gutless gordon and gutless country.
Mr Orwell you where right!!!!!!
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Do you realise that this 'Gang of Four' bankers have brought this country to it's knees.
No foreign army or terrorist group have achieved this before.
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Post 2:
Individual bankers generate huge quantities of revenue, and if they walk out the door they take the revenue with them.
Not quite true is it? But that's what city boys would like us to believe. In reality the next gambler to the table could equally well bring in the huge quantities of revenue. Stand a banker up next to a nurse or ambulance driver who has saved a life today and suggest for a minute that they are worth these extraordinary sums.
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121 Yukapataya
"I am a banker and am in no small way responsible for untold hardship to bank shareholders, customers, taxpayers and for damaging the reputation of UK plc. Right, now can I have a bonus?"
No you bloody can't. You can have an annual salary like the majority of us, no company expense account, let alone a bonus for selling dodgy loan insurance scams or any other loan scheme voted flavour of the minute by the boss.
The bonus culture must be addressed, people can no longer expect such a benefit for meeting targets. Get it right, banks print enough money by lending on a stable ratio never mind on fractional reserve schemes, certainly enough to pay their employees a reasonable salary without embelishing it with bonus payments.
As far as the top end are concerned its time to get real, where the hell does the arrogance come from that ANYONE in this country in gainful employment, at WHATEVER level considers themselves worthy of an income that runs into millions per annum? Now what's the minimum wage? perhaps its time we legislated on a maximum wage as well.
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Please explain how four men who have no training in banking can end up running four major banks.
If you need no qualifications, when replacing these gentlemen, ( who have brought us virtually to our knees ) try hiring four very good bookies. They can add odds in their heads , lay of bad risk bets ect, everything these four couldn't see because they weren't looking.
These four hire hundreds of minions to do the job they're paid to do and then just let them go. The more idiots they have under them, the higher the salaries they can demand.
They will walk away extremely wealthy at our expense with no comeback, just a thank you very much. 'Mugs' !
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Comment 224 : TheresOnly1Soupey
I think you're right in your analysis.
There's one big assertion, and one big denial, that underpins the system under which we live.
The assertion is that the pursuit of self-interest will overwhelmingly be a stimulus to wealth creation, and that therefore the best solution for humanity is to allow this process to occur, and for any socialisation of the results to be made post hoc.
The denial is of the thought that the motivation for clever people will be to game the system, because they will see more opportunity for enrichment from acquiring what has already been produced than in creating new wealth themselves.
I suspect that what will increasingly become clear is that neither assertion nor denial is a realistic version of what actually happens, and that until we have a fundamental reassessment of what we should expect from human beings, we'll never come up with a way forward that is satisfactory.
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the banks are driven by profit and the shareholders want profit if the bank you have shares in are not lending as much as the others as a shareholder you want to know why? . the bankers clearly thought that they needed to be in the game and not left behind .If the boss of northern rock had cut back on lending ,which had been profitable for say 10yrs and profits reduced .the shareholders would have called for his head. The truth is we are all responsible for whats happened including the media who helped to fuel the fire. Remember the tele programs( why not remortgage buy another property ,refinance buy another property be a property millionaire no knoledge or experience needed,very rearly talking of any downside risk ) The media who are now asking" What went wrong" .If your bank would not lend you the money to buy a 2nd property complain and change bank or find a broker to do it ,if it all goes wrong blame the bank,or the broker.
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DenseSingularity
Yes, Directors do owe a duty of care - that's a civil liability. As a former Marconi shareholder, I now know that as a shareholder it's impossible to bring these people to book. Somewhere out there there are people living on the fat salaries and bonuses they awarded themselves while they ran a great company into the ground. It's clear that not only do these people have egos the size of houses, they have no scruples or morals either. If they had they would not only be expressing remorse (which as far as I recall the Marconi directors didn't bother with) they would be giving some of the money back like the Swiss banking people.
But of course in Switzerland they take that sort of thing seriously - Swiss to Swiss at any rate. Whereas over her you can't even get the courts to help you do this.
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The problem with boards of companies is that they are like clubs. If you are already in the club, you will potentially be hired onto other companies boards (its very similar to a 'closed shop'). Board members who have qualifications at all often do not have any which relate in any way to their board post. Yet they exhort their underlings to get everything from NVQ's to MBA's ... yet of course THEY don't need appropriate qualifications. In UK its not what you know, but WHO you know.
The nasty 4 bankers were driven by avarice and a desire to be top of the heap - a bit like the old school game of "I'm the king of the castle' . Most business rules are based on the assumption that the directors will exert self control because they will end up losing their money when the company goes to the wall. These giant corporate company directors do not have much exposure to personal risk, so if they can take a wild punt they get mega bucks if it works and lose little or nothing if it fails. What needs to happen is that banks stop ALL bonuses ... if anyone thinks these 4 morons (or other employees) deserve a new job or have talent then god help the country
WHy has broon done nothing? Well when he loses the next election he will need a job and guess where he will be looking!
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#2 excellent comment. Yes the senior execs of UK banks shouldn't receive bonuses but the bankers who have been and will continue to make these banks and now the country profit will go elsewhere if the rewards aren't there.
As for saying sorry for bringing down their banks perhaps now Robert could now say sorry for reporting which may well have brought down Northern Rock?
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#225 glanafon:
I think you’ve missed my point, but I thank you for responding in a way that manages to prove it.
You have either fallen for the spin being put on events at the Treasury Select Committee and are now outraged at bankers with this mess being their entire fault.
Or...
You are naive enough to think that the government and their ‘light touch’ approach to regulating the banking sector, combined with rampant consumer appetite for credit (debt) has not played any part in this mess. (My example could be someone borrowing in euros, dollars or pounds. It was just to make a point. Apologies for not being more subtle.)
I wasn’t exonerating bankers. I’m not a banker nor do I work in the banking sector. I certainly don’t think bankers are marvellous and I’m not sure I said that. They need to take their share of the blame *along with the government and consumers*.
The government are doing their best to avoid taking any responsibility. A response like yours suggests that the spin is working and that consumers are avoiding taking any blame too.
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As we have seen in the case of ratings authorities and auditors there is a systemic weakness in the auditors/raters being in the pay of the audited.
These appointments should be made by a neutral body. This might also weaken the grip of the few major audit firms who play pass-the-parcel with major reporting.
I lost a lot in the Equitable scandal and once agin we see the auditors making no comment on high-risk actions.
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High "sales" targets starting from the bottom with counter staff right to the top has resulted in the banks' downfall!! They are corrupt to the core!
Staff have been encouraged to lend to anyone and everyone never mind if they could to repay or even needed to borrow in the first place!
As for bonuses, as someone from within one of the banks that have gone cap in hand to the Government, the bonus due in March is known as "profit share". With no profits this year, surely a share of no profits is zero?
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Hi
On subject of Banks
I would like someone to explain
BANKS received our money for BAD LENDING
Does that in MORTGAGE or LOAN LENDING to us?
IF YES
Does that me my MORTGAGE or LOAN has been paid for?
or
BANKS will be PAID TWICE?
rgds
tony
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The 'bankers' concerned did not make personal apologies (probably as advised by their PR and Law teams). Mr Stevenson, Andy Hornby, James Crosby, Tom McKillop and Freddie Goodwin should be all made to pay for the total and utter disregard to banking risk they each encouraged. Indeed Pride, greed, herd instinct and big egos seem to have taken over these so-called leaders! In my view, and no-doubt that of many folks with business loans, these guys should be made to sign retrospective PERSONAL GUARANTEES, for the billions they have effectively lost, and equally importantly, setting financial services in UK back generations. 'So Fred, here is your half share of the £28 billion (losses + toxic amb amro 'known' losses) PG we are now calling in............' We'll come to an arrangement over your repayment terms....
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Isn't it truly incredible that we find that the 4 most senior people in HBOS/RBOS aren't even qualified bankers? The fact that Hornby came from a retail background to run a highly complex financial organisation perhaps shows the mindset of the Board of Directors when thay appointed him; the only concern was to pursue growth, perhaps at all costs.
There should be a legal requirement for the top management of banks to have formal qualifications as a bankers.
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"So the question to Mr Hornby - who is not a banker by training and yet went on to run one of our biggest banks..."
In the Black Swan Nicholas Taleb talks about the conflict between the fat Tony's, the industry veterans who based their actions on common sense rather than obscure models, and the new breed who put their faith in models based upon physics and not finances. Chalk one up for the fat Tony's.
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One of the really irritating mantras we hear over and over is that the banks' products were so complicated that they did not really understand either the products or the risks involved. This is just plain nonsense. One can accept that the products and their mathematical valuation models are beyond easy explanation to a non banker. However, if anyone designed a product that could not be understood by the bank's risks managers, or could not be explained to the banks directors, then the managers and directors would have failed in their responsibilities if they allowed that product to be marketed. The truth of the matter is that the banks were betting so much on credit based products that in the event of a serious credit crisis they would be wiped out, and that is exactly what has happened. They were living in a fools paradise, believing that cheap money and rising house prices were here to stay and that we had eliminated boom and bust. They evidently believed that the complex mathematics in their risk management models somehow guaranteed their safety, and they lost sight of the fact that their basic assumptions were just plain wrong.
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Yet another banking blog which has just turned into a debate about bonuses (despite the fact that Peston didnt even mention bonuses).
For all those criticising banking bonuses, do me a favour and point to any company in the FTSE 100 that doesnt pay its directors (and staff) bonuses.
Almost every company pays some form of bonus, overtime or commission these days - even Woolworths had a staff bonus scheme. Perhaps this led to "excessive risk taking" at Woolies which led to its collapse? Lets get them in front of the Select Committee.
Also, why is it that despite the fact that banking chiefs have formally gone on record and declared that they have increased lending this year to support the economy, journos and bloggers still remain convinced that our banks (RBS, Barclays, HSBC, Lloyds etc) have ceased lending? Most of the contraction in lending in the economy has been driven by vast numbers of overseas banks withdrawing from the UK market (e.g. all the Icelandic banks for starters).
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Great post #17.
I havent seen any original thinking on this aspect of the regulatory failures by any of our journalists.
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My question for Sir Tom McKillop : Why on earth did you leave ICI/Zeneca?
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The economic bail out
In my opinion the Obama package to bail out the banks etc is doomed for failure. The banks have failed miserably.
I am convinced that a bail out package should be given to small businesses. In the beginning it was the small busines that created and sustained the need for banks, Not vice versa!
The small business is the backbone of every economy whilst the banks are only a necessary parasite for the custody of the wealth created by the small business entrapeneur.
All banks have proved corrupt and should be allowed to suffer the results of their self perpetuated demise
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Robert,
I think that bankers should answer questions regarding their conduct in the run-up to the economic downturn...
~Dennis Junior~
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Hi We have just lost a lot and I mean a lot of money on an endowment policy due to maturity in 18 months time. Can we sue the bankers or FSA for the bankers using are money for their big bonues & the nerve they have of using the recently given taxpayers money to reward themselves with big bonues. It is OUR MONEY. Can anyone advise?
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