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Brown and bonuses

Robert Peston | 11:09 UK time, Sunday, 27 September 2009

Gordon Brown just told Andrew Marr that there would be legislation to curb bankers' bonuses - and he implied that what he planned would be tougher on bankers and banks than what other countries were doing.

Gordon Brown talking to Andrew Marr

How significant is this?

Well not very, unless you think that a decision to legislate is per se of interest.

Government members tell me that a short bill - of perhaps 50 clauses - planned for later this autumn will enact what we already know to be government policy on bonuses.

And to be clear, we already knew this bill was coming. In July, the Chancellor, Alistair Darling, told the Commons that he would legislate in the autumn to give the City watchdog, the Financial Services Authority, a new statutory objective for financial stability and give the FSA assorted new powers to prevent banks taking excessive risks and to punish reckless banks.

In other words, the legislation will cover much wider ground than bonuses, picking up the urgent parts of the Treasury's recent paper on "reforming financial markets".

Also, those government members tell me that there will be no new restrictions on how and what bankers are paid that hasn't already been divulged in policy papers or official statements.

Thus, the constraints on bonuses agreed by the G20 leaders in Pittsburgh - which were less radical than some continental countries wanted but were very much the preferred solution of the UK - may be put into this bill.

In particular, ministers feel it may help to put fire into the belly of the Financial Service Authority, the City watchdog, to enshrine in law what the G20 has just agreed on bonuses or "variable compensation" - in particular the stipulation that the amount of variable compensation that a bank can pay out should be restricted to a certain percentage of its total net revenues when there are concerns that it may have too little capital, the essential buffer against potential losses.

But for the avoidance of doubt, this would be a restriction on the funds available to a bank perceived as too weak to pay bonuses, not on the size of any bonuses that any bank wished to pay to individual bankers (even the weaker ones).

Also, the recommendation of Sir David Walker - appointed by the Treasury to review the so-called "governance" of banks - that there should be greater disclosure by banks of how much they pay their top people, well that too may well be included in the new law.

In fact, the City minister, Lord Myners, has been arguing that Sir David has perhaps been a bit too timid on this: Lord Myners wants the identities of those receiving the big bucks in banks to be disclosed, whereas Sir David would keep their names secret (if they are not on the board).

And what of the prime minister's claim that the UK is being tougher on bankers' pay than other countries?

Well that seems hard to sustain. In the Netherlands, for example, a ceiling is being imposed on the absolute amount in bonuses that any particular banker can receive.

Mr Brown has no plan to impose such a bonus cap in the UK.

In other words, nothing substantially new was announced by the prime minister this morning.

Although maybe it was new to him, in that I am told the chancellor gave him a long briefing on all these already-disclosed measures on the flight back from Pittsburgh.


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  • Comment number 1.

    This is par for the course for Labour. Announce 'new policies' time and again. Also remember that Brown had a nice little trick as Chancellor of counting the same money over and over as though it was an increase in spending.

  • Comment number 2.

    Bankers' bonuses is an irrelevant sideshow designed to calm the restless natives. Fundamental reform of banking and the way money is created is required. The political and financial elite ask the wrong questions and provide the wrong solutions. Government should create new money, not banks by creating more debt, and casino operations should be separated from ordinary retail banking.

    The quote by Jefferson has been highlighted by others on these blogs and still applies

    "If the American people ever allow private banks to control the issue of their currency, first by inflation then by deflation, the banks and the corporations will grow up around them, will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

    "I believe that banking institutions are more dangerous to our liberties than standing armies."

  • Comment number 3.

    How significant is this ?
    Not very significant at all Robert is the short answer.
    For the past few months NuLabour has been promising every pressure group ever conceived, and some yet not conceived,every thing they desire and some things they did not even know they desired.
    The long answer is that this is the most dishonest Govt for a very long time. If there really is any justice in the world history should name them for the disgrace they really are.

  • Comment number 4.

    Robert, a good piece of forensic dissection of Gordon Brown's claim on bank bonuses. This form of questioning is surely the way to extract any form of truth or sense from the man. He is a grand illusionist and uses language very carefully, if every statement he made was subject to this type of analysis then it would surely be in most peoples interest.

    It will be an interesting period into the New Year as apparantly bank bonuses will be as high as ever. Will Brown act to curb these ? Or is he hoping that his statement this morning will be forgotton by then ?
    I hope that you will take a close interest.

  • Comment number 5.

    Plus ca change from Gordon Brown!Lots of hot air and no real action.
    Robert, just a thought if
    "In other words, nothing substantially new was announced by the Prime Minister this morning."
    They why bother blogging about it?

  • Comment number 6.

    It's depressing really. The reason why Britain will never legislate on bonuses in any effective way is because the banks rule. They literally do. Both through financial muscle, and the dominant worldview that seems to have triumphed everywhere.

    Even when we, the taxpayer, own the banks, we still can't stop them hiding losses, legally, and then declaring profits, and then, unbelievably, paying themselves bonuses. I mean, the banks are busted, broken, not able to live without taxpayer support, but the people who did this still get a bonus.

    What happens now? This is the bit that makes people mad. Now, we go into deflation and the cash rich (bankers, bonus-paid bankers with no company liabilities) can pick-up assets at knock-down prices. Assets that people had to buy at hugely inflated prices. (They get left with the debt, of course.)

    Gordon Brown, does he even get it?

    Anyway, if all this happens, as it will, since the times hardly feel revolutionary, then it's old, old, old news: Thomas Jefferson predicted it 200 years ago, and the history of the 19th century is, in many ways, democratic powers fighting the oligarchy of the banks.

  • Comment number 7.

    The problem is not so much banning the "old bonus system" but more making sure the "new bonus system" does not come into being.

    We've heard plenty of tough talk from Gordon Brown and Alistair Darling but very little if any action.Even if they did start to get tougher with the banks you couldn't help but think that the situation could have been avoided if the government had placed legally binding agreements on the banks when they loaned them all that taxpayers' money in the first place.

    The only way to ensure the banks will comply is to go back to the prudent, safe, boring way banks used to be run in the past. For that to happen, the banks need to be nationalised & placed under the control of the Bank of England as they cannot be relied on to comply with government policy and are a threat to our national financial security.

    Instead of having standardised pay which makes bank outgoings predictable, the bonus culture ensures that outgoings rise each year in an unpredictable,uncontrollable and unnecessary way. The complexity of products and the intricate interactions between banks makes it impossible for banks or anyone else to keep track of toxic debts.In essence it is a crisis waiting to happen. Sadly, bankers are only interested in their bonuses and not really concerned about the security of the banking system or about taxpayers' money.

    I doubt if Gordon Brown has the guts to take on the banks in the way he talks about. After all, we are still waiting for him to prosecute those MPs found guilty of fraud in the expenses scandal.He is just delaying any real, constructive action until after the election possibly in the hope that despite this crisis being a New Labour mess it will be once again cleaned up by the Conservatives, who will be left to take the necessary remedial action.

    It is possible that Gordon Brown will rush through the necessary legislation.It is possible that he will act proactively to deal radically with the banks, bonuses and the crisis. Then again pigs might fly.

  • Comment number 8.

    On the Andrew Marr show this morning,I felt he looked a failed manthat has forgotten what truth is and blames the rest of GB AND THE WORLD FOR HIS SHORT COMINGS.rEMEMBER HE HAS BEEN IN CHARGE OFF OUR FINANCES FOR NEARLY 13 YEARS .

  • Comment number 9.

    This is meaningless drivel, the government may curb bonuses where it is the major shareholder, but cannot dictate how independent companies reward their employees. This is for company bosses and shareholders to decide. This is just a soundbite with no substance supposed to convince the Labour party conference that he can curb the fat cats of the financial sector, he cannot. What is he going to do, fix salaries and bonuses for the private sector , when he can't even curb the obscene salaries being paid in the public sector to high ranking civil servants ,local government executives and health service executives. Before he attempts to curb the productive, he should get his own house in order.

  • Comment number 10.

    Robert wrote:

    "Mr Brown has no plan to impose such a bonus cap in the UK."

    Typical Tory!

    A real Socialist, not Mr Brown, would introduce a maximum wage! But Gordon Brown is not a Socialist - he is a open and unabashed Tory!

    The people have already been fleeced and forced to pay 30,000 GBP each to the UK's 'wonderful' banks and they are to be gouged still more - they will not put up with it! We, the people, (and I hope I am representing the views of at least a few) want justice and at least a degree of fairness.

    I frankly don't care about bank bonuses - it is a side issue - what I do care about is that the poor are being robbed to bailout the banks and what is more the banks have so corrupted the media that the media are telling us that this is right and proper!!!!!

    Bring in a maximum wage for the whole Nation until the result of the terrible financial incompetence that caused the bubble is paid back. That would be fair and just. (Say a cap of 250,000 GBP!!!)

  • Comment number 11.

    Usual Brown and Labour spin to divert attention from the real issues of a dishonest and failing government [ eg the Attorney General ]

  • Comment number 12.

    Brown should first consider scrapping bonuses for the overpaid, over superannuated and unaccountable civil and public services.

  • Comment number 13.

    But what about what REALLY matters -

    1. Capital adequate for loans made

    2. Seperating off investment banking into seperate companies and making it illegal for banking utilities to get into investment banking

    Nothing on those and so nothing to stop the whole merry schaboodle coming round again in my grandchildren's lifetime.

    Bonuses are a populist side issue and irrelevant to what brought the banks down

  • Comment number 14.

    The city exidos has already started with HSBC anouncment about relocating head office to Hong Kong.

    If the city leaves who does he think will repay his big spend!

  • Comment number 15.

    What really is NEWS is that Gordon Brown's approach to controlling perverse incentive bonuses within Banks has got G20 agreement, and because of support from the USA. Also news is that the German-French alliance plan that would have stymied London capital markets has been marginalised. Thank goodness!

    Money markets always were international - including the inter-bank markets that kicked the foundations from under Northern Rock. Surely you remember that?

    It is news that the UK Government can now include this new bunch of measures in its Autumn programme. Without that international backing, it would have been useless. So there was GOOD NEWS after all. It just didn't bite anyone watching hard enough!

  • Comment number 16.

    I posted my comment before I read #3, but, unsurprisingly, I agree. Monetary reform is a must. As long as banks issue money with compound debt attached, or any debt, then the vast majority of us are unwitting slaves continually selling our labour to fund the wealth of others.

  • Comment number 17.

    I suggest a month of complete media black-out on politicians. They can go and listen to their constituents but not speak back. They can talk to each other and DO something.

    All their talk has just become cheap, meaningless rhetoric and as such insignificant prattle.

  • Comment number 18.

    Does anyone believe this crap from a pointless PM?

    No, neither do I.

    For God sake just call the General Election and let's start to try to rebuild our shattered country.

  • Comment number 19.

    Once again the BBC angle on this is anti-Government and factually incorrect. On the one hand Peston states that this will not restrict the size of bonuses banks can pay, on the other he says that, and I quote " particular the stipulation that the amount of variable compensation that a bank can pay out should be restricted to a certain percentage of its total net revenues" - So which is it Robert? Even you can't seem to agree!

  • Comment number 20.

    There was something new: the PM was forced to deny he was taking "prescription painkillers and pills to help them get through".

    I'm not sure if the latter is an oblique reference to antidepressants.

  • Comment number 21.

    The focus upon the issue of bankers' bonuses is another case of "deckchairs on the Titanic." This is not to suggest that the sheer greed expressed in the investment banking community should not be curtailed; however, whilst I personally think the levels of bonuses achieved have been immoral, the real issue on bonuses is how to create a bonus scheme which creates responsible attitudes towards risk-taking. This is essentially an issue about using incentive schemes to discourage casino behaviour with other peoples' money.

    That said, the real issue centres upon the way in which the banking system in the USA and parts of Europe has happily gone about creating a huge 'shadow-banking' system, which sits outside any kind of external regulatory environment. When major commercial banks get involved with investment banking activities we should be concerned. But when those same investment banking activities set about creating various structured investment vehicles (SIVs) and their associated financial 'innovations', then we should be outraged.

    Bankers will always regard themselves as being the essential oil that greases the capitalist system; this is true up to a point. What politicians and indeed some economists and policy makers appear to forget is that for bankers, they are running a business. For bankers, the name of the game is to make a profit - the bigger the better. This not only provides some of the 'turks' with fat bonuses, but it creates a healthy return for their shareholders. Customers, generally come somewhat further down the list, especially if they are not rich and simply represent the masses in retail banking. Of course, any intelligent person (and their are plenty of intelligent people in the banking industry) will look to seek the development of markets which create a healthy return. Retail banking is the boring part of the business. Therefore, to say to bankers involved in the more esoteric parts of the business that they should not innovate is rather like telling engineers at IBM, Boeing or Apple that they should not innovate new products. This would plainly be ridiculous.

    The problem is not that bankers create risky and innovative products. The problem is when bankers create such products with excess leverage and/or misrepresent the real risks associted with such products. The caveat emptor defence does not wash here, since many of the exotic products created during the past ten years simply were non-tranparent and virtually impossible to verify in terms of risk. Hence buyers depended upon the ratings agencies (whose clients were the banks) such as Standard and Poor's, Moody's and others. Unfortunately, these agencies were way behind the curve.

    The real issue is about separating commercial banking from investment banking activities, so that if the 'turks' run excessive risks which blow up in their faces, then they can simply go bust and most will be none the wiser. The problem at present and going forward is that nothing is being done in the legislative reform (so far) to separate these two activities. Indeed, quite the opposite, since Goldman Sachs and Morgan Stanley have so conveniently registered themselves as banks to benefit from the bail-out package last year. Until the commercial banks are banned from setting up SIVs, which are financed at arms-length with funds from within the commercial banks, then nothing will have changed.

    Sadly, this kind of reform would been seen as reverting to the world created through the Glass-Steagal Act in the aftermath of the 30's crash or the more regulated environment prior to the financial 'Big Bang' of 1986. However, when speculation becomes the dominant part of the financial system and virtually every major bank in the USA and UK was looking at technical insolvency last year, then our politicians are under a duty to the people to protect the interests of ordinary people, over those of the elite banking community.

  • Comment number 22.

    And your point is...?

  • Comment number 23.

    So what is the chance that Brown will announce to great fanfare in Brighton, instead a system where bonuses are delayed and paid part in shares (which saves the bankers 22% in income tax)?

  • Comment number 24.

    Yes, typical.

    All bluster and no real meaningful action.

    This Labour government is absolutely petrified of taking the sort of measures that are needed, because their whole model of "leave the City alone and ignore most of the things going on there" is bust, and they are at a complete loss for any other ideas (OK, a bit like most economists generally!).

    Looks like the Netherlands at least is showing some leadership.

  • Comment number 25.

    How come Brown ONLY wants to interfere in the banks' business? If he really wants to interfere what about re-nationalising the public utilities? Sure, it would take good management teams to run them but at least consumers wouldn't be filling shareholder pockets. Nationalised utilities don't have to be loaded with bureaucracy (as in complex hierarchical structures ruled by procedures) - that would be up to the government and admittedly, Brown and his merry men are way out of their depth when it comes to serious considerations of efficiency (in spite of millions of pounds' worth of consultants who are very aware of being on a nice jolly there).

    I get frightened when someone like Brown who has made so many mistakes (and hasn't learned from them in spite of what he says) pokes his nose into private sector business. Yes, we need regulation and Brown should be congratulated on twigging that twelve years too late. But don't let's go crazy about it. Stifle the freedom of banks to run their own business and they'll base themselves elsewhere. That's a simple issue that Brown hasn't twigged it - capitalism in a global market means that people can shift their money/operations where they want when they want. Businesses will and do move from the UK.

    Besides, this all smells of the reaction to the 1929 crash - heap on regulation, control this and that, rein in tight.... then a few years down the line and new governments will get in and start stripping it back, leading to another crisis - that's if humanity is still around.

    And another "besides" - there are countless ways for banks to avoid using the word "bonus" when rewarding their people. So it's a waste of time, another useless piece of legislation that merely sounds nice and throws the public off the scent of things that really matter. Nu Lab are great at being seen to be doing something when that something actually adds up to nothing.

  • Comment number 26.

    unless it's a hard, enforceable legal cap ... at half a million pounds, something like that ... on the size of the individual annual bonuses paid to the individual employees of all FSA regulated entities, then I'm not interested - oh, and I'm seriously unbothered if it causes all the "Talent" to leave the country - they are very welcome to go forth and multiply

  • Comment number 27.

    Gordon Brown is sooo! disliked by the majority of voting folks that nothing he can say or do up until the general election, whether a policy statement or yet more of his vote - buying gimmickry, will change his fate.
    His party's fate is sealed ,too, and they can only mitigate the losses if they switch leaders before Christmas.
    As for the direct subject matter, Posting 13 sums it up succinctly.

  • Comment number 28.

    What a waste of time, it requires more investigation and vigilence from regulator, not yet more laws. Labour seems to think answer for everyhing is a new law. The end result is more important, so did their laws on employing illegal workers help; well apparently not with Lady Scotland. Now we have Gordon Brown wanting to put a law in place to make himself be prudent with public spending; What is he going to do put himself in jail for being stupid over last ten years and running up massive debts, instead of following his own self professed gold rule and prudence.

  • Comment number 29.

    #18. SilentHunter2 wrote:

    "For God sake just call the General Election and let's start to try to rebuild our shattered country."

    But we don't yet know what the Tories' policies will be with regard to bankers' bonuses and the national debt. Do you really think they will have the answer?

    I am as keen to see the back of this corrupt, smug and mostly incompetent government as anyone. But I can also see that things would have been no different had the Conservatives been in power - in fact, things would have probably been worse because of their desire for even less regulation of, and control over, their friends in the City. Let's not forget that the last recession - and the last time Sterling reached the depths it is currently testing - was under a Conservative government.

    So let's not kid ourselves that a change of government is the answer. What this country really needs right now is a government of national unity, driven by consensus and what is best for Britain rather than by short-term political opportunism.

  • Comment number 30.

    Human nature, is ultimately the problem being addressed. The personal interests, rewards and aggrandizement of business, political and community leaders are straight forwarg matters of public concern because of the inherent costs they impose upon everyone. These people are not worth their wages let alone bonus. That is to the nation, the adventures and rewards simply drive up costs and this from a community of leaders advocating the inherent 'value' of competition.

    Customers should be shareholders, simply buying the product, should provide shares in the business providing the product. That simple answer, empower the customer, is the answer. Those running services, finance, government and in honesty the entire economy, think very much too much of themselves and their worth. They cost everyone too much, for what are, the very simple administrative positions held. Way over the odds they cost with little that can be done about an endemis, systemic problem of overcharging and living on expenses. It is shameful and perfectly normal human nature.

  • Comment number 31.

    henry @ 13

    bonuses are a populist side issue and irrelevant to what brought the banks down

    you're very wrong - the warped "one way bet" personal remuneration structures were (and are) an absolutely key issue in the downfall of the industry - needs addressing

  • Comment number 32.

    What a lot of sterling work on this particular 'stable door', even though the chances of bankers repeating the mistakes of this particular crisis in the foreseeable future are virtually nil. Might I suggest that energy might be better used looking for the next crisis? There will be one and it will have nothing to do with current debacle.

  • Comment number 33.

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

  • Comment number 34.

    afternoon Pestonite landlubbers

    nothing new indeed; we should studiously ignore politicians of all parties and the political reporters and media who consort with them and conspire to present party politics as relevant or important to the major issues we now face - beginning with climate change and the likely failure of the Copenhagen conference later this year to come up with any substantive decisions to save us from ourselves!

    by the way, if the UK really does get rid of its 4th Trident due to a total lack of money, how will you stop me sailing right up the Thames in my gunboat the Mullered Numpty, and seizing the Mother of all Parliaments myself

    be warned, if I do, I will make all the bankers walk the plank in front of the Old Billingsgate fish market when the tide is going out; tickets will be sold for the general public to stand on Tower Bridge and wave goodbye as they go downstream

  • Comment number 35.

    #7 "The only way to ensure the banks will comply is to go back to the prudent, safe, boring way banks used to be run in the past. For that to happen, the banks need to be nationalised & placed under the control of the Bank of England as they cannot be relied on to comply with government policy and are a threat to our national financial security."

    You don't have to nationalise the banks for that. Pre-Thatcher-Reagan, British banks WERE under control of the B of E that gave each a credit rating, governing how much they were allowed to go into overdraft before the B of E charged them exorbitant interest rates or worse, invite the CEO for a cuppa - that spelled trouble. The B of E also kept tabs on how much each bank was lending so that the capital ratio could be checked - and if found lacking, on went the brakes.

    This was long before the FSA came into being with the remit to concentrate on the obedience of financial organisations to the rules (including whether risk was being calculated properly). Until then, risk was an issue also overseen by the B of E. The money market was about each bank balancing its books at the end of each day, not the ludicrous nonsense it has become: borrowing short term to fund long term lending. Crazy. Stop that for a start.

    So forget about nationalisation. Would you like politicians meddling in the workings of the bank? Look at them out of depth on what the banks are supposed to do. On one hand, rein in risk, build up capital to an appropriate ratio against lending; on the other, why aren't they lending more to businesses and mortgages; why aren't their rates tracking the base rate? Politicians don't understand simply that in these times, mortgages and business loans are fairly high risk. Would you lend your own money secured against an asset of 100% of the loan value when its price might drop substantially in the coming years.

    So keep politicians out of banking. PLEASE. Let them do what they're good at: lying and wasting money.

  • Comment number 36.

    In a Democratic & Free market Economy country the government has no right to control the business of any private enterprise. The government can only influence what happens in banks in which it has major shareholdings.

    It has not been mentioned at all that the biggest losers in this fiasco have been the shareholders of the banks, since the shareholders - both direct & through Life & Investment Funds - are also tax payers & perhaps paying even higher amount in taxes than non-shareholding taxpayers.

    The real answer to the problem both of bonuses & investment philosophy of banks lies in giving greater power to the shareholders( the real owners of any business). Rather than the Company Board dictating to it shareholders surely, as owners of the business & with most to lose, the shareholders should be telling it's employees what they should & should not do & fixing all their remuneration. Take the example of RBS, Murray Goodwin has walked away with a large lump sum & an unimaginable size of a pension for the rest of his life while the shareholders, some of whom may have had a large amount of their life saving in RBS shares, have been left high & dry. The Directors & the company employees can move on but the shareholders can have their entire future affected by the financial lose, like the families who lost their entire life savings with Maddoff.

  • Comment number 37.

    I've just had a recent contribution removed from this thread by the Moderator because he alleges I "broke house rules", which was nonsense. I notice you don't get any detailed explanation, just some garbled "rules" chucked at you and you're supposed to second-guess what it was that upset the hyper-sensitive Moderator.
    It's high time moderation was just that, moderation - NOT CENSORSHIP by BBC New Labour lackeys who after all get their wages paid by US, the licence payers. Caledonian Comment

  • Comment number 38.

    One of Marr's questions was "Do you think the Bankers just don't get it?" Well I think the whole establishment just doesn't get it, they seem to be dangerously living in another world.It is only a year since one of the concerns, here and in the USA was that mobs would be chasing Bankers down the street with a rope and possibly some politicians as well. The public expect the Govt to stop Bankers bonuses entirely and in my view anything less will leave the electorate incensed. Across Europe and Europe millions of people have lost their jobs and their homes and their lives have been ruined probably irretrievably while the Financiers are seen as just down to the second to last Rolls Royce. In my personal view people consider this to have been a calculated crime and that because there has been no retribution, they believe that Bankers have got away with the biggest financial scam ever and that the Govt's of the USA and the UK have connived at this. I think that both of these groups are deeply despised by the People and that if some kind of very firm retribution is not forthcoming the situation could easily revert and become violent overnight. The Establishment seems to have no idea of the extreme underlying depth of rage and I think Brown was right when he said that we are "a Nation waiting in judgement" but if Govt's throughout Europe and the USA do not stop bonuses, this could be the fuse that will light the waiting gunpowder keg and the people of Europe and the USA, in judgement, will be putting on their black caps and it is true that half a dozen of them were hung that would 'encourage the others.'

  • Comment number 39.

    The financial crisis just passing blew up because 1). Too much money sloshing around led to excessively low interest rates which prolonged a housing boom which prolonged an economic boom too long. This left all banks with too much money and decreasing sources of profits. Thus banks and some insurers (mainly AIG) chased ever riskier profits, firstly in Sub Prime loans and then CDOs. 2). The length of the boom led people to forget previous crises and almost everyone believed it would go on for ever, and spent accordingly, using the excessively easy credit available from point 1. 3). Following on from points 1 & 2 we ended up with a collective madness where governments companies and people spent madly mainly on credit and it all blew apart. 4). Much of the underpinning for all this was the globalisation boom which moved so much manufacturing to China and other cheap labour areas that kept inflation and interest rates too low; it also led to the massive trade imbalances that allowed exporters to create vast amounts of stored money to support the western credit booms.

    Bankers bonuses were at most a tiny element of all this. Government is primarily to blame because they all encouraged the madness, because it provided them with easy votes through constant economic growth, and provided vast sums of money to spend spend spend.

    resolution of the current crisis, sustained and sustainable growth and reduced probability of another mess in 5-10 years when the trade imbalances are recognised and serious efforts made to change them.

    At the end of the day however any free or free-ish market system that allows people to make their own decisions will end up in some kind of boom/bust. NO matter what we do now to constrain things will be bypassed in a decade or 30 years or 80 or so years, as people forget and the desire for more money engulfs society once more.

    Government cannot stop these events, just recognise them, work to reduce the impact and hopefully not get so caught up in them that they save in the good times.

    The criticism of Banker's bonuses could just as easily be applied to politicians rewards (kudos, news coverage and votes) as they respond to short term events. Government just thinks of the next vote or news headline, not even as far as the next election. So when we have a boom like recently, they don't manage it, they encourage it... and thus we come to the bust .

  • Comment number 40.

    It just shows the power of spin.

    Gordon apparently put on a "pretty good show" when interviewed by Andrew Marr.

    In fact he had rehearsed some of his spin phrases so much, I think he almost believed them himself.

    Despite his seemimgly confident interview, he is a man who has failed as a Chancellor and dithered as a Prime Minister.

    I don't support any partucular party, but I recognise a man who has the skids under him and deservedly should go.

  • Comment number 41.

    #38 "One of Marr's questions was "Do you think the bankers just don't get it?""

    What the electorate aren't able to broadly appreciate, it seems to me, is that THEY just don't get it either, never mind the bankers! By that I mean it's one thing for Joe Public to moan and groan about bankers bonuses, but are they ACTUALLY willing to translate those thoughts into action that will DO something about it? Are they willing to vote for someone OTHER than Labour or Tory, for example? Or if they moan and groan, but just never vote, are they going to bother voting next time?

    Of course the bankers "DON'T get it either!" They have chosen to live in total denial about their lunacy! The continued reason for this is....The Americans! Their legislators have become too scared of the banks to do anything, I mean ANYTHING, to actually curtail their crooked banking system.

    Gordon Brown doesn't have a clue about what's happening out there in the wider world. He even had to find out from Alistair Darling what's been happening. Sadly, Darling's been nothing, other than ineffectual, about this crisis.

    When Gordon does lose the next election, he won't even know it's happened! (Reflecting his total incompetence of what's been going on around him.)

  • Comment number 42.

    Yet more law that cannot be enforced with consistency.
    Unenforcable law is bad law.

  • Comment number 43.

    Who the hell is going to listen to Brown?
    He plays merry hell about the banks paying bonuses but what about the major fiddles ALL the MP's are on.
    What's been done about his / their expenses and 2nd homes?
    A big fat nowt as I can see.
    No matter what happens they will bleed the working class until the day they die. All we can hop is that someone will get in power whom is going to look after Jonny English first and formost.
    Stop giving money away to other countries, (especially the ones which send rockets into space) and kepp the money in the UK then the banks and the MP's can have their bonuses and expenses.
    We can then up domestic spending by 20,000% and still have money over.
    The NHS and Welfare state would be something to be proud of then.
    What could a £trillion do for our home economy / domestic spending?

  • Comment number 44.

    Isn't this whole 'banker's bonus' business just getting a bit long in the tooth? Why can't the Treasury tell us more about the true state of the economy, and it's plans for wider economic policy rather than zeroing in on what Brown & Co perceive to be popular politics? Do they think the public is so shallow we'll just swallow this frankly boring 'beat the banker' saga as being a substitute to true policy?

  • Comment number 45.

    Gordon Brown on the Andrew Marr Show, then Frank Dobson and the refugee from expenses fiddling Tony McNulty on the politics show not to mention meddlesome Mandelsson in the press are as one of a kind. One could really admire their sheer b…… mindedness if they were taking on some foreign enemy of state for us but they are taking on the British electorate. All policy eventualy impacts on our social and economic future.

    These policy inept politicians can only tell lies about what the Conservatives would have done had they been in power, which they have not for over a decade. They forget we are judging Labours record on what they have and have not done.

    What they are measured on is what they have done for the citizens of this country. That to me is to engineer a far worse economic, domestic social state and global prestigious situation for us than any other labour government has done since the Second World War beating the damage of Wilson s undermining of us and Callaghan s fiscal loses and destruction of hundreds of thousands of manufacturing jobs gone for ever and creating social mayhem for a decade.

    This crowd could not make a policy or keep a promise that delivered what it said on the tin to save their own lives so the bankers have little to fear. But when the IMF have finished with us and the printing of money without a prospect of even medium term fiscal recovery boy will we be in a mess

    These so called socially minded people have a set of policies for reforming post Victorian philanthropy but not a clue as to how to build for a modern international economy they are out of their depth and time, they should go.

    We are in a brave new world and when it come to world supply of our needs China and India have enough capacity to supply the world three times over at a quarter the cost we can. That’s the type of world we have to build our society to cope with not seek an alternative to the Victorian work-house because if we cant find a policy to handle the world as it is today. We are seriously in a mess for decades.

    Building debt and printing money is ok as a limited and very short term fix to keep us afloat but to build a debt mountain which will in due course be owned by China is not the answer to our problems or the western world’s problems.

    Ultimately though it will give China some intermediate clout but again it is not a long term solution to Chinas future either.

    So while we have some turmoil in the worlds economic fair let us get some debate going that might build some global policy to take us forward both socially and economically because you can never advance one with out the other only in short term bites as we have done for the last sixty years.

    More importantly we can not solve our countries problems without due consideration to our and every other countries needs. Fortunately by the same token the good news is that neither can they.

  • Comment number 46.

    # 19 Andyfree64 wrote

    Once again the BBC angle on this is anti-Government and factually incorrect. On the one hand Peston states that this will not restrict the size of bonuses banks can pay, on the other he says that, and I quote " particular the stipulation that the amount of variable compensation that a bank can pay out should be restricted to a certain percentage of its total net revenues" - So which is it Robert? Even you can't seem to agree!

    I cannot see an anti govt slant here and as for factually in-correct, it is not, it is what was said by the treasury, what it means is for example you can limit the total bonus pot for a bank to say £ 1 billion, but that bank can quite legally pay that £1 billion to one person. There is no restriction on the individual.

  • Comment number 47.

    This entire policy apears to fundamentally miss the point. Bankers' bonuses, no matter how unfair they may seem to the average worker, did not cause the financial crisis and their impact on it is negligible. This being the case, the restriction of bonuses should be left up to the banks and not to the government. Popular legislation against the bankers won't achieve anything and it is debateable how enforcable it would be anyway. There is no real desire by politicians for reform, now we appear to have got over the hump and instead empty legislation like this is being put in place for the piece of mind of those who are bitter about the recession.

  • Comment number 48.

    Of course it would be interesting to hear something from the treasury but people's lives have been destroyed and while it may seem boring and shallow to some there are others who are burning for revenge. Certainly I think the UK was already technically bankrupt due to PFI spending before this crisis and that is certainly down to Brown. Plus we had the connivance and what I think was the indirect encouragement by Govt. and the Banks for exaggerated self certified earnings by people desperate for a home but who were on a tightrope and I believe that is also down to Brown. Perhaps we should have a massive enhancement of the FREEDOM OF INFORMATION ACT so that we can check the basis of every Ministerial statement because,in my opinion,the House of Commons is the place that Ministers go to lie and we no longer believe any statement that is made by any Minister or any department. Effectively representative Democracy in the UK looks to have broken down. My son did a retrospective random analysis of Ministerial Statements over the last 25 years,I haven't checked the basis of his conclusions, which could be flawed, but he concluded that more than 70% of the content of statements were either outright lies or distortions of the truth.

  • Comment number 49.

    If you own banks outright and are majority shareholders in most others, why do you have to legislate to stop them paying bonuses?????

    Bank bonuses are an effect, the way to stop them is to deal with the cause. The cause was Bankers getting their hands on other peoples' monies and using it in a risky manner that the rightful owners were dead set against.
    This was the monies that the risk averse saver had deposited in High St and Main St savings accounts, they were content to receive a modest interest return knowing full well the banks in turn performed a social function by loaning their monies onto businsses boosting the businesses and giving the banks in turn a modest but, save profit on the deals.

    This sensible and safe practice endured the test of time from 1933 through to 1999, then the act that offered protection to this sane and sensible arm of banking was removed. The repeal of the Glass-Steagall act led to bankers accessing these monies, not for any social benefit but, purely to allow them to play casino with it. They invested these monies in the riskiest of products ones that Warren Buffet would not touch with a barge pole refering to them as " financial products of mass destruction".

    Was he ever right. It took time for the worthlessness of these products to unravel, long enough for the bankers to trouser their bonuses and Governments to spend their increased tax revenues. All on an illusion of profit that emptied every High St and Main St account in the Country.

    The potential for this to happen all over again still remains, in fact it has already re-started but, never mind sometime, maybe, never, Gordon is going to legislate on banker's bonuses.

  • Comment number 50.

    new regulations to curb bankers bonuses well it must be the tip of the iceberg, this prime minister has over seen the ruin of this once great country and its relegation to a laughing stock.
    we the people should be ashamed of ourselves allowing this to happen, it is time we stood up and demand a government that works for us rather than overseas powers or their own pockets.

  • Comment number 51.

    All very well, but where's the closure on this financial mess? Why have we not seen any heads roll of the primary creators of the problems that have led to millions of people lose their homes, jobs, pensions, decimate any income from savings and absolutely RUINED the lives of many ordinary people??? The banks are doing OK now though I hear so thats all right then is it??
    We need to name, shame and imprison those at the root of mess - and quickly.

    Why did the UK and USA governments allow the massive taxpayer stimulus money go straight into the banks funds, without any strings attached, JUST so they could gamble more on the stock market and directly fuel the current stock market bubble instead of lending it to businesses and ordinary people, as the stimulus was intended???

    Like most ordinary guys I am stumped, confused, frustrated, angry, bitter and downright appalled at the way all the key players are just back at their old jobs doing the same old things without a matter of any correction or closure - and seeing those people who created these clever "financial instruments" - derivatives, Credit default swaps, CDO,s etc etc "in the nick" where they belong...

    Also - WHERE DID ALL THE $ £ TRILLIONS GO?? nobody knows - s'funny that innit?

  • Comment number 52.

    If the country recycled waste like Brown recycles his "Statements" we would be hitting 100% success.
    More useless waffle. Even if someone did restrict bonus payments they will find another way to take the excessive profits.
    The system is wrong that allows "gamblers" and "investment bankers" to be so one sided that whatever happens they come out super winners whilst the pension funds and other investment deposits pay derisory returns.
    The whole investment and banking system needs massive doses of clarity and honest promotion.
    That will only be achieved by regulation unfortunately

  • Comment number 53.

    This might have helped ten years ago when it should have been done.

  • Comment number 54.

    For those who haven't seen it yet, I recommend watching on Dan Pink's excellent presentation on motivation -

    Management summary: bonuses only work with menial tasks, and are counter-productive with tasks that require creativity and the qualities you are expected to deliver in a "knowledged-base" economy.

  • Comment number 55.

    I would like to see Gordon trying to load 100 hogs in the back of a lorry with one stick is futile. There will always be the expert manoverers who will dart back at the earliest opportunity from under his feet.Same trying to impose the law on bankers bonusses.It's a no win game. The banks are slushing it elsewhere where he can't get hold of it. Plainly obvious.
    I thought I understood this right ? A couple of months ago with Tim Geithner (US) both were against curtailing bankers bonusses. So now Gordon has moved his goalposts.Angela Merkels German wahlsieg is far more interesting.

  • Comment number 56.

    cromer @ 39

    bonuses were at most a tiny element of all this

    you're wrong ... a very large part of the problem in the industry was behavioral and what do you think mainly drives the behaviour of the key players in these institutions?


  • Comment number 57.

    steam driver @ 55

    trying to impose the law on bankers bonuses is a no win game

    wrong - we impose the law - they can't pay the bonuses - we win

    please don't fall for that "they're so clever, they'll just get around it" nonsense

  • Comment number 58.

    Mr Brown when talking about bank bonuses said he wouldn't allow bonuses like in the 'bad old days'. Would they be the 'bad old days' when as Chancellor for 10 years he did absolutely nothing about bank bonuses?

  • Comment number 59.

    Ah you think that these products wouldn't have been invented if traders weren't paid bonuses?

    I disagree with this sentiment as super-senior CDO-style financial products were in my opinion an inevitable by-product of the relentless hunt for yield amongst investors during the boom years.

    And if RBS etc don't pay any bonuses this year a large number of their top staff WILL leave thereby weakening the company. If people calling for this are happy to see this happen then great, why not just go ahead and say this outright?

  • Comment number 60.

    "All very well, but where's the closure on this financial mess? Why have we not seen any heads roll of the primary creators of the problems that have led to millions of people lose their homes, jobs, pensions, decimate any income from savings and absolutely RUINED the lives of many ordinary people??? The banks are doing OK now though I hear so thats all right then is it??
    We need to name, shame and imprison those at the root of mess - and quickly."

    Find out who in the US was behind letting Lehmans go bust; then get all the regulators who simply sat there and watched it building up. Let's face it, we ALL knew about the hugely inflated propery prices, the bubble, the wreckless lending. How come the regulators - the FSA, the very organisation supposed to stop this (and the SEC in the US) didn't do anything about it? Then there are those who were taking a huge tax take from the bank profits (and bonuses at 40% you bet) and NOT reinvesting it in industry; not saving it up for a rainy day.

    Those are the people you need to deal with. Don't even THINK that Brown and Darling are being sincere in their caning of the banks. They knew very well what was happening. And I'll bet that Brown has that sinking gut feeling knowing that if he has his way nailing down the banks, that huge tax flow has gone for a very long time.

    Until all this kerfuffle started the banks thought they were doing the right thing and doing it well. Then....Lehmans.

  • Comment number 61.


    However you try to rewrite history and shift the blame to Bankers bonuses, history shows that this recession was part of a credit crunch, assets bubble burst, debt/credit bubble burst in part driven by the spend now pay later policies of the current Government, which 'Joe Public' and businesses took as cue to do the same.

    What the banks in the UK did was service that demand albeit with increasing funding gaps between what they held as deposits and what they lent (Risk now increased), in 2001 there was no funding gap and in 2008 it was near £750 bn, this gap created by loans demanded by Government, businesses and individuals. Yes they (banks) made money from the loans, bonuses were paid - but who led the charge on borrowing, one GB as Chancellor.

  • Comment number 62.

    I think Brown and pals are focusing on bankers bonuses to move attention from the real rip-off going on: the fact that banks are charging new mortgage holders a margin of 400-600 basis point above the base rate. My home mortgage (taken out a while back) costs 0.9% above base, a new one I have just had to take out is costing 4.5% above base.

    I'm sure you do not have the same motive Mr Peston but you seem to be focusing on the rather academic subject of bonuses too....

  • Comment number 63.

    I agree with those commentators who argued that banker's bonuses played a significant role in the casino banking madness which has almost bankrupted Britain. Of course, negligent major shareholders, regulators asleep at the desk, corrupted rating agencies, financially uneducated boards, silently colluding pension funds, politicians not understanding economic cycles and new financial products, all are also to blame. Still, in the end it was the banks failed speculation and bad investments that held the UK tax payer to randsom and we are all paying for it now. Whilst Labour has been asleep on these matters, I would expect the Tories to have been similarly subservient to the City of London. Looking forward, what can we expect from a Tory party, with their Deputy Chairman Lord Ashcroft, who is making his money in the tax haven of Belize, first exploiting the really poor citizens in Belize and then using the money, via his UK companies, to corrupt British politics.
    The consequences are well explained in the following article:

  • Comment number 64.

    should be no restrictions on bonuses except to change the way they are paid eg in share options, over future time period to reduce short term risky behaviour.

    however the huge sums given to the financial sector by the tax payer should be re-paid by companies who have benefited directly or indirectly eg a new financial industry tax. otherwise the 'loan' is effectively financed by the public sector in terms of reduced services/salaries.

  • Comment number 65.

    To quote ' the legislation will cover much wider ground than bonuses, picking up the urgent parts of the Treasury's recent paper on "reforming financial markets".

    I would love to have earned the bonuses of bankers, I am sure I saw many driver bankers today ( I saw 4 Aston Martins!). But the issue is not the bonuses but surely the key measurement systems of Banks and Finance Houses of Capital to Lending. HBOS, B&B etc. used commercial products (i.e. repackaged securitised products) to extend their capital.

    Surely it is not beyond the wit of the FSA/BofE et al. to monitor this?
    The bubble in the Finance Sector was easily perceptible from 2003 onwards. What the layman didn't know was what was driving it. How come the Regulators couldn't measure it?

    If you as a person breaks out in boils the doctor hopefully tries to find out what caused the boils. For boils read bonuses. How come the boils of the bonuses were not read as an underlying problem of excess in financial metrics?

  • Comment number 66.

    No 62
    "I think Brown and pals are focusing on bankers bonuses to move attention from the real rip-off going on: the fact that banks are charging new mortgage holders a margin of 400-600 basis point above the base rate. My home mortgage (taken out a while back) costs 0.9% above base, a new one I have just had to take out is costing 4.5% above base."

    But the banks are doing exactly what Mr Brown wants: lending wisely. House prices might still fall; jobs will still be lost; not every mortgage will be repaid on schedule and so the risks are higher. Then there's Brown's other demand: that banks build up their capital so the ratio between it and loans is a little better than when the gov and FSA threw capital adequacy issues to the wind. They won't do that without accumulating some capital. So Brown (and you) can't have it both ways: a sound, prudent, well capitalised banking system; or a flimsy, risky house of cards just waiting for the next financil draft.

    Don't blame the banks. They thought they were doing the right thing all along with their risk-taking. They were ALL at it. The regulatory bodies turned a blind eye and Brown dribbled over the massive tax he took. And no one complained before about "the bonus culture" - it's been going on for thirty years. So....just because Brown is under fire and desperate to blame any- and every-one else is no good reason to believe him, no reason to trust him overlording the banks.

    He has made too many mistakes in the past - we all know it - so I'd sooner he was fiddling around with bank bonuses than getting really immersed into our bankiung system. Look at the Tax Guide: through his reign it's gone from about 100 pages to several thousand. Imagine getting his latest greatest "bank regulations" in with your bank statement. It would come by fork-lift truck to your doorstep.

  • Comment number 67.

    Several posts say that bankers' bonuses are a very small part of the whole dismal financial picture at present - which is undoubtedly true. Nonetheless, these outrageous bonuses are still the factor that most ordinary people who take an interest in this financial crisis we are still in (which is very many of us, especially those who have been particularly personally affected), do have strong feelings about.

    Please don't minimize the impact of admittedly controversial screaming headlines in the media about the Fred Goodwins of this world, either retiring on undeserved fat pensions or else taking home unbelievable amounts of extra cash bonuses on top of unrealistically high salaries, at fairly regular intervals.

    Many of us are very angry, yet feel personally impotent - our politicians have the power to take tough action - yet they do not. Why not? I agree wholeheartedly with 'newshounduk' on post #7:

    "We've heard plenty of tough talk from Gordon Brown and Alistair Darling but very little if any action.Even if they did start to get tougher with the banks you couldn't help but think that the situation could have been avoided if the government had placed legally binding agreements on the banks when they loaned them all that taxpayers' money in the first place."

    Quite. Why wasn't this done at the time of lending so much money to the incompetent and greedy banking system, or even now?

    I applaud Holland for taking the initiative to do so now, even though it is rather late. At least one developed country has the guts.

  • Comment number 68.

    In a free market economy you cannot legislate the market price for labour.

    The US isn't going to. If we look like succeeding in this Canute like exercise, say goodbye to London's prime industry.

    Look, some banks have really screwed up and should have been allowed to fail and have the carcasses picked over by those left standing.

  • Comment number 69.

    #68. StopFiddling wrote:

    "In a free market economy you cannot legislate the market price for labour."

    But banking is not a free market! And contributes to the reasons that it is out of balance. Banking is a highly protected market with insurmountable barriers to entry so please do not use arguments that it is a free market because it is almost the absolute antithesis to a free market!

    "...say goodbye to London's prime industry..."

    No need for us to say it, the banks have proved themselves so incompetent that they will kill it all by themselves. They blew it all by themselves. They needed bailing out so, again I totally, disagree with your statements.

    Perhaps you haven't noticed by we, the real people, outside the banks have poured billions of pounds into them from our savings and hard earned wealth to prop them up! We will also have to continue to do so for a generation just to make sure that they stay in business - they are like leeches sucking the lifeblood from the Nation! Every British subject has already paid some 30,000 GBP and we will have to pay much more before this is over. (on the basis of GDP/capita)

    The problem for Britain is that we have to bailout the international activities of our 'wonderful' banks - that's right, if a British bank messes up, in say, South America the British taxpayer has to step in and these are "London's Prime Industry" - some industry!!!!! The only 'industry' they know is stealing the wealth (and subverting the democracy) of the Nation. We are in by far the worst situation of any nation in the World because of our supremacy(!!!) in Banking!

  • Comment number 70.

    #67. SquirrelSM wrote:

    That bonuses are important...

    However, if you ban my bonuses I will simply have my salary put up to compensate! - If I do that, and not call it a bonus - it will then be OK with you, will it?

    It is their pay that matters and they have been very successful in diverting our attention to bonuses and away from what really matters!

  • Comment number 71.

    It is the tone, rather than the content of Mr. Brown's comments which scares me the most.

    For forty-plus years I served in the banking industry, rising to a level perhaps close to that of the modern group board.

    My concern relates to the paragraph;

    "But for the avoidance of doubt, this would be a restriction on the funds available to a bank perceived as too weak to pay bonuses".

    In the UK that would seem to suggest those institutions having received public funds, i.e. RBS, NR and LloydsBG. These are the very same institutions which MUST succeed for the sake of us all - they are effectively owned by every one of us. If Mr. Brown introduces legislation which prevents them from offering competitive packages to the brightest and the best, they will surely faily. Any our money, every one of us, will be lost.

    Those who took the foolish gambles have long since fallen on their swords. Or they have been culled. Those who remain seek to repair the damage, for the benefit of the tax payer. Those capable could easily move elsewhere.

    This misguided legislation has the potential to destroy our taxpayer investment.

    Lets get this clear now. If we target the 'weaker' banks, we are targetting OUR OWN PUBLIC INVESTMENTS. And we won't hurt Sir Fred & Co in the least. The phrase 'cutting off one's nose to spite his face' springs to mind..

  • Comment number 72.

    So what? Will anything change? Doubt it very much. Same old same old. Meantime, the fires of Rome burn as Nero fiddles!

  • Comment number 73.

    Sounds like Gordon has finally realised....
    "Banker Bashing" wins votes.
    And there's an election coming up.....

  • Comment number 74.

    Does this all make for a better banking industry
    Will this create more jobs?
    will all the fraud in the system be found out? (i am sure there is more to be found)
    Will I find a job and stop my own panic?

    Should I vote Lib dem?

    Big questions on the' street'

  • Comment number 75.

    I wish I could gamble then say it was not my fault, could I have my money back.

  • Comment number 76.

    This is indeed intended to calm the natives. It fails to calm me. These people have damaged thousands of lives - remember the food riots in many parts of the world. People were buying wheat in the city markets, pumping up the price, and leaving the poor of this world to go hungry!

    In saying that, don't think for a minute that the Tories would do anything to regulate the markets properly. They'd hand the bonus boys even more of our lolly while we have our services cut way too deep in order to pay for further rewards to the gamblers. Remember, these gamblers are no more than poker players.

    Every government in the world is running scared of these guys, these gamblers. I think we need Sir Geldof to giving them all a good verbal kicking on camera. If that doesn't wake them up, then nothing will.

  • Comment number 77.

    More and more, people are waking up to the lies that we are fed every day by the PARTY POLITICO'S

    I had to laugh at BBC news tonight when they quoted Gecko Brown as claiming that the Tories will just let free market anarchy rule if they are voted in!

    This, on his return from Pitsburgh...where NO Glass-Steagall type legislation has been implemented to separate casino investment banks from retail no ban on bankers bonus's either.

    I just wonder which bank Brown will work for once he loses office. The compliant are ALWAYS well rewarded after their tenures in office (ala one T. Bliar)

    Hate Labour, hate Tories and hate Liberals etc.....they're all the same...VOTe OUTSIDE THE BOX!

    Watch-out for the next bubble!

  • Comment number 78.

    horreur @ 59

    do you think that these products wouldn't have been invented if traders weren't paid bonuses?

    hello again! - no, I'm sure they would have been invented and I have no problem with that - I'm a big fan of both sub prime (i.e. the democratisation of credit) and securitisation (fabulous idea) - the problem was NOT the products per se, but the misselling and the mislabeling of same (with the collusion of the ratings agencies) - and a big driver of that (not the only driver by any means but a very significant one) was the crazy levels of personal remuneration ... the bonuses ... on offer to the players

  • Comment number 79.

    I just love the last bit in this music video by Muse

  • Comment number 80.

    alfred @ 71

    if we target the 'weaker' banks, we are targetting OUR OWN PUBLIC INVESTMENTS

    I agree that's sub optimal ... we should target ALL BANKS

  • Comment number 81.

    John_from_Hendon wrote:

    "A real Socialist, not Mr Brown, would introduce a maximum wage! But Gordon Brown is not a Socialist - he is a open and unabashed Tory!"

    No John, Gordon Brown is a socialist and the leader of the Labour Party. Like the Labour Government of the seventies before him he has, true to form as a socialist, led the country into bankruptcy once more.

  • Comment number 82.

    #34 Mr Pirate

    Ahoy there!

    Have you been stuck in the doldrums?

    Mrs Bloggs

  • Comment number 83.

    Will banning the old bonus regime help the risk equity capital problem so that we can create more new value adding companies and export more so that we can have a more balanced economy? No - of course it won't.

    Frankly I couldn't give a monkey's as to the size of a banker's bonus if we had Germany's industrial capability and capacity.

  • Comment number 84.

    Its drivel

    Press release and spin by bogeyman and...

    Bankers bonuses are bogeyman of the week again
    Swine flu made a valiant attempt to break back into the news last week
    Global warming rears its ugly head from time to time
    Iran looks like it might be a returning bogeyman
    Terror - there's one we haven't had for a bit

    These are attempted distractions from incompetence, avarice, a completely undemocratic government, erosion of civil liberties, various strikes, nearly 3 million unemployed and hideous sums of government borrowing which no doubt would be more if there weren't a few bonuses to be taxed at 40% or shortly 50%

    In comparison, this is just drivel

  • Comment number 85.

    This 'bonus' legislation is almost laughable. It will result in longer speculative booms, is all.

    As for that 'Central Bankers' special macro policy stuff (which they themselves qdmit won't work - the information is too noisy and the 'remedies' can be counter-prodctive (they don't know whether or how!)) even if they could dampen a bubble that wouldn't stop the damage bubbles do.

    The rich can still get richer by using the authorities-driven downturn to raise profits, high salaries and bonuses at the expense of wages.
    Japan suffered (via an interst rate hike in the late 80's) as America required she should, to preserve US hegemony.
    (Figs A and 4 in the link below)

    But within that pattern, in the Lost Decade, at first all suffered but then the rich gained at the expense of the poor:
    Figs B, 1 and 3 at

    [Unsuitable/Broken URL removed by Moderator]

    And capital's gains are real then, unlike those in the house booms where 50,000 on your house means the house you plan to move to went up too.
    Capital can benefit relative to labour in booms, obviously, but in depressions too, On a world wide scale it seeks cheaper labour and cheapens it as necessary. Then relative price falls of output and labour can be strongly beneficial to capital
    And it is that price relative which ensures that labour works for capital to capital's idle content and labour's discomfort.

    We have already seen how capital can benefit here with catastrophically falling wages. On a world wide scale capitla will find even cheaper sources of labour than China and India to undercut her competitive effort (wrt US capital) and further to impoverish labour here.

    Bubbles, crashes and credit crunches are always and everywhere devices designed for the long term benefit of capital a the expence of labour.

  • Comment number 86.

    #81 goldmy2centsworth

    Now just what Socialism would you be referring to?...would that be Jewish International Socialism oder National Socialism?

    Yours and JFH's usernames belie your psuedo argument!

  • Comment number 87.

    The extent to which Joe Public has been ripped off by the banks is quite brethtaking.

    Poor old Joe - he saved hard from his post tax income and put his savings in a bank because he didnt want to risk losing it. The bank then decided to gamble with a multiple (up to 35 times) his deposit. Unfortunately their bets went bad and they lost it all. However the bankers had earned bonuses from the trades by pretending they were profitable.

    So then the banks went back to Joe Public, via the government bail-out and demanded that he stump up the 35x they lost. So poor old Joe got saddled with a debt, via the government, of more than he had invested.

    All of this was so that the bank could still be able to return Joe's original deposit should he ever ask for it. This is what Gordon Brown called 'saving the banking system'.

    In spite of the fact that what the banks had been doing was clearly fraud on a massive scale, nobody went to prison. In fact, the bail-out money was cleverly used to make it look like the bank was still making a profit, so yet more bonuses could be paid.

    What is the net effect of all of this? Joe public and his children/grandchildren are enslaved into a lifetime of debt while the bankers get off scot free with all their bonuses! What did the G20 agree to do about this? Provide further bail-outs and increase the national debt even further, while doing nothing about the bonuses!

    You could not make this stuff up.

  • Comment number 88.

    ahoy mrs bloggs at #82

    I'm still engaged in my summertime piracy on the Great Lakes; cigarette smuggling has proven to be highly lucrative too, though winter approaches so I might pop back to austerity Britain soon

    Haven't felt the desire to post to Peston or even the delectable Stephanomics blogs over the last few months as the topics have generally seemed stale and repetitive

    Given what we're doing to the environment, this whole financial crisis is a tempest in a teacup, IMO, though our inability to deal with either is telling!

  • Comment number 89.

    To me Wee-Scamp says it all in post # 83:"Will banning the old bonus regime help the risk equity capital problem so that we can create more new value adding companies and export more so that we can have a more balanced economy? No - of course it won't.

    Frankly I couldn't give a monkey's as to the size of a banker's bonus if we had Germany's industrial capability and capacity."

    Britain does have an unbalanced economy based on a service industry (banks at the hub). You cut my grass (with a Japanese lawnmower) and I'll do your washing (with a German washing machine), and at night we'll sit and watch politics on BBC using a Chinese TV. And you wonder why you've got problems! Worse still you think the banks caused it. Precipitated the problem, maybe.

  • Comment number 90.

    an interesting article but a mistake you make is ;

    "Well that seems hard to sustain. In the Netherlands, for example, a ceiling is being imposed on the absolute amount in bonuses that any particular banker can receive."

    This is not correct, the limit is only on directors of banks in the Netherlands. There is no limitation on how much non-directors (e.g traders) can earn.

  • Comment number 91.

    If talent has to leave the UK there is not doubt that Sagamix will still be around! Can you really make more stupid and arrogant comments? At this level maybe it requires some talent!

    So Sagamix is a great fan of the subprime and the democratisation of the credit, well be happy now you have the democratision of the losses! So daft!

  • Comment number 92.

    More Labour lies.

  • Comment number 93.

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

  • Comment number 94.

    3 says it all - the most dishonest Government in living memory (worse even than Lloyd George?!) combined with the most venal group of bankers (except perhaps those who exploited the defeat of Napoleon 1815) Roll on the next election and please punters give us a hung Parliament where they can do no more damage.

  • Comment number 95.


    Because Germany has no financial sectors? Sagamix your ignorance seems to have no limit!!!

  • Comment number 96.

    For once there may actually be some sense in the GB proposals (not much though). The issue has never been the size of any particular banker's bonus. The issue was always about how much capital was the bank retaining to cover loans and that depended on how risky or otherwise the bank's business was.

    Both banks and regulators completely mis-understood the risk and therefore completely mis-assessed how much capital should be retained. As a side issue the accounting rules for whether the bank makes a profit or not on any particularly deal helped cover up what was happening.

    I have said it before and will keep repeating it until someone shows why I am wrong - it makes no difference whether the bank pays out big bonuses or big share dividends, if the amounts are the same as a percentage of earnings. In both cases money leaves the bank and as a consequence the bank has smaller retained earnings so cover future losses.

    So FSA should have the power to specify for each bank how much they can pay out in bonuses or share dividends. After that it should be between the bank's directors and its shareholders how much goes in bonuses and how much in share dividends

  • Comment number 97.

    #81. goldmy2centsworth wrote:

    "No John, Gordon Brown is a socialist and the leader of the Labour Party. Like the Labour Government of the seventies before him he has, true to form as a socialist, led the country into bankruptcy once more. "

    It is a funny sort of socialism that increased the division between poor and rich and that is exactly what has happened. It is a funny sort of socialism that has left the country totally in hock to the banks. It is a funny sort of socialism that started out by saying that it would carry on with the previous Tory government policies. This funny sort of socialism is not socialism at all but a veiled Toryism. I think I can easily offer a very persuasive argument that New Labour 'socialism' is in fact Toyrism by another name. (And this is why the red top press 'allowed' the country to vote for it!)

    The reason that the country is bankrupt is that unrestrained, but highly protected (un) free market banking has been unconstrained by rationality, arithmetic or common sense and of course with the full support of the Tory (New Labour) government. The Banks 'knew' that the government has no choice but to bail them out and so they could indulge in the most stupid and absurdly risky and insane schemes to enrich themselves at the cost to the rest of us.

    New Labour did not produce a Socialist government, but a closet Tory government. It can also be argued that if the Tories had themselves been in power (e.g. John Major who is after all a banker) might have constrained the absurd banking excesses of the last decade remember however that dash for financial services that has destroyed the Nation was a (real Mrs Thatcherite) Tory project. If New Labour had been a Socialist party they would have immediately, on coming to office, cut financial services down to size and boosted manufacturing for a more balanced economy!

  • Comment number 98.

    In bonuses in the banking industry are a concern, and they are, and the issue must be broadened to include all forms of compensation in every industry. They must address the issues raised by the disparity of incomes. Why are bankers paid what they are? On what basis? But these questions apply to not only bankers. And society has no answers.

  • Comment number 99.

    "restriction on the funds available to a bank perceived as too weak to pay bonuses, not on the size of any bonuses that any bank wished to pay to individual bankers (even the weaker ones)"

    - well that's a no-brainer then isn't it -- no bank is too weak to pay bonuses, and take the pool - restrict it from the staff - for the chiefs. Come to think of it that's what happened last time.

  • Comment number 100.

    So let me understand this,

    Brown et al are going to enshrine in law that performance related pay can not go above a certain amount or will be time limited

    Will these new laws only apply to the financial sector? Will it include commission sales too? Civil servants?

    If these laws are enacted will it close all those loop holes that bankers currently use to pay themselves extra?

    Will these new laws actually claw back any extra tax to the treasury?

    Why are we further hamstringing our zombie banks against those which didn't take the state aid? Are we in effect encouraging the brighter and more profitable bankers to seek employment in other banks away from these shores?

    What effect is this going to have on the UK financial system? Wouldn't it have easier to just let them go to the wall to show that no bank is too big?

    Is it also true that RBS was not insolvent, merely illiquid, and the lender of last resort (BoE) refused to provide the funds that the banking insurance levy should have provided? If so, why did the government/BoE follow that policy?

    Does Lloyds now have recourse in law against the government for not disclosing everything about HBOS?


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