Curbing bank executives' enthusiasm
A Treasury-sponsored review has today recommended substantial reforms to the structure and behaviour of banks' and financial institutions' boards, to restrict the freedom and the incentives for senior executives to take reckless risks.
Sir David Walker, who is a senior adviser to the US investment bank Morgan Stanley and is a former director of the Bank of England, believes that last year's financial crisis, which helped to precipitate the worst global recession since the 1930s, was in part a consequence of "failures in governance in banks and other financial institutions".
After five months of analysis, he has concluded that:
1) the boards of big banks didn't understand the scale of the risks their organisations were running;
2) that non-executives of big banks did too little to rein in the excesses of the executive directors;
3) that shareholders in banks also failed to curb reckless gambling by financial institutions, that the owners didn't "exercise proper stewardship",
4) and that bankers were paid in a dangerous way which encouraged them to speculate imprudently.
One recommendation which is likely to alarm some banks is that boards' remuneration committees would set the pay not only of executive directors but also of executives below board level whose "total remuneration" might be "expected to exceed the median compensation of executive board members".
In the case of Barclays, for example, which owns a substantial investment bank, this would lead to the board setting the pay of hundreds of bankers paid as many millions each year as those on the Barclays board.
The pay of these so-called "high end" executives would also be disclosed "in bands" in the banks' annual reports, although the executives' names would not be published.
In an interview with me, Sir David said he was fully prepared for protests about this degree of disclosure on pay from the big banks, who are likely to complain that they would be revealing commercially sensitive information that could put them at a competitive disadvantage.
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Like the Financial Services Authority, the City watchdog, Sir David also wants a significant element of bonuses or performance pay to be handed to relevant bankers only after several years have elapsed, up to five years, or enough time to verify that the deals triggering the bonuses aren't toxic.
Other proposals are:
a) new risk committees should be set up on boards, separate from the audit committees, which would be chaired by a non-executive;
b) these risk committee would overseas all substantial transactions and would have the power to block those deemed too dangerous;
c) non-executives would devote 30 to 36 days each year to the affairs of a bank or financial institution, up from 20 to 25 days at present (many of you probably won't believe they earn their fees of £100,000 or so a year for four to five weeks of work);
d) non-executives would be better trained, they would be scrutinised more rigorously by the FSA and they would be encouraged to hold the executives to account, in a way that would probably end the "collegial" nature of bank boards;
e) the chairmen of banks or other financial institutions would commit no less than two-thirds of their time to the business, they would have significant and relevant "financial industry experience", and they would face re-election by shareholders every year;
f) boards would monitor more closely whether their big shareholders were selling shares and would take steps to learn why these shareholders had lost confidence in their businesses;
g) the FSA would also "be ready to contact major selling shareholders to understand their movitation";
h) institutional shareholders would sign up for a new set of "principles of best practice in stewardship", to encourage them to be more actively engaged in the affairs of companies, which would be overseen by the Financial Reporting Council.
When I spoke to Sir David he stressed that he was acting in an independent capacity when making these recommendations and that the Treasury was under no obligation to implement them.
Some may feel that his reforms would lack teeth, because he does not want them enshrined in legislation. Instead he wants them enforced through the Combined Code, the voluntary code on UK boardroom practices that is overseen by the Financial Reporting Council.
Update, 15:35: Barclays has told me two interesting things: first that its board already approves all group pay packages worth more than £500,000 a year; second that it's not worried about disclosing in its annual report how many of its staff receive pay of that magnitude and greater.
I'm 
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Wow. It took a Sir 5 months to reach conclusions that plenty of us commoners concluded years ago.
Greedy, grasping, bloodsucking so called bankers didn`t have a clue. As for the idea that Goodwins non execs were up to the job - previous post, and that ABM Amro was the main cause of the collapse, this is total nonsense.
The culture of fear and target rather than customer driven practices have been evident in banking for many years. ABM Amro was just the last straw, if it hadn`t happened something else would have come along.
Madoff wasn`t the only one in finance employing smoke and mirrors.
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All these measures amount to greater regulation, and that sounds good to me.
And the idea that a longer-term view should be taken on payment of incentives is also good....we can't have any more "bonuses paid on non-existant profits".
The publics' image of the City as a "corrupt and fraudulent multi-millionaires club" needs to be changed.
The City badly needs a "dose of reality".
"Two-tier Britain".....finance versus everyone else must be ended.
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A though occurs to me re point g of the reccommendations
g) the FSA would also "be ready to contact major selling shareholders to understand their movitation";
How about profit taking, or short term investing, or even worse shorting.
These or stop loss positions, what else can there be.
A quick buck is a quick buck end off.
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In local government and the medical profession there are bodies that regulate certain jobs like accounts (CIPFA) and are able to expell those of fail to meet professional standard or commit serious misdemeanors and thereby end their careers. How about the finance industry copying this?
My problem with Walker's recommendations which are very plausible is that there must be external and independent scrutiny of these large and strategically critical institutions - that is missing (hint it is not the FSA)
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How are MPs who are busy filling their boots with booty ever going to make rules to stop bank executives filling their boots with booty?
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1. No internal risk management solutions will work.
2. The Auditors' of banks (and indeed all large companies) should have to produce a 'critique of risk' for the organisation.
(These Risk Auditors should not have any other roles within the organisation and should have their remuneration made public and further to ensure independence Risk Auditors should be remunerated through general taxation as a surcharge on the organisation administered by the Inland Revenue (HMCR).)
3. If any system of internal risk management is proposed it will always be subverted by the management of the organisation.
4. Non-Exec solutions will not work as there people are chosen for their compliance with the existing management on the basis of an old-boys club, each approving each others wishes on each other's company.
5. Another solution might be the German solution of creating a compulsory supervisory board on which there would have to be external and union representation, with a statutory role in agreeing remuneration and remuneration structures and incentive schemes.
All in all the Walker report seems to be yet another contribution to the pile of paperwork, just like the Higgs report was before. Destined never to be implemented!
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And excuse me if I seem a bit thick, but isn't the city supposed to be of benefit to the general public, and not just to the 50,000 or so multi-millionaires who happen to work there, particularily as their method of "obtaining" their multi-millions now seems highly dubious?
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To limit responsibility for the credit crisis to the banks is a political expediance. Many more are equally responsible.
1/ The individuals managing funds for institutional shareholders have an interest in mega bonus culture continuing.
2/ The huge incomes of our financial and management elite places them outside "real life". Houses were and still are overpriced relative to incomes. Yet the lending continues.
3/ Govt sees ever rising house prices as a sure fire winner at elections. The failure to address the housing shortage is a deliberate policy aimed at winning elections to the detriment of our economy.
4/ The babyboomers were happy to make huge unearned sums at the expense of young families. Not a care for their own children.
At heart the credit crisis was created by the greed of the generation who want it all for nothing at the expense of anyone else. And our problems will continue until they retire.
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Recommendation "e" is fundamentally wrong. What we really need as the Chairman of these organisations are people with a much broader set of experiences that can appreciate what's going on in the broader economy and the consequences of the bank's actions. People with "significant and relevant financial industry experience" smacks of the same old suspects from a sympathetic source. I don't like it.
I also think that seeking re-election on an annual basis is barmy. Every three years should be frequent enough.
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And they've PAID Sir David to come up with this?
I reckon half the country could have come up with this, in about 10 minutes. It's quite pathetic!
(Doesn't want any of this to be enshrined in legislation, instead use "The Combined Code." Oh, not that combined code that's proven to be monumentally useless and ignored when profits "at all costs" became the imperative. Unbelievable rubbish!!!)
Just writing to my MP, yes for what it's worth, but he needs to be screamed at because of people sponsored by Government, knocking about, coming up with twaddle like this.
"Won't have teeth." You don't say?
Aren't we allowed to bare our teeth at bankers, either, why not!?!
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It's dead easy.
First, measure the risks of deals. Then tax banks with the riskiest deals more than those with the safe deals. Then, when the risky banks go broke, use _some_ of the extra tax to bail them out. Keep the rest for us, the beneficiaries of the banking system. How do you measure risk? By keeping deals simple enough to understand. And if deals aren't simple enough to understand, then they are, by definition, risky.
Right, that the banking system sorted. What's the next problem?
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WOW a former adviser to Morgan Stanley and an ex Bank of England Director, needing five months to state the blindingly obvious.Those 'in charge' of the Banks were-and still are-running a cosy little club that trades in Betting Slips and lending policies on a quasi Ponzi basis,designed to generate paper profits to justify unwarranted salaries and bonuses.Which set of guards will watch the guards??? Not the FSA who could not find a keg of beer in a Brewery.
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The non execs need to be the 'grit in the oyster' ie in the business of questioning and challenge and have independent access to expertise. For the publicly owned banks this must include representatives of the state (not UKFI who seem to be the undertakers of public ownership)and consumers/TU's. John_from_Hendon is right about supervisory boards. Better also if there was publication of socially sensitive aspects of procedings. The obligation for formal risk assessment must be back by a statutory provision - we are talking about other peoples money which they manage in 'loco parentis!
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# 4 watriler wrote:
In local government and the medical profession there are bodies that regulate certain jobs like accounts (CIPFA) and are able to expel those who fail to meet professional standard or commit serious misdemeanors and thereby end their careers. How about the finance industry copying this?
+++++++++++++++++++++++
Yes, amd let us get a degree of responsibility on the shoulders of those who gave AAA ratings to aaas paper.
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About thirty years ago there was another banking crisis where greedy British bankers lent huge amounts of money to Brazil and Argentina who subsequently defaulted on paying back the loans. The two banks were bank of London and South America (now a small part of Lloyds bank Group) and Midland (now HSBC).
One example of the stupidity of a deal was the Itaipu hydroelectric power station on the River Parana on the border with Paraguay. At the time it was the biggest dam and hydroelectric power station in the worls, and the electricty was to be routed to the industrial power house of Sao Paulo.
However none of the banks did their homework - presumably they were dazzled by the potential profits. There was no underlying infrastructure in order to get the elctricity to sao paulo, some 1,000 miles away. So for 2 years after the dam was up and running electricity was exported to Paraguay which at that point was best known as a hideaway for Nazi war criminals and not much else. Only one of the turbines was put to work and at that nowhere near capacity.
The two banks got stung badly and perhaps explains why Lloyds and HSBC are the most capitalised banks in the UK. Top bankers retired, just as now and I exoect something like this will happen again and again. Maybe the Goodwins should be kept on the boards as non executive directors to serve as a constant reminders of when things went wrong last time rather than sweep it all under the carpet.
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# 12. At 11:03am on 16 Jul 2009, jacquescartier wrote:
It's dead easy.
First, measure the risks of deals. Then tax banks with the riskiest deals more than those with the safe deals. Then, when the risky banks go broke, use _some_ of the extra tax to bail them out.
++++++++++++++++
Sorry, I must disagree. If they go broke, that is it, finish. To encourage the others, as a Frenchman said.
If we keep bailing them out, they will keep gambling, knowing they cannot fail. Let them GO!
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Talk about "stating the bleedin' obvious".....
Without any sort of bite to these proposals, who in the City of London is going to take any notice?
Surely not the highly paid executives of the major financial institutions.
The next suggestion from this bankrupt government will be that it should be 'self-regulating'. We all know what happens when any industry self-regulates, the rules only apply when it is in their own personal interests.
As for the CEO's of these financial bodies infesting the financial district, just how many have any financial qualifications to run these institutions and safe guard our investments?
Very few by the sounds of it.
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So the bottom line is ex-banker Sir David wants the bankers who have cost their shareholders, tax payers and the economy of this country billions of pounds, to continue to be regulated voluntarily via the Combined Code, to receive a minimal amount of training and occasionally turn up for work. No mention of any of them being prosecuted for fraud or mis-management, even under the current law, which they have have clearly broken.
Meanwhile in Wales today a grandmother is threatened with an ASBO for growing a few tomato plants in the wrong place.
One rule for the rich????
I believe it was Chairman Mao that said something along the lines that the human condition is such that the only way for the people to stop corrupt government and institutions is to engender a state of perpetual revolution. It looks like we need one urgently.
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The best regulation is self-interest. Closely align the self-interests of the bankers and financiers to that of the shareholders, the society and the country. Make consequences and rewards balanced and personal.
Sweeteners like titles should be for a limited period, like 3 years.
Consequences of failure may be the loss of pensions, title and the claw-back of all past bonuses. We have been shown and proven that in the world of money, nothing focuses the mind better than personal rewards and consequences. No more woolly, airy mumbo-jumbo about reforms, regulations, code-of-conducts.
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Was it HBoS or RBS that sacked their Risk Assesment director/manager? The banks ignore those they employ to warn of risk and a banker wants more "risk assesment". Turkeys and Christmas I fear.
NEDs are used to make up the numbers, why should they rock the boat and jeopardise their sinecure? They are invited to join the board GBP100,000 for attending 12 board meetings are you going to bite the hand that feeds.
I think that anyone one with a modicum of commonsense could have come up with this for free. How much was Sir David paid for this? More tax payers money wasted.
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And this took 5 months? I assume it was 5 non-exec months which seems to add up to about 7.5 days which seems about all it is worth. The commenters on this blog had all these and more within days of the mess at the big banks coming to light months ago.
They also indicated the need for enforced compliance with any new arrangements not voluntary self regulation, the conspicuously absent 'recommendation'. The banking sector have shown themselves incapable of exercising proper control of themselves under such 'light touch'/voluntary rules and so have forfeited the 'right' to be permitted them.
These people played with other peoples futures and financial security at very little to no risk to themselves - if fact they awarded themselves huge slices of the illusory 'profit' as compensation and when it all went wrong ended up cap in hand to the general public asking for a bail out and left the real owners (us the pension fund participants mostly) and taxpayers picking up the pain both ways - they suffered little if at all.
Sorry but these are very weak suggestions. I can't even call them recommendations since the author himself doesn't want them to be more than voluntary.
Reform has to be compulsory and have teeth because as it appears the public are the bearer of the pain either via taxes or rubbish pensions returns we need protecting from these people.
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The last three times I have had to speak to a bank employee - all from the Halifax Bank of Scotland HBOS, they have suggested either a new higher interest account (thanks) or in fact suggested I take out a loan ! I couldnt believe it and started saying to them I cant believe you are suggesting that and just look after the money we have given you in the first place. (we have lost lots in shares this year). They actually respond as though I am a raving lunatic and I end up feeling bad ! They dont see what I am saying at all - I know they are junior members of staff but you might think they would see the funny side of it - surely other people must respond as I do as well ! They actually said that I could take out £15,000 and it could help when buying a car. I said the only debt we ever take out is our mortgage.
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1. Changes need to be enshrined in legislation. There have to be severe penalties for non-conformance.
2. It has always been a mystery to me why large shareholders do not demand greater transparency themselves. Up to now investment has been largely a guess - however the rewards should really go to those whose analysis of the economy etc is the best, and we all know that you cannot make a sensible decision unless you ask yourself "what information do I need in order to make this decision?" and then go and get it. And that information has never been forthcoming and never will be as long as companies continue to operate behind a veil of secrecy.
Before they ever see my money again as an investor, they have a long way to go in terms of disclosure.
3. For banks to claim that disclosure of bonuses etc causes "competitive disavantage" is total nonsense since it will be the same for all, and therefore a level playing field. If they start to claim that kind of rubbish then we can tell that their hearts are not in this process and so a solution needs to be forced upon them.
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This is laughable!
What a load of self interested bumbling!
These guys are simply running scared of the personal awkwardness they would face from their mates in the big banks if they actually proposed something closer to what we as the millions of ordinary UK voters and the hundreds of thousands of UK companies need to live our lives without getting shafted by the small cosy cartel of magic bankers! (....."I'm afraid, darling, we haven't been invited to either the Marley's summer party this year, nor the Flankbein's. They don't like the fact that I'm suggesting they have to bet with their own money, rather than use the savings of ordinary people".....).
I thought we had worked out by now that self regulation and 'voluntary codes of practice' simply do not work when there is so much unbridled self interest at play, and so much disintermediation between the original lender (poor Joe Public who has put his savings in a BS account, or paid into a pension scheme) and the person betting the stuff on the roulette wheel at no downside to himself.
We need clear, strong, simple legislation and a completely new structure to our monetary system.
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Over the last 10 years those who work in the City have come to regard it as their own personal "piggy bank".
I still think that the involvement of the Serious Fraud Office is necessary.
The Citys' reputation may even be enhanced by having investigators scrutinising it.
We all know which parts of the banks, the brokers and agencies should be investigated.
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Back in the old days there was a word for this sort of report. The first word described the male animal of the bovine species and the second word was what that animal left behind.
I am sorry but this goes far beyond the mechanisms of corporate government. It goes down to cultural attitudes and the belief that something can be had for nothing. This just isn't the case and never has been: an individual can pull a stroke and might get away with it but an entire industry and the government are too big for such stunts. People tend to notice.
We need to follow the example of the Hungarian Communist Party when faced with the prospect of the Hungarian people revolting against a new measure ordered by Stalin. Their solution was not to change the policy but to change the people. It is the people in the City and what they believe to be reality and truth which is the problem.
If they prove themselves unable to change to a more responsible behaviour then we should clear the City out one afternoon, a bit like Pol Pot in Phnom Penh all those years ago, and truck the people to a rotting social housing estate in Inner London - there are many - for re-education so that they understand that the rot and the degradation is their reponsibility and if they just behaved better we can make it all go away.
For as long as the taxpayer is subsidising broken banks populated by greedy bankers nothing is going to improve in our country. I for one am getting more than a bit frustrated by the great and good waffling on about it.
What is happening to our industries?
Why are there no jobs for young people?
Why is unemployment growing inexorably higher month by month?
Why is the Minimum Wage now the maximum wage for so many?
This sort of report is just not good enough. In order to move on a line needs to be drawn under the past and a new beginning formulated. Where is the leadership to achieve that?
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Is this the same Sir David Walker:
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/07/notsoprivate_equity.html
???
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I was hoping for the roar of a Lion, but got the squeak of a Mouse.
Hardly unexpected as we just seem to go around the same loop. Gross coporate incompetence, inquiry set up to investigate and recommend actions, inquiry carried out by someone who is compromised by being an 'insider', minimal proposals with no teeth.
Not only very disappointed with the proposals, but feel deeply disillusioned and disenfranchised. We have taxation without - we will be paying taxes for years to bail out these crimnals, but are there any serious proposals to control and/or make these people accountable in the future - apparently not.
Deeply, deeply disappointed........ looks like business as usual, just nod to getting the snouts back in the trough.
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Just another expensive report to be filed and forgotton about
At a time when banks are having to go through comprehensive restructuring to put their own house in order perhaps all these rushed rules and regulations should be put on the back burner until we have a banking system worthy of regulation.
Gordon Brown's global regulation is as far off as putting a man on Mars.
There will be many changes to the make up of banks over the next few years as well as the financial regulatory system.
There's nothing wrong with throwing ideas into the melting pot but as the select committee pointed out to Brown this morning the right tools have to be in place first.
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Important issues everywhere - government battling bad publicity and defending terrible decisions on every front ! Where is Nick Robinson when they need him ? Or just where is Nick Robinson ?
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The Walker recommendations are superficial and stillborn. If there's any lesson from the recent collapse, its to (1) eliminate banks that are Too Big To Fail through restrictions in size and business scope; (2) impose higher capital requirements overall PLUS extra reserves for higher risk activities (100% reserves); (3) ALL bonuses spread over three years; and (4) exclusion of high risk banking activities ('casino banking') unless specifically authorised, upon application. Anything less is ineffective and ensures a repeat of the bank collapse by 2013.
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Of course there are some workers in the City who do represent good value for money.
But my "beef" is with the general attitude that City workers are "automatically" worth between 3 and 100 times what the rest of the population earn.
Are they any more important or worthy of wealth than soldiers, nurses, paramedics, doctors, or energy workers?
They think they are, and their institutions have access to our savings and pension contributions.
The financial industry is the only industry that has direct access to our money.
To many of us, the term "bankers enthusiasm" could be interpreted much less politely.
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strange how the government still seem to want the banks to be more prudent in the future AND to lend more (to an over-indebted economy) at cheaper interest rates than they have in the past. Not much sign of coherent thinking there.
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And in looking through old blogs:
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/03/why_dont_banks_compete_harder.html
Read the line: "worst thing about being chairman was that he was always being assailed with complaints from friends about alleged mistakes made by his bank. But whenever he investigated, it turned out his friends were simply being dim"
Also read comment 4
Ok, hands up to all the bloggers here who admitted they saw the problem back then...
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Only a radical General Election or a peaceful Revolution will change the culture and perceptions of those in power in UK. Political Elites coupled to Bankers are stragling our future, our rights, our interests and our hope for any reasonable future.
We are still "Serfs" and they remain "Masters" unless and until we throw out thousands of them on the street. We are a sad lot in today's New Labour Britain, while Blair continues on his merry way to his goal of being President of Europe and Brown? Well, I do not know what future there can be for such a failure as a leader.
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Another groundbreaking exclusive from the Comrade (dull) Peston at the British Banking Corporation in the Republicj of Westminster.
GC
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Surely this report needs to be about institutional shareholders taking more responsibility to directly appoint non-executive directors to do their bidding in the board room. They're the ones that lose when the share price dives, so they'll appoint someone with the necessary risk appetite and foresight to apply the breaks.
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I was wondering where we are in the economic cycle, have we broken Gordon Brown's golden rule yet?
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Another "systematic" problem. No one was or is accountable. Wizzard banking CEO's were apparently fairly stupid and decided to use other people's money on a known lame horse at the derby. Well if this is the case, I would think that they would have all been fired and not still leading financial institutions or providing the lap-dog government with advice. Seems to me if a repairman severly botched a simple job and resulted in something going from maintenance to unrepairable, they would be fired. Because the government is culpable in this scheme,they are smiling as no personal responsbility is assigned. Should be very clear to everyone now about the meaning of the story of Jesus overturning the tables of the money-lenders....they haven't changed. We should also thank all the acedemics and economist who spoke at banking and financial services conferences,for swollen fees, and applauded the industry for their creative plans. Of course the same academics and economist are now advising the government. These discussions are about refilling the chest so that there is something for them to steal. As professional theives they find it demeaning that the government would just take your money and give it to them, the sport is in the swindle. I believe Sir David is stating that if you do not properly police the banks and financial institutions they will be reckless and steal....makes you want to go out and put what money you have left in a bank....not their fault just the nature of the beast.
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Sir David Walker, who is a senior adviser to the US investment bank Morgan Stanley and is a former director of the Bank of England, believes that last year's financial crisis, which helped to precipitate the worst global recession since the 1930s, was in part a consequence of "failures in governance in banks and other financial institutions".
>>>>>>>>>>>>>>>>
So what else if anything is in the report? Looks like the problems are getting brushed well and truly under the carpet?
This would be rather funny if it was not so serious - Do we have another major goon on our hands to join the ranks of Goondog Trillionaire Brown , the Naked Goon Darling amongst the notorious Goon Show members?
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One change that would help to sort the problem.
No bank can be involved in branch/retail banking and investment banking. This used to be the case. So ordinary taxpayers money is not then subjected to the whims of those that speculate in corporate takeovers etc.
This might stop the headlong dash into bigger and worse companies, where debt is used to build a supposedly better organisation. Is it a coincidence that the biggest failure were HBoS and RBS where mountains of debt were raised to buy small "banks" into the big boys?
We might also see companies judged on what they can make and deliver and not on the value of the land they own.
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Re 41 Ghostofsichuan.
Good post.
The financial industry is the highest paid industry in the country.
It is the only industry that has access to other peoples money.
In the past ten years...
Has the financial industry "taken advantage of its' privileged position" of having access to everyone elses' money?
Have all those City multi-millionaires "earnt" their money, or simply "taken" it?
I dont know the answers to these questions....what do you think?
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Another time wasting Brown tactic, another fob and another useless
waste of OUR money.
The ship UK is sinking fast and Brown launches reviews and inquiries and raises tax instead of the alarm
The longer this failed administration is in charge the harder it will be to EVER recover from the lunacy we have suffered for the past 12 years.
Shred the "Review" together with Tony's files eh !
Had enough
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Bearing in mind the mess the banks have got themselves into, and the fact that we as taxpayers are going to be picking up the tab for a good few years, why on earth would we want to make all these changes voluntary?
43 - Spot on. The Big Bang continues to reverberate today.
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Robert presented some more revelations today.
Absolutely no professional should command over one hundred thousand for giving advice for appox. thirty days a year.
PURE MADNESS AND EXCESSIVE ARROGANCE
Non-Executive directors are plainly not worth their salt. They were obviously living on a wing and a prayer, not wanting the bubble to burst, but it has!
All profits should go to the people entrusting the banks with their money.
Employees from top to bottom must understand that. All staff should work for a fair salary the way every other professional does. [Kick bonuses out the door.]
At what point did bankers think they could just help themselves to profits, not only that but think they were entitled to it?
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The main function of the banks' boards are to keep the government in line to let the banks keep power; they are only paid a fraction of what they appropriate from us.
You might say they are worth every penny.
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47 good post.
To illustrate how low the image of the City has sunk....
When you see a photo of, or an interview with, a banker or top City worker, what do you see? No really, in your heart, what do you see?
Do you see a jolly decent chap, with a social conscience and a sense of service to the public, taking sensible risks for reasonable pay?
Or do you see a th*****g ******d in a pin stripe suit?
There are a lot of "thinking stewards" in the City.
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This does not go far enough. In particular someone with national responsibility, perhaps the MPC, should be able to impose an overall limit on the amount of sterling lent by each bank, because this effects the money supply. This would provide the MPC, or whoever was given the job, a second lever, in addition to base rate, with which to steer the sterling monetary system.
In addition someone should be looking after the poor retail customer. Making sure that products are not mis sold, by banks or any other financial company.
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Banks and financial institutions will always pay bonuses, they may not be called bonuses but that is what they will be. It is a risk/reward culture that is supported by everyone of us that want's a better return on our investments and pensions etc.
The problem at the moment is that there is no equity in the risk v reward equation. Banks do well = huge bonus, banks do bad = no risk (no punitive measures taken against the boards that preside over the failing banks, and Government bail outs without losing control).
Until there is substantial action taken against the board for any losses they will continue to push the riskier deal safe in the knowledge that if it comes off then great, bonuses all round. If it fails, never mind, lets just shuffle around and move on.
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Another hornswoggle of a report.
Scrap all bonuses in the UK banks. Directors and executives of banks found to be paying bonuses should face fines and imprisonment.
If that means the so called, best bankers (ie biggest gamblers) go elsewhere so be it. The vast majority would stay in the UK; don't believe the line they would all leave. If bonus free banking is the only game in town where do they go?
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51
"Just shuffle around and move on."
Bang on target.
All directors of all these banks should be barred for life from further board appointments. It is not as though any of them could not survive without the pay is it?
Any replacements could hardly be worse, a name-sign that said "I vote no" would have been far more effective and much much better value for money.
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Excuse me #9.
The babyboomers were happy to make huge unearned sums at the expense of young families. Not a care for their own children.
I understand your anger, but please don't lay your woes at the foot of the baby boomer generation. Many of the reckless traders who have indulged in casino banking were in the under thirty age group - Nick Leeson was the first. The baby boomer group have been helping their children through Uni (student loans do not begin to cover the costs, then supporting them while they search for work, then paying out deposits for their first flat, first car etc. Many baby boomers lost their jobs in the last recession, which BTW was far more painful to ordinary people. They were subjected to rampant age discrimination when still in their forties and no politician lifted a finger to help. Now they are footing the bill for mortgages taken out by young families who had high aspirations and wanted the best (because we're worth it). Where do you think money for low interest mortgages comes from? The answer is the retirement savings of baby boomers. To compound matters pensions have been decimated.
Your response is really not very intelligent. You should blame the bankers who took the risks, the status driven people of all generations who bought on the never never, those politicians who were totally corrupt. Generation x, mind you, has it particularly bad - student loans to pay back, starting their careers in a recession, pay freezes at the start of their career and a dire financial future. If you feel strongly, show some mettle and object like the French do. Don't attack those who are paying the bill!!
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Why the obsession with bonuses and performance related pay?
There are people in our society who perform far greater good with little or no fiscal remuneration:
Do we want doctors on a bonus scheme? Pay per patient cured, per operation (extra prizes for saving lives??)
What about soldiers? A bounty for every enemy combatant killed (perhaps deductions for civilian casulties??)
Engineers: extra cash if the building / bridge stays upright!
Firemen, judges, scientists..........
Was Newton on a performance related pay scheme, or did Pasteur need a bonus to incentivise him?
All these people have talent. They give (gave) it to us for the good of the people - not because they were greedy spivs purely on the take.
Bankers are behaving like spoilt children - they threaten to withhold their "talent" if they are not paid to the hilt. I am minded to think that they need slapping back in place.
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Let there be no doubt, Gordon Brown will go down in history as the greatest ever redistributor of wealth. There is a bit of analysis on the site http://moralorder.mediumisthemess.com/blog that suggests that this might not have worked in the direction in which he intended, but noone can deny that he was a redistributor.
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After 6 months this is pathetic. I fail to see why bonuses are necessary at all. Surely the salary obliges the recipient to perform adequately. A more effective arrangement for paying executives (and public sector employees for that matter) would be "minuses" instead of bonuses. Failure to achieve given job targets would necessitate repayment of some percentage of salary. Failure to achieve results 3 years in a row would result in permanent salary reduction, demotion and greater salary deduction, or dismissal, depending on the degree of underachievement.
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56. At 6:24pm on 16 Jul 2009, NickBloggins wrote:
Let there be no doubt, Gordon Brown will go down in history as the greatest ever redistributor of wealth. There is a bit of analysis on the site http://moralorder.mediumisthemess.com/blog that suggests that this might not have worked in the direction in which he intended, but noone can deny that he was a redistributor.
>>>>
Well said mate.
GB robbed the poor as well as 'middle England' to give to the rich and banksters/ non doms. as well as hand outs to Robert Mugawbe's henchmen (and to send their children to the UK for their education), the Taliban and many others who hate 'us'.
Now that's what I call re-distribution!
(See-ee - I can write something without being rude to our Prime Minister).
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"Sir David Walker, who is a senior adviser to the US investment bank Morgan Stanley and is a former director of the Bank of England, believes that last year's financial crisis, which helped to precipitate the worst global recession since the 1930s, was in part a consequence of "failures in governance in banks and other financial institutions"."
I'm fed up of reading it put this way - there was no failure, it was done in a calculated way, i.e. on purpose. Bankers did very well out of bubbles which they contrived over the years, and they've done very well for themselves at the expense of the public since as Peston and others report. Bankers and politicians will earnestly talk of what should be done, they may even agree to new structures, but our liberal-democratic (aka anarchistic) political system dictates that this will all continue in the absence of draconian national socialist legislation with greatly increased enforcement of such legislation i.e. regulation, which would be illegal by EU law! Does anyone seriously see any prospect for change on the horizon? Lisbon says:
No.
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Until we see a Banker of Hedge Fund Manager facing a Court Jury Trial, then a jail sentence, nothing is going to change in either the City or within our so called Political Elite Class.
If by chance the Police prosecute one of the blatent financial rapists of innocent taxpayers within the Westminster village, then we would witness a "culture change"
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Banks do as banks always have done.
But this time, as always, they are claiming there is a twist to the tale.
Regulation. Moral hazard.
Phooey. The banks know that the government of the day will not be able to let them fail.
Twas ever thus. It is the system.
Arguably the banks need the real economy to prosper.
Without a burgeoning real economy their money is worthless.
But meanwhile they must make money no matter what happens.
The banks are above reproach.
Let the government sort out the economy.
Meanwhile the banks need to be left alone to make money.
Twas ever thus.
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Well, Sir David, nought out of ten for this effort. Nothing will change, the climate of scepticism and lack of any trust will continue unabated. The failure to convince us that the banking nightmare is going to be dealt with effectively will continue to paralyse the country.
The idea that disclosing the pay of high end executives in bands without disclosing their identities is a recipe for disaster. You would just need one lost laptop from the IT department to turn that into a very sensational news item. Worse, the mere risk of it would turn an already unhealthy macho culture within banking into a mafia culture. Maybe that's intended?
Maybe bankers thrive on all the secrecy? It brings the bully to the top of the pile.
@41 ghostofsichuan "As professional theives they find it demeaning that the government would just take your money and give it to them, the sport is in the swindle."
You hit the nail on the head!
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#59. JadedJean wrote:
"I'm fed up of reading it put this way - there was no failure, it was done in a calculated way, i.e. on purpose"
From my experience the people who run the banks are not that bright to be able to calculate much and almost certainly the reason for the bubble/crash was incompetence and human frailty not some form of conspiratorial 'calculation'.
My knowledge of some of the internal accounting and control systems within the global banks support my contention that they are basically incompetent at even running the highly protected cartel they possess. This also goes for the Regulators except where I have specific knowledge the individuals had been warned of the the inevitable results of their actions/inactions (Mervyn King etc.) Then the reason was cowardice and personal moral failure.
I thus disagree with your unsupported view that they did it on purpose!
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So, Board members are going to be paid more to oversee the operation of the banks. But if these higher paid Board members are ineffective and the bank fails, they take the pay and the tax payer still picks up the bill! The gravy train rolls on.
Banks which are too large to fail, are too large.
Unless someone can show how Banks can be regulated such that they will not fail catastrophically, Parliament should legislate the size of a Bank to mitigate the financial exposure of the tax payer.
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#57. newGrumpy1 wrote:
"A more effective arrangement for paying executives (and public sector employees for that matter) would be "minuses" instead of bonuses. Failure to achieve given job targets would necessitate repayment of some percentage of salary. Failure to achieve results 3 years in a row would result in permanent salary reduction, demotion and greater salary deduction, or dismissal, depending on the degree of underachievement."
It is not for us to say how private companies should reward their staff.
And I think you'll find that most employers - public as well as private - already have procedures for dealing with underperforming staff, including the measures you have suggested.
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Since the banks, as presently constituted, run the world, and rings round our Government, the answer must lie in a new form of bank -- one which is controlled by taxpayers. If the others want to go overseas, let them go -- call their bluff -- I bet they won't all go. The ones which do -- good riddance!!
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What is the difference between a bonus and a bribe?
Answer -- A bribe has more stringent conditions attached
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It has always been the case that good managers are not frightened to pay others more than they earn to get good staff-simply because we have not paid good money to managers. But it should never be an issue that because you are the boss, you have a natural right to get paid more. Otherwise you destroy incentives.
The problem is that we have always overpaid the risk taker. They have a free bet on the firm. Some of the risk takers were clever, the vast majority were not.
So l think we develop a culture where the risk managers have more power. And I can say this, because I was a trader.
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Ninetoninetysix has some very good points.
What are we doing wasting money on reports that tell us the obvious.
We just need to get back to basics, which is to look after the customer. In the good old days, say in Dad's Army, that was how it worked.
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Morning Robert,
well, a treasury sponsored report by Sir David Walker, how interesting!
May I ask Robert, whether any of this report covered the inadequate audits of the banks' accounts?
My recommendations are first of all to make the auditors independent of the bank which pays their fees (ie Treasury to appoint auditors, centrally funded with a levy on all banks to pay for it). Secondly, remove all non exec directors from boards of public companies by law as they are not effective in providing guidance or critisism to the main board, so what use are they? Thirdly, make bonus payments to direcors subject to 90 per cent witholding tax for say five years, to verify that the performance bonus is really based upon performance of the company and not some MP expenses type of arrangement.
I'm not holding my breath for any kind of meaningful reform, after all we need to empower our directors to make money for the shareholders, don't we?
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How surprising he has been so long with a report. Which results in not only the obvious but also a whole lot of GOB'BIEDEGOOK consisting of a number of committees making sure that satisfactory standards are followed and reporting to another committee surprisingly called the REPORTING COMMITTEE in which considers the Board Room CODE OF PRACTICE is carried out.The repetition of code of practice does not appear to be observed as a good dose of legality to insure they do not break the law would.PLEASE LET US GET IT RIGHT SO WE DO NOT HAVE ANOTHER DISASTER.
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a) That seems to already be in place, but has it worked?
b) Again, this is a power a Board or Committee may already have.
c) Good plan, but non-execs may ask to increase their fees? This could also lead to a decrease of the total experience on the Board.
d) Again, this is supposed to be their responsibility anyway.
e) As per post 10 (wee-scamp) who is right, you would need a chair who while had some experience relating to financial services, was not someone who used to be a bank executive. You would need someone who basically has experience on how a company should be run properly, especially making the books balance. That could be someone with experience of auditing other companies' annual reports each year, and prepared to ask a ton of questions afterwards.
f) well the big shareholders tend to be on the board themselves, or be personally known to at least someone on the board.
g) same here also.
h) bit difficult when shareholders are given scant information on how their company is run.
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John_from_Hendon (#63) "From my experience the people who run the banks are not that bright to be able to calculate much and almost certainly the reason for the bubble/crash was incompetence and human frailty not some form of conspiratorial 'calculation'."
We would all have to know just how competent/bright you are in order to be able to rationally appraise the reliability of any of that though wouldn't we? Whilst you are very fond of appealing to your own anonymous authority, you never provide any indpendent corroborative evidence. I suggest you need to learn a little more about the problems of the ad hominem in all its guises, Johh_from_Hendon, as well as thinking long and hard on the term 'competence'.
"My knowledge of some of the internal accounting and control systems within the global banks support my contention that they are basically incompetent at even running the highly protected cartel they possess."
Which is precisely how systems are run when those who wish to let others profit from them abrogate responsibility/culpability is it not)? People are put into positions where they are perceived to be 'incompetent' because it is just 'all so complex' (see CDS/CDOs etc). See the FSA/SEC and other regulators.
I suggest you need to think very carefully about what 'ocmpetence' really comprises behaviourally in liberal-democratic/anarchistic governments and their agencies in order to fully appreciate the point being made here. This often means just appearing to do something, i.e. a sinecure. You might also like to consider why mesures of abiliy are no longer as de rigueur as they once were, and how and why national standards are falling.
"This also goes for the Regulators except where I have specific knowledge the individuals had been warned of the the inevitable results of their actions/inactions (Mervyn King etc.) Then the reason was cowardice and personal moral failure."
Or, heaven forbid, just ignoring you as highly opinionated, as their job/instruction was to interfere with the markets as little as possible, despite what you and others 'advised'?
"I thus disagree with your unsupported view that they did it on purpose!"
Mea Culpa.
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Robert
CAN you do a item on the Massive margins the Mortgage companies and Banks are now making on mortgages ????
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You can continue rambling but don't you notice that nobody give a dam about what you say? Where were you when the economy was "booming"? Too busy asking for cheap loans and cheap mortgages when it was obvious you could not afford it? Enjoying the money that the bank was pumping in the economy at the time even it was obvious that it was not sustainable? Happy for your pension funds to ask for totally unrealistic return, putting pressure on the market to invest in riskier and riskier instruments? Where were you then greedy people? Your silence was deafening so shut up now!
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Re 68 and 69 veryexHBoS
Good posts.
"always overpaid the risk taker.
They have free bet on the firm.
Some of the risk takers were clever, the vast majority were not."
We just need to get basics, which is to look after the customer".
And this from an ex bank-trader.
Well said Sir.
Re 67 oap-john. Good post.
And what's the difference between a bonus and theft?
A bonus is paid on a genuine profit, not a "pretend profit", which turns out to be a thumping great loss, and ends up coming out of your and my pocket.
Hard-up OAPs paying for the lottery-jackpot bonuses of City staff?
Is that theft?.....you make up your own mind.
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#74 Any clue what you are talking about?
Libor ~70bps
Current spread for A/AA (typical bank) ~250bps (from CDS market)
So cost of funding ~320bps
Expected loss on mortgages ~30bps
Cost of holding capital to back the mortgages (say thanks to the treasury) ~30bps
So just based on cost funding and cost of risk mortgage rate should be around ~380bps. Then take into account operating cost and that high LTV mortgages are singificantly riskier so dearer and then explain to me the "massive margin"!!!
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Re 75 darksurfer.
Some of us knew that the "boom" was a lame-duck.
Some of us did not not take out any loans or mortgages, because we knew that we could not afford it.
Some of us have never had anything to do with City-based pension funds, because we know too many pensioners who have previously lost their shirt to the City.
Some of us knew that the price of our house was a joke.
Some of us withdrew all our savings from banks years ago, because we had a good idea what was going to happen.
We are not all greedy, and we certainly won't shut up.
Only the BBC can shut us up.
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Message 75 darksurfer
No: I did not go and get any cheap loans when times were good. I paid off my mortgage and got abused by an HBOS `financial adviser' for doing so.
No: I did not rejoice in the boom as I kept wondering what was sustaining the economy because what I was being told did not match the reality. What's more I timed the collapse exactly. Indeed I can recall all the time being abused yet again by people, who of course knew better, for being so `negative'.
No: I did not ask my pension fund to pressure the banks into making more profits. if anything my pension provider was cutting back on the earnings of my fund in order to boost its own profits.
No: I wasn't greedy. I was fiscally very conservative. I even had savings for all that they are worth now.
So please do not go and dump your guilt on the many millions who like me
kept our noses to the grindstone, who did not believe the nonsense being peddled by the banks and by the government but who are now carrying the burden of all the losses those arrogant people made.
How many ways are there to spell out the words UNFAIR and UNJUST?
For my part I am in a hanging mood over this: many people share that feeling.
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#73. JadedJean wrote:
Irrelevant rubbish as per usual.
On the incompetence of bankers: You maintained that 'they' did it on purpose. You have no basis for this assertion at all. Bankers as a profession have in the past proven to be incompetent - e.g by not pre-empting and avoiding the disastrous costs to themselves of the credit crunch. No sane person would allow themselves to get into the position of destroying their own business thus they have shown themselves to be incompetent. If that is we rule our the likelihood of mass insanity.
Again your assertion that they did it on purpose (in bold from you) is plainly ridiculous, not in accordance with the facts, and not sensible and thus irrelevant illogical rubbish.
Your general direction of contribution is highly supported of the status quo and suggests strongly that you are always persuaded, by whatever means, and contrary to logic, and the available facts, to always intervene on the side of the establishment. This is itself a despicable and unprincipled stand.
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#78
So it is all right for you, post after post, to generalise talking about THE banks, THE bankers with no differentation but when I talk about THE society you ask to be separeted from the rest. Special rules for you? Touchy feelings? Moral high ground already gone?
Concerning pension funds you have obviously no clue what you are takling about. Even pension funds from the public services are invested in the market and they were asking for higher and higher return putting a lot of pressure on the market.
Society as a whole is greedy and it is why we are where we are now but it is always so much easier to blame someone else. History tells us it is how the weaks deal with problems!
And in the same way that it is you right to continue posting your nonsense it is my right to ask you to shut up and look into the mirror!
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Regulation alone will never be enough to prevent bank failures in future - since risk taking is an integral part of banking. It should therefore be part of international law that a bank cannot operate unless it pays a certain fraction of its annual profit into a global banking fund which insures against bank failure. If this had been in place since the 1950s (say) the fund would have been so large, by now, that it would have ensured depositors money and paid off the banks creditors - without involving the taxpayer. In this way, failing banks - like any other business - are allowed to fail; thus avoiding the problem of moral hazard. It's never too late to start.
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Perhaps we're all missing the most important point here.
The City could be signing its' own "death warrant".
No doubt the City would like us all to forget the "stunt" it has pulled-off in the last 10 years.
Old news?
Water under the bridge?
But we can't. Neither can our kids and grand-kids. Colossal public debt.
Hundreds of thousands of financial job-losses?
A quarter of the number of bank branches? (wait and see).
The British public refusing to have anything to do with the financial industrys' products?
The Citys' reputation ruined, worldwide?
That is why regulation on risk and pay is vital.
I would like to see a healthy, successful, trustworthy City, serving the public, and the world, without the shocking greed that is ruining it.
Just like it used to be decades ago.
I don't believe Gordon Brown set out to ruin the financial industry....he just did not understand.
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Robert
I yet again find is amazing that you write another banking story. Its is becoming very apparent that you and the BBC have no interest in looking at issues in business away from London.
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The Banks are just laughing at the government and us If the government bring in tough new rules they will just move there HQ's abroad so they do not have to comply with rules on top wages
The only way I can think that the government can get any control over the banks is to require them to put up a bond for them to operate in this country if there HQ or parent company is not in this country
This bond should be 50% of there turn over in the UK this will be required to compensate every one if the bank go's bust
I do not see why these banks should have any rights to UK tax payers money if they get in to difficulty
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The Government has just created the biggest incentive to gamble for the banks - we will bail you out if the gamble goes wrong.
We have to get back to the capitalist system where if you fail you die. This is incentive enough to ensure that risk taking is kept in check.
The Tories seem on the mark with this. They are the nasty party and assume that human nature is greedy and corrupt whereas the Labour party seem to assume that given a framework we will all miraculously become symbiotic. Unfortunately the Tory model is the better model of human behaviour.
Separation of retail and investment banking.
The break up of Banks too large to fail.
The BoE given draconian powers to punish offenders.
Simple measures like this are necessary.
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Yes,
Barclays see themselves as the next Goldman Sachs / JP Morgan.
A very bad thing in itself.
If the banking sector doesn't want to lose the 'trust' of the people, they should take their medicine, (I think we the people have much more potent controls and shackles in mind, rather than this polite tinkering) and behave themselves.
Remember -even in a civilised society- we are only ever a month away from mob anarchy. One day, when the general public realise what was stolen from their pensions and their taxes, they might just get stroppy.
Regards,
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You can lead a horse to water but you cant stop it bolting!
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It is rather interesting that Barclays' have decided that they will no longer subscribe to the final salary scheme, and that they have done this without agreement with their staff.
The pension payments are a financial arrangement Barclays entered into to, agreed and signed.
Does this mean if they can decide to abandon a financial agreement and stop paying because they can no longer afford it, then all their customers can do so too on loans, credit cards etc.
If Barclays will no longer pay what they owe, why should their customers
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During Robert Peston's interview with Sir David Walker, Sir David said "....the adjective I would use to describe it all is culture...." Well sorry but culture is a noun not an adjective. I hope some of the five months preparing the report were used to check the grammar. Despite the English, the conclusions were predictable and unlikely to change the culture of over-paid executive or non-executive bankers.
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Me again, apologies.
In my last rant I forgot to mention one group....savers.
If savers start abandoning City institutions in favour of organisations that are seen as non-City and non-greedy , like National Savings, the Co-op and Tescos, we may indeed see "To Let" signs all over those shiny buildings in Canary Wharf.
And will there be a statue of Gordon Brown at the gates of the derelict site?
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It will be interesting once the full effect of the lack of tax income from the financial sector kicks in - including that from 'fat cat' bonuses.
I wonder what people will be complaining about then ?
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John_from_Hendon (#80) "Bankers as a profession have in the past proven to be incompetent - e.g by not pre-empting and avoiding the disastrous costs to themselves of the credit crunch. No sane person would allow themselves to get into the position of destroying their own business thus they have shown themselves to be incompetent. If that is we rule our the likelihood of mass insanity."
Insanity is a legal term. You need to look into the Axis II, Cluster B Personality Disorders in DSM-IV. Did you see what Dick Fuld walked away with along with his senior colleagues? How about this?
You don't appear to be listening/reading.
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#89
It is not merely interesting but frankly disgusting. The deficit is 2.2bn compared to Barclays profit last year (a bad year) of over 6bn. They could have made up the deficit out of profit, even discounting the fact that it is partly Barclays own fault their pension fund is in deficit - after all damage to the economy caused by the banking crisis (of which they were part) caused shares to fall thus creating the deficit in the first place.
It also begs the question if there are so incompetent they are unable to get their own pension funds right what recommendation is that for letting them have anything to do with managing others wealth or providing advice on financial matters.
It is particularly heinous that this is the measure which affects mostly the lower paid workers at the bank (the ones we see in our dealings). It does not affect the higher paid/masters of the universe bankers greatly since they have sufficient money from bonuses and obscene salaries to begin with to cover their early(?) retirements.
Neither does it affect the directors and others who propose to implement it. It is also likely that from the money 'saved' these unprincipled [cannot think of any word unlikely to be moderated] would derive benefit by way of bonuses for themselves as a result (less pension contributions out = more profit) - these people are appalling. They deserve more derision than heaped on Goodwin for this proposal.
Frankly I hope the workers at Barclays go for broke on this one - if they don't broke is precisely what they will be in retirement like the rest of us (should they be lucky enough not to be made redundant before then). If they break the bank in doing it they are unlikley to be worse off in the long run than they would be meekly accepting it now.
I'll happily deliver tea and sandwiches to the picket line outside the local branch if they do strike for as long as they want to.
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INCOMPETENCE?
"Once the bailouts were in place, Goldman went right back to business as usual, dreaming up impossibly convoluted schemes to pick the American carcass clean of its loose capital. One of its first moves in the postbailout era was to quietly push forward the calendar it uses to report its earnings, essentially wiping December 2008 with its $1.3 billion in pretax losses off the books. At the same time, the bank announced a highly suspicious $1.8 billion profit for the first quarter of 2009 which apparently included a large chunk of money funneled to it by taxpayers via the AIG bailout. "They cooked those firstquarter results six ways from Sunday," says one hedgefund manager. "They hid the losses in the orphan month and called the bailout money profit."
Two more numbers stand out from that stunning first-quarter turnaround. The bank paid out an astonishing $4.7 billion in bonuses and compensation in the first three months of this year, an 18 percent increase over the first quarter of 2008. It also raised $5 billion by issuing new shares almost immediately after releasing its firstquarter results. Taken together, the numbers show that Goldman essentially borrowed a $5 billion salary payout for its executives in the middle of the global economic crisis it helped cause, using halfbaked accounting to reel in investors, just months after receiving billions in a taxpayer bailout."
I guess that's one way of looking at it. Buy then, looking is intensional.
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Re 92 DMJeffery.
You Sir, are living in a dream world.
If you add up all the income tax from City fat-cat bonuses in the last ten years, you'll get a figure of about 100 billion pounds.
The "fat-cats" have dumped a ONE-TRILLION pound debt on the public.
Re 95 JadedJean.
That's a very interesting piece. Very interesting.
What is its' origin?
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stevewo (#96) "What is its' origin?"
It's in the title. For the record, whenever I cite something there's always a hyperlink to the source(s).
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It seems to me that a vital recommendation here is the deferral of a substantial percentage of bonuses for up to 5 years. But we need to see much more detail on how it will be implemented and policed.
And I think many of the suggested measures should definitely be enshrined in law. The public cost of the credit crunch is simply too great for answers that rely on City goodwill and cooperation alone. The City has abused public trust and must expect more legislation.
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Robert
The banking story you should write about is why Graham Brady MP has had important information about the Lloyds TSB/HBOS merger withheld by the Treasury because it would cost more than six hundred pounds to provide it.
He sent a formal Freedom of Information request regarding meetings where Treasury officials were present and the proposed merger was discussed. He asked for minutes of any such meetings and the details of any reassurances given by Ministers over the application of competition law to the proposed merger.
Mr Brady has been told that such information is held by the Treasury. In my view this is a flagrant denial of a proper request for information from one of our elected representatives. In the light of the monstrous billions of pounds that the merger has cost the public to turn down a request that might throw some light on who knew what, and why the merger was allowed to go through shows the appalling state of our country. Six hundred pounds against finding out why the merger has cost the tax payer billions? Sounds like Gordon Brown all over.
I deduce from this affair that there is something lurking in the papers that we are not meant to know about. There was the reported meeting between Gordon Brown and Sir Victor Blank, which seemed to some to give the green light to going ahead with a bid. What did the Prime Minister promise? Was it that the government would put pressure on the Competition authorities to turn a blind eye to something that was blatantly outwith existing UK and European competition laws? The merger meant the new bank would have over 30% of all savings and mortgages. Not even Tesco is allowed such a huge slice of the pie in its field.
The bid did not go through until the beginning of this year. CEO Eric Daniels and Chairman Sir Victor Blank, with the government's agreement, went ahead with a rights issue to stabilise the proposed bank (before the bid was finally closed), almost all of which was left with the Government (that's us folks) at one pound seventy three per share. They are now 70p. Another fine mess they have got us into.
The non execs were nowhere to be seen throughout this debacle. Nor were the competition or banking authorities, nor the European competition authoriites (although they are belatedly making noises now, after the horse (black that is) has bolted. It is clear from the denial of the appplication from Mr Brady that the government was in it up to its armpits.
We need answers and I am sure there are a great number of people (leaving out the instituttional shareholders who owned both Lloyds and HBOS shares and so voted for the merger to save their HBOS bacon).) whoi could set out some importantr questions so that we can all know why our money was thrown away as it clearly has been. SIX HUNDRED POUNDS!
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#93. JadedJean wrote:
Still rubbish and psycho-babble!
On Bankers and insanity: You argue that bankers may have been insane in your terms and deliberately destroying their own businesses. This is a daft idea!
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John_frm_Hendon (#100) "You argue that bankers may have been insane in your terms and deliberately destroying their own businesses."
Provide verbatim evidence (direct quotation) for that assertion please.
"This is a daft idea!"
You appear to be dramatically making things up rather than reading what is written. That is what produces 'daft ideas' (see 'intensional idioms of propositional attitude').
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#99
perhaps Mr Brady could charge the 600 pounds to expenses
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101. JadedJean wrote
"John_frm_Hendon (#100) "You argue that bankers may have been insane in your terms and deliberately destroying their own businesses."
Provide verbatim evidence (direct quotation) for that assertion please."
You did contradict my earlier statement that they were not insane! And thus it is quite reasonable to say that you were supporting the negative! (I.E Bankers were insane!)
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102
A good point. Perhaps he has already done that since the Times piece this morning, or if not will read your suggestion and act accordingly!
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# 91 stevewo
"And will there be a statue of Gordon Brown at the gates of the derelict site? "
Probably, and on its plinth they can write:-
HERE IS THE MAN WHO BANKRUPTED BRITAIN
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Government should stay out of business - here's a fix for the banks with some added benefits too.
1. Make it Law everyone over 16 has a Bank of England account (transactional only, debit card, no loans, ODs etc)
2. All receipts must go thru that account - and government scape off 1-3% of ALL incoming money (salary, car sales, house sales etc etc)
3. Instant transfer to any other bank/building soc account
4. No guarantees for commercial banks
5. Customers should be aware of risks of putting money into other commercial entities (so some may leave it is Bank of England account)
Benefits
1. We can take responsibility for our own money.
2. Vastly simplified tax system (ie no more VAT/PAYE/hidden taxes), so we can sack all the Tax regulators and get rid of Civil Service infrastructure
3. Choose to take up products from commercial banks if we wish (knowing risks)
4. Effective Bank monopoly no longer supported by public purse
Banks ripped us off because there were no choices, and held public purse to ransom because we can't exist with them. So the answer if not to regulate but to remove the need for their existence except on commercial terms.
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This comment was removed because the moderators found it broke the House Rules.
This comment was removed because the moderators found it broke the House Rules.
This comment was removed because the moderators found it broke the House Rules.
This comment was removed because the moderators found it broke the House Rules.
a few months ago there was talk of moral hazard. Surely, what is needed is financial hazard. Merely holding on to a bonus until the loan or other financial instrument has matured is piffling. Any banker who wants a share of the profit to his bank must take an equal share of the risk - and show his employer that he has the assets or insurance to back it up. So if that deal goes bellyup, saddling the bank with a loss many times the potential profit, then the banker is in it for his share. This would make him analyse the deal rather more closely!
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I believe there is something fundamentally rotten in the state of our government and financial industries. Greed has taken over and a massive fraud is being committed against the ordinary working people of this country.
When the government printed money runs out there will have to be huge cuts in spending which will result in massive unemployment. There will not be enough money to pay pensions and social security.
When the 5 million or so unemployed look at these people who have got rich at their expense they will do more than just write indignant posts to your Blog.
Fundamentally those earning many multiples of the average wage need to look closely at their consciences, and ask if they really deserve what they get. Failure to do so will only feed the grapes of wrath that are constantly growing in this country, and may wreak a terrible vengeance on them.
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#105. GrumpyBob wrote:
"...and on its plinth they can write:-
HERE IS THE MAN WHO BANKRUPTED BRITAIN"
It was the banks that caused the current financial difficulties, not the Prime Minister. And Britain's not bankrupt.
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how can we regulate overseas owned companies.
sadly the horse as bolted and only now they want to close the stable door.
to 113 i say you are wrong britian is bankrupt both moraly and very close to financialy, this government seems hell bent on selling what ever is left to rich europeans.
once we could say we are proud to be brittish sadly now we fear saying it incase we get laughed at.
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GUESS who is the GUY that let GB go BUST? GB!!
This report is a farce any child could have produced it!
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John_from_Hendon (#103) "You did contradict my earlier statement that they were not insane! And thus it is quite reasonable to say that you were supporting the negative! (I.E Bankers were insane!)"
You need some lessons in logic.
You are rather to fond of making up whatever suits you whenever it suits you regardless of what others post. The fact is that you made an irrational inductive inference. Nobody is 'entitled' to infer anything from the absence of a response, just that one does not get a response.
I respond to arrogance by pointing out that it's usually indicative of a) narcissistic entitlement and b) ignorance.
You need to learn what insanity is. You also need to learn how the law works, and what the difference is between illegal actions and venal actions. Read the RollingStone article.
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106. markthebank wrote:
"1. Make it Law everyone over 16 has a Bank of England account (transactional only, debit card, no loans, ODs etc)...
Benefits
1. We can take responsibility for our own money."
How does compulsion equate to taking responsibility?
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# Around 6:00pm Alexander Curzon -all blocked.
I'm always interested in what the venerable Curzon has to say, even when it is all in capitals......
Moderators-
Rather than moderate it all out, why not just blank out the words you don't like (it can't be all of them) -maybe even ask Pesto to have an opinion before you block it.
Regards,
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#113 rbs_redundant
'Britain's not bankrupt'
----------------------------
JUST LIKE RBS WASN'T BANKRUPT PRIOR TO ITS NATIONALISATION!
You need to study history just a bit more...the Scots seem to have a habit of creating asset bubbles and bankrupting nations.
Try looking up John Law.
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I will simply repeat, because it is a fact, that Britain is not bankrupt. It is indisputable.
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Let the financial industry go elsewhere.
Don't deal with them. If they don't get your mony they can't 'rob you blind'
Don't borrow from the banks where these fools work.
Don't people understand what capitalism is? Most of the global population has sufferred at the hands of these incompetent fools. If the population shun them, they can do no further harm, and left to retire on an island (St Kilda, perhaps). Don't borrow from them, don't buy the goods/services from companies who borrow from them.
Demand morality and you will get it; only the moral will be hired.
Demand greed and you will get it; only the greedy will be hired (and intrenal/external risk management talent will be successfully bullied)
Who has the real power?
I dream of course.....
A child could have produced this report.
It simply is not rockt science - just loud-mouths with money throwing their weight around with threats. Treat them as such.
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"18. We demand struggle without consideration against those whose activity is injurious to the general interest. Common national criminals, usurers, profiteers and so forth are to be punished with death, without consideration of confession or race."
I fear the above is the only way that this sort of enthusiasm has ever been curbed, as long-term imprisonment in the GULAG (cf. Madoff) is a) very expensive and b) all too easily spun as persecution.
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Back full circle then? Report after report, but no action to break the banking culture behind this mess.
Where are the investigations like the ones in America? The longer all this carries on, the more people will believe there is something to hide.
When will someone, somewhere, finally blast it all wide open? This all has the horrible sense of foreboding that a couple of paracetamol has for Appendicitis-eventually an operation will be needed.
Why,oh why, can't courage and teeth be found to sort this out once and for all? Apparently us mere mortals know there has been something truly amiss in this whole mess. This 'kid gloves' approach just fuels those suspicions.
Telling the truth won't shock the nation-there would just be a national sigh of relief because then we could finally move on to repair the damage.
Until EVERYTHING in this unholy mess is exposed, nothing will ever change.
If nothing has been done wrong, then noone has anything to fear.
Let's have a real report genuinely aimed at looking after the nation, not protecting bankers, politicians etc and skirting around issues.
Will someone, SOMEWHERE, please grasp the nettle?!
PS-please publish Alexander Curzon's comments-they really do spice up the blog! Thank you.
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The central issue is the government guarantee to people who lend money to banks - whether depositors or bondholders. Banks make profit and accept risk based on the amount of assets under their control which is 20x the equity at risk from their shareholders. They pay out 1/2 the income they make from those assets to their staff.
As a shareholder even if you knew for certain that every 15 years there would be a crash your equity would be wiped out you could easily make enough dividends based on the profits from assets which are 20x shareholders equity to make it a good investment. Shareholders might quite rationally prefer a risky strategy. As a Northern Rock shareholder I received more in dividends than the nominal value of the shares: even though the shares were eventually worth nothing I probably came out ahead.
The people who have most to lose should be the depositors and bondholders - but they dont care about risk because they have a government guarantee. Without the guarantee they would be very careful about lending to banks and the market would force banks to be more conservative, pay better interest and hold more capital.
If, as government, you believe that there is a 1/10 chance that a bank might lose £100Bn and you provide a guarantee to the people who leant the £100Bn to the bank then you have an expected loss of £10Bn which is effectively a £10Bn subsidy to the bank. Its not surprising that banks getting that kind of state subsidy can make big profits and pay big bonuses.
All the arguments about interfering with private companies are specious when it comes to banks. If they want to be private sector they should dispense with the government guarantee. If they keep the state guarantee then the state is quite entitled to regulate all aspects of their business including pay.
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@123
There won't be any investigation, any truth or any action.
Why? Because instead of nationalising the banks, they have bankised the nation, and it flat won't happen.
A succession of governments in our duopolistic system have courted the bankers, and have been nobbled by them.
The system will only change when it crashes and breaks and a new one is made - it will not be a pleasant process and will involve massive global conflict. Fortunately, it will happen quite soon, when there will be a chance of recovery.
We have only ourselves to blame for allowing a debt vortex to develop.
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I read in the New York Times that Goldman Sachs are making huge profits again and handing out huge bonuses. No doubt the same is happening here.
In my home town of Hull, 1500 people have applied for 20 jobs as bin-men.
Regardless of the result of the next election, the bankers and their political stooges who created this catastrophe will walk away laughing with their huge pensions and pay-offs secure.
We do not need an election, we need a revolutrion.
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RE MY POSTS NO 107 108 109 110 ALL DELETED/PENDING???
COME ON PESTON?
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RE POST 126
REVOLUTION? Probably NOT that far away. . theres an upsurge in the SUNNY
SURREY BONUS PROPERTY MARKET PLENTY OF SALES AT 3,000,000 plus ALL BEING
PURCHASED WITH BONUS CHEQUES. . .
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It would appear that the Mail's Alex Brummer must read these blogs!
'As Goldman Sachs posts huge profits from the economic crisis, the question is: Did it cause the problems in the first place?'
http://www.dailymail.co.uk/debate/article-1200481/ALEX-BRUMMER-As-Goldman-Sachs-posts-huge-profits-economic-crisis-question-Did-cause-problems-place.html
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Post 129 Bankslicer
Alex's article is very interesting BETTER THAN PESTON'S CLIPPED VIEWS?
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Barclays bank unveiled plans last month to shut its final salary scheme to existing members, affecting 17,000 staff, although 1,500 of its top earners were not affected.
That is typical that the top keep there final salary scheme and those who are on the front line lose out
The pigs to keep there snouts in the trough it is time we start moving our money around the banks as the top seem only want to get as much out for them selves and blow the staff who give good service and costumers
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*sigh*
The Credit Crunch came about because the system created a way of making money that effectively hid its own risks. The warning signs of an upcoming disaster were there and a few doomsayers were speaking up... but no-one (either in the banking sector, the Treasury or the FSA) wanted to know. The dangers were just hidden enough for everyone to pretend they weren't there.
In other words, there are non so blind as those who will not see.
Imagine if climate science was only carried out by the energy companies and overseen by industry friendly watchdogs and government departments. We'd have not the slightest chance in hell of averting Global Warming, but this is eactly where we are now with the financial sector.
If we really want to stop another Credit Crunch or similar disaster taking place, we need to move oversight of the financial sector away from those who can make short-term gains by turning a blind eye. This means removing the ultimate responsibility from boards, non-exectutives and democratically elected Governments and handing it to a body whose purpose isn't to police the financial sector but to understand the financial sector.
Basically, we need a new scientific community of economists whose job it is to scientifcially investigate the way the economy works on all levels, who have nothing personal to gain by lying or fudging the truth and who will be able to speak unpleasant truths without risking their own careers.
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This comment was removed because the moderators found it broke the House Rules.
I have a cousin, a teenage naughty boy. This morning, when he woke up, he suddenly talked to me: can British government and banks provide technical, personnel, and low interest loan to India to expand and improve their railways system, where fast developed economy had over-performed above the transportation system between their large modern cities. Then Indian modern cities people lives and safety can be guaranteed, and it can stimulate the Britains economy and keep some steel plant survives.
I laughed at the boy: have you thought about that British government and banks are short of fund? Besides, Britain adopts capitalism, which believes industries manage themselves for profits. And the government is only for management.
The boy scrubbed his hair, argued back: during the recession of mid 20th century, some economy stimulation strategy used by American government did include use the countrys money for infrastructure development.
I lost in word and wish that I could have more time and knowledge to research in depth of the feasibility of the boys idea, which is simple and straight in logic.
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ruler to my-all life
banknote to the noted
uncirculated virgin
desired time taken
rub me clean and through
pristine for the mean
rare for the rare clean
bile
unused all in my hairline
spleen spline nine
holed to the bleed line
spliced and diced public mice
spot me a mark-me up
lupe, the lupe Mr Smooth
Curve
dare not dent
drop me an airline
minted bint
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The worst global financial problems since the 30's were accidental ( not deliberate ) screw ups all over the world.
Re: 126 / 128 R-word
( you have to be subtle if you want to get ready and fight the right Revolution )
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#116. JadedJean wrote: his/her usual claptrap.
Your logic is flawed.
"Nobody is 'entitled' to infer anything from the absence of a response, just that one does not get a response."
I disagreed with you when you maintained that bankers were insane and you have the gall to criticise me for pointing this out to you and then you say I am wrong to say that disagreed with me! Utter rubbish hidden inside a load of irrelevant repferences and wrong psycho-babble, as usual.
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(OK then,)
'Some of'..... the investment banks' behaviour in manipulating markets and commodities seems to me not too different from the actions of organised crime. Why aren't the pension funds and investors -ohh and bail-out governments entering class-actions against them.
If nothing is done, all oil, rice, wheat, metals, carbon-credits (isn't that the biggest joke?) are going to be manipulated by these cowboys onwards and upwards for the next generation.
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Re: 138 allmyfault
The money (billions) was lost 100% legally.
There have been no Government Investigations or Fraud Reports to prove there were any Dodgy Companies, or Phantom Consultancy Payments or Vanishing Money Transfers From Company To Company except for the usual mark ups on commissions etc
Filed under Corruption, Freedom Of Information, Offshore Investments, Political Corruption, Politics, Politics & Corruption
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stevewo wrote:
"And excuse me if I seem a bit thick, but isn't the city supposed to be of benefit to the general public, and not just to the 50,000 or so multi-millionaires who happen to work there, particularily as their method of "obtaining" their multi-millions now seems highly dubious?"
Virgins and cattle must continue to be sacrificed to Mujumbu, or great evil will befall the people.
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Suckers,
The game is to be sold not to be told. Ever bought a used car from a dealer before? Want to know what REALLY happens behind the scenes? This movie offers some insight through the eyes of one of the dealers.
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John_from_Hendon (#137) "I disagreed with you when you maintained that bankers were insane"
Either quote verbatim where I posted that bankers are insane, or take some time out to fully appreciate what I have told you that a) you are not reading/understanding what is written and b) making material up.
Look up intensional idioms of propositional attitude (this is a logical matter), and you may learn something useful about what I'm highlighting using your verbal behaviour....
If you do as instructed, you may start to see what's radically awry with non Behavioural Economics. If you don't, I predict you'll just keep digging a bigger hole for yourself without seeing how or why. ;-)
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I think the banking comunity is looking to talk the recent past out of existence. Unlike the majority of other troubled industries, they have been saved because of the consequences of letting the general public's savings disappear. They now are intent upon building back their balance sheets to earn their next bonuses whilst continuing to steal from the public with miniscule returns on savings. Osbourn was talking about what he will be doing to regulate them in future but I won't hold my breath on any of his empty rhetoric. Whatever comes out of future banking regulation will be a smokescreen and they will remain the dinosaurs they have always been gambling with others money as if they have a god given right to do so.
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In the days to come there will no doubt be a great gnashing of teeth and shouting of "Foul" as some of the bigger banks announce the bonusess to be given out to their star performers.
Realise a few things:
Robert Peston is Business Editor and yet he just goes on and on about banks.
Banks are business. Pure and simple.
The bankers job is to make money in a variety of ways. All of them "artificial". Why should not the bankers see Government Paper as a legitamate way of making money?
Ditto other government loans and currency movements. Etc etc.
The bankers have a real insight into the way that marks on bits of paper relate through legislation and inter government agreements into money making schemes just for them.
The bankers do of course live in the real world, but what they do at work has nothing at all to do with the real world.
Except of course that the money they make at work is exchangeable on a 1:1 basis with the money we all use in the real world.
And that is our fault and loss.
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notfooledsteve (#143) Agreed, but the only thing which will stop them will be if a credible variant of Strasserism sweeps through Europe and the USA. Hence the remarkable, and extremely revealing hissy fits when the BNP won a couple of MEP seats and 1m votes.
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#142. JadedJean wrote:
Garbage and through attempted deliberate obfuscate divert our collective attention from the state which he/she supports without question. There can be no discourse.
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erratum (#142) "Either quote verbatim where I posted that bankers are insane, or take some time out to fully appreciate why I have told you that a) you are not reading/understanding what is written and b) making material up.
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Why in the Uk do we have shroud everyhing in mystery and try and pretend all above 'pond level' is so clever.
Why do we lack the guts to confront situations, people and institutions.
Our so called leaders are pathetic wimps and we should sack the lot and start again.
Disgusted.
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cynicgrahamwalker (#148) "Why do we lack the guts to confront situations, people and institutions."
Because, as I have pointed out elsewhere, in Liberal-Democracies legislation is written to protect their freedom to behave as they do whilst proscribing others from 'curbing their enthusiasm'. All the talk of reports, papers and recommendations won't change a thing. Only dramatic Stasserian changes like those in Germany in the 1930s or in Stalin's USSR could ever do that.
Dos anyone see that happening?
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Robert
In the article published on 16th July; "Curbing Bank Executives' enthusiam" the discussion covers a section on "inexperience" (in banking) and begins with an introduction about Non-Executive Directors.
The example quoted is Andy Hornby at HBOS. Was he not an Executive Director, as CEO, rather than a non-exec? Perhaps there are other, perhaps more specific examples of non-executives in the banking industry involved in the crisis that could be quoted in this context?
This question about inexperience deserves more careful airing than has been given so far. The Prime Minister in his response shown on your website to the Walker report seemed to suggest that NEDs would concentrate more on risk. Walker clearly states that they have a role in the organisation's strategic direction too. International Business Strategy is a much wider brief, than risk.
International Business Strategy requires a broader set of skills knowledge, which may, or may not be acquired soley in the banking industry. A bank's board surely must have balance and a broad range of skills and backgrounds, not a monoculture.
It was partly the failure to either recognise, or act soon enough upon the changing economic climate , especially in the US, at both executive and non-executive director level, which led to the loan and mortgage defaults. A change, in the international business environment, which required a response at a strategic level in the UK banks. This contributed to the scale of the difficulties; at least in retail banking in the UK.
There is an argument, which goes that an NED asking to have an exotic financial instrument explained to them in layman's terms might better be able to independently assess its risk to the bank's financial position, than an expert in such products might. Any NED will have a perspective as a user of banking services. Surely different perspectives from people who know about the exotics and people who don't will enable an organisation to reach better decisions overall, will it not? Training for those NED's that have not worked in banks will therefore be very valuable indeed.
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