Labour bets on bashing bankers
The chancellor and the prime minister are certainly not lowering the temperature of their attack on banks' bonuses.
Which, I suppose, is significant - even if there's nothing new of substance that they've announced in the past 24 hours or are likely to do in the next 24 hours (see my note of yesterday).
Let's be clear: British banks have already changed their bonus practices fairly significantly over the course of this year, largely due to pressure from regulator, ministers and public opinion.
In particular, for senior bankers, cash bonuses paid at the end of the year and available immediately to snap up the bright yellow Lambo, well they're a beautiful memory.
These days so-called variable compensation typically cannot be pocketed in the year that it is earned. Distribution of readies is deferred and subject to so-called claw-back, linked to the future profitability of relevant deals and the bank as a whole.
But don't cry for the bankers. They can still earn in a year more than many earn in a lifetime, even if they have to hang around for a bit to bank it.
Which remains something of a sore point for millions of taxpayers, who are more-or-less aware that almost no bank would be standing today if it weren't for the £1.3 trillion of support given to them by the state in the form of special loans, investment, guarantees and the creation of new money.
And the bits of their banks that are doing so well this year, the investment banking bits, are profiting from the frantic scramble by governments and companies to mend their finances - which in a way is to say that they are making hay from the resolution of an economic and financial crisis after having made a very special contribution to the creation of that crisis.
If this is an example of modern distributive justice, some would say that Genghis Khan was a caring, sharing leader.
So who can be surprised that Gordon Brown and Alistair Darling want to tap into a national sense of outrage by creating the impression that the banks haven't yet gone far enough in reining in pay?
But what more do they actually want from the City?
Presumably what they would like is to see a serious reduction in the amount bankers are actually paid in this first year after the debacle of last autumn.
So the question, I suppose, is how responsive the banks will be to what's known as moral suasion - or pressure from the chancellor for them to voluntarily slash bonus payments this year.
Alistair Darling will have more of a sense of this later this week, when he's meeting the chairmen of the banks' remuneration committees.
Here's a funny thing. At least one of your biggest banks is actually quite relieved by the bonus-bashing: Royal Bank of Scotland.
It and Lloyds - as the banks most conspicuously rescued by taxpayers - are more constrained then most in their ability to pay bonuses.
And the constraints on them will become more severe, because they are perceived by the regulator, the Financial Services Authority, to be short of capital (the buffer against potential losses).
Which is why they are being forced to insure their loans against future losses with taxpayers through the Government Asset Protection Scheme (GAPS) and/or raise additional capital from investors.
They are therefore most in the firing line to have a limit placed on the respective pools of money they can set aside for deployment in the form of bonuses, according to the stipulation made on Friday night by G20 leaders Pittsburgh (again, for more detail on this, see yesterday's note).
This is more of a worry for Royal Bank than for Lloyds, because it is bigger in the bonus-paying businesses of investment banking.
So if only the chancellor can shame Barclays and the other big banks not to use the lure of fabulous bonuses as a recruitment tool, Royal Bank will find it so much easier to attract and retain all those invaluable traders and financial engineers (which, I suppose, warms the cockles of all us, as de facto owners of this bank).
In a curious way, Alistair Darling and Gordon Brown are doing a favour for the bank owned by taxpayers, Royal Bank of Scotland, by endeavouring to kill the bonus culture everywhere.
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It's all just so much spin!
Labour had a chance to head the Greedy Bankers off at the pass, when they handed over all OUR money to them.
The money was supposed to be used for mortgages and small business loans, but because Labour "gave it away without any strings attached", the bankers used it instead to recommence their greedy life styles and started paying themselves massive bonuses again.
Just ask anyone who's tried to get a mortgage recently, just how easy it is? . . . NOT!
If Labour think this is going to save them from electoral wipe-out, then they are even more deluded than we thought.
The best thing Labour can do for this country is call an immediate General Election and let the people decide who they want to fix the mess that we are in.
And let's face it . . . it WON'T be Labour, will it.
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labour bets on bashing bankers is all well and good but look at their overall rhetoric all they seem to do is attack to opposition, the bankers, military etc etc they never have the answer though.
any monkey in a suit can look good whilst attacking things that have failed or are in need but ask it to do the job of correcting the problems and it will throw its bananas out.
the good people of this country deserves a government that will work for the good of the country first and foremost, not for the good of its party members itself then maybe the country.
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I am so sorry for all of these banks and the staff. Now they all seem to be lending to each other, or putting the money under the mattress against the next rainy day they are creating.
Do we, the public, get any return out of all of this?
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From what Brown et. al. have said at their conference it is just announcing things that have already been announced, wrapped-up in "tough sounding words" but really no change and not particularly tough (e.g. no as tough as the Dutch) and still following Brown's "light touch" system.
All party conferences are about Spin and PR and Brown is desperate so will say anything to try and head of complaints from his party. Does not matter what impact it might have on anybody, if it allow him to stay in power for an extra 10 mins then he will say and do it.
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Lord Mandy stated on Today that we should be re-strutring the UK so we were not so dependant on the City of london!
We be causing a Mass Exidos NuLabour will succeed!
HSBC has anounded they are leaving, a wonder which of the bing banks will have their head offices and trading floors here in 5 years time?
Just remember that 40% of bonuses goes straight to the Tax Man and the City pays 20-30% of ALL tax in the UK, If they leave who is going to pay off the national debt?
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Don't believe anything that they say re the bankers!
It would appear that Gordon and his henchmen can dish the smears out (re Sir Gen. Dannatt)...but they certainly can't take them.
Lord Mandelson criticises BBC for questioning Gordon Browns health
http://www.telegraph.co.uk/news/newstopics/politics/gordon-brown/6238509/Lord-Mandelson-criticises-BBC-for-questioning-Gordon-Browns-health.html
Are there no depths that these shysters will not sink to?
JUST KEEP TAKING THE PILLS GORDON!
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Labour were always going to turn this into a class war, their sole chance of any kind of survival post the next election is to portray the tories as laughing at the poor poeple losing their jobs and homes while the greedy bankers continue to reap the rewards of their almost criminal behaviour. And if you hol d that view then go and vote GB on whatever date he has worked out is the absolute latest he can go to the polls. But the truth is, and people are waking up to this, is that when New Labour came to power in 1997 Tony Blair recognised that the tories had got the public finances of this country back on track after the disasater of the Labour governements of the 70's and yes we needed to spend a bit of money here and there to bring some things back up to scratch so people thought OK, have a go for a bit, you seem like a decent sort of chap. But since TB left an GB took the helm, the true Labour Party has come back into the accendency and low and behold, two years in and the country is on its knees. Now you can "blame" the USA and the sub prime mortgage market, but the truth lies much deeper than that. Look to the stealth taxes GB implemented whilst at the treasury, the robbery from the pension funds for example. Well if you are going to tax the growth of pensions at a time when returns are 5 - 6% pa then that shortfall has to come from somewhere and that somewhere was deregulation the deregulatin that allowed derivative trading to become the norm. I could go on for hours and I porbably will - as Paul Weller once said, but the old adage that Labour bankrupts Britain is as true today as it has ever been, so keep peddling your politics of jealousy Labour, because everytime you open your mouths the tories get another vote. Oh and one more thought, next time Labour introduce another ill thought out law, a pertinent question would be, does this law apply equally to Labour Ministers as it does to the rest of the population, Neil Hamilton, owes this country a huge debt for the election of Labour in 1997, luckily Baroness Scotland is reversing the situation.
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Isn't there a way to tie bankers' bonuses (and even their pay) to socially useful investment? Sort of like forcing them to do the job properly rather than stuffing their pockets any old way.
Or link them inversely to national debt? The more debt rises, the smaller the bonus.
And if they leave in droves - wouldn't that be good news for unemployment? Couldn't we then get new graduates in linked to good practice?
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#5 icewombat wrote:
"Just remember that 40% of bonuses goes straight to the Tax Man"
Just remember that 100% of the money any bank has belongs to the customers. Billions in bonuses are paid for my 'eye watering' high levels of interest on small business loans etc. Whilst the depositors get a fraction of a % in interest.
The mass exodus has already started (they put their bonuses in off shore accounts years ago to avoid tax) and the are just fleecing us for the final amounts before they disappear to ponzi island all inclusive resort)
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What about those of us who work for banks, but have no say into any financial decisions as we're too busy trying to keep the technical infrastructure working and adding in changes to systems based on regulations?
It seems to be a case that if you work for a bank, YOU are responsible for the fall of Western civilisation, but all I want at the end of the year is a recognition of all the hard work I put into this place.
Don't tar us all with the same brush.
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Does anyone still believe that big pay attracts big talent? All the evidence shows that big pay attracts only the greedy and the unscrupulous. Big bait attracts big sharks.
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We will have to spend the next few days admiring the smoke screens.
Sure, bankers pay is an issue but it has been a critical issue for almost the last year and nothing yet has been done.
How about the regulators pay? They didn't exactly cover themselves with glory either but they seem to have expectations based on the back of the bankers compensation.
We will hear all this nonsense about bankers pay, Tory cuts and unemployment but who has been in charge these last twelve years? Who is complicit in causing the banking collapse? Who overspent even in the good times? Who did not support the real value-added element in the UK economy? Who was prepared to allow the value-added element in the UK economy to suffer a death of a thousand cuts so that their banker friends could be allowed to let rip?
Sorry Labour: it is all your fault. You deal with it and stop blaming everyone else under the sun. We have had enough of your dissimulations and lack of candour. You are just a bunch of incompetents who have sold the country down the sewer.
The cuts in the public sector which are coming are entirely the fault of Labour and, you know, in a situation where young women are now not allowed to make their own childcare arrangements without the prospect of being criminalised I hope the entire public sector gets shredded to ribbons as it has quiet obviously gone mad.
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Darling ‘asks’ bankers to ‘Gonny no dae that!’
More spin and drivel from the useless clowns (Both of them) at the helm of HMS Titanic, they will get wiped out next May. The Tories?
I suspect they will be even worse! Their policies will lead us back to desperate times, people voting for this lot should be afraid, very afraid!
I hear New Zealand & Australia are always on the look out for good engineers, lucky me.
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#10 Myopicaardvark
Either: you are lower down the management chain in which case no one holds you responsible for the irresponsible decisions of your directors
Or: you are more senior in which case you seem to have no understanding of the fact that those of us not in banking have no opportunity for large bonuses.
This is not petty jealousy or sour grapes - it is reality. We are rewarded for our efforts by our salary and resent the huge bonuses given to people for doing their job (badly in some cases).
The general public holds senior bankers in little more than contempt for their unwise investment decisions and irresponsible behaviour. The signs are that they regard the surrent situation as nothing more than 'a little local difficulty' and are getting ready for a return to huge bonuses before too long.
If it were not for the fact that ordinary people would suffer most, I would be all for letting a couple of banks fail.
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The point is that banks are now dealing houses and market traders. This is the nub. If we look at banking as taking deposits and lending that money to business first and consumers second, there are no big bonuses. If we look at raising capital for corporations it is mostly fees. Where the trouble starts is when the banks become traders. That broke the system and this arm simply has to be removed from the banking function. They can pay themselves what they like but if they get into trouble they must go bust.
Meanwhile unless we separate this toxic component with its assets and liquidate it, whilst nationalising the retail banking system, we must insist that bank incomes are controlled until every single penny of taxpayers cash has been repaid world wide and that the recession, measured in eight consecutive quarters of growth, is over.
We have to get very tough with these people who think they have got away with it, because the real pain of the recession in terms of fewer services and higher taxes which is yet to be felt in the wider economy and which will cause much suffering to the ordinary people, will result in endless strikes and chaos if the poor are seen to bail out the rich.
As for this rubbish that if we do not pay them they will all run abroad to the U.S, let them. They will end up busting the system again and next time angry Americans will put them in gaol.
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This comment was removed because the moderators found it broke the House Rules.
if Labour are indeed "betting" on bashing bankers, I would like to chip in a fiver of my own ... because it's a damn good bet
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I wonder what effect on tax revenues these regulations will make?
By stopping the bankers from taking large cash bonus' now and paying 50% tax on them in the current year I guess the treasury (and all of us) will suffer from the lower tax take.
From a financial perspective, it would be in the UK's interest if banks paid bankers big bonuses in cash so that a) the tax man would get 50% instead of the 28% corporation tax and b) retailers, car dealerships, restaurants, bars etc. would benefit from the increased spending power of the bankers.
This increasingly looks like a policy of "cutting your nose off to spite your face" by a government desperate to do anything that courts favour with the voting public.
The government would better serve us all by focusing its attention on public sector largesse and making cuts now.
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This is such a massive distraction by the powers that be. Real questions of policy need deciding. but instead it is this pure populist nonsense. The bankers who caused the problems are nearly all out of work, except those at the bankof england and the treasury.
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From what I heard, bankers will probably earn no less, but will just get it in a different way. There's much anecdotal evidence of bankers having their basic pay doubled and their guaranteed bonuses slashed. The pay will be decided on the forecast for the next year and the performance from the last few years - sort of an 'advance bonus'.
The government is too ponderous to be able to stop this - it's like trying to nail jelly to the wall, but they have to make a good show of doing it, if only to appeal to their core voters who have been sickened by the money grabbing that's been going on since day 1.
I'd bet there is a lot of horse trading going on, Brown and his mob have been awfully cosy with the city for a good few years or so, and I reckon there may be some large skeletons in the closet yet to emerge.
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Good post RP!
Only problem with just focussing on bonuses is that the banks will just increase basic pay - which also could be seen as a guaranteed bonus!
I know someone who works at one of the aforementioned banks and this has already happened due to the political pressure to get bonuses down.
Surely the FSA etc should be look at total pay of the bank including bonuses rather than just bonuses. Its only by stopping the crazy overall pay that banks can rebuild their capital cushion which they need.
My idea is to tax all pay over £100k at 60%/80%? for all banks that rely on some form of government guarantee. Good luck to the bank that doesn't want any gov guarantees - such as its depositors protected by the government! (of course they need this guarantee to survive)
When Woolworths went down that was it the workers were unemployed - no more bonuses for meeting those Pick'N'Mix weekly targets! The injustice is there for all to see except the bankers - they believe their own hype(and also can hold the country/economy as well as individual savers to ransom).
P.S. - you need to be careful though when taxing/regulating banking pay that the bank doesn't just use consultants and split off sections of the company - which can then pay themselves whatever they like. I think this has already happened/happening at different sections of Barclays. Roger Jenkins who headed up their infamous "tax planning" section has now left - if Barclays (or other bank) pay his new company a fee the new co can pay as big bonuses as they like without any interference from the FSA etc. leading to more unseen off-balance sheet risks.
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It seems hard to justify bankers pay on the basis of the value of the work they do, but it might be possible to justify it, if they took commensuarate risks - indeed banks used to be and some still are run as partnerships.
How about senior managers of banks providing an uninsurable indefinite guarantee of the bank's liabilities secured on their houses of 5 times their annual remuneration and subject only to an indemnity from their successors - this might focus minds on how much risk they wished to take on both personally and as a bank.
If you are in the risk game, it must be sensible to align the personal risks for the managers with the risk profile of the organisation.
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#15, well said.
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It does seem that Lord Turner at the FSA is a bit more switched on than the government in that he is advocating reducing the profits from 'socially useless' banking activity rather than going on about bonus levels.
Why are the investment banks making so much money?
Is it from making one way bets based on inside information?
Are they exploiting inefficiencies in markets and regulatory systems?
Is there a lack of competition?
Are oil and other commodity prices being artifially raised through speculation meaning that we all pay more for goods?
Are companies paying over the odds for borrowing?
Are pensioners paying too much in investment management fees for 'services' which on average fail to do better than tracking a market index?
Like stamp duty on shares or property, I think a modest international tax on all exchange transactions, open and transparent settlements for derivatives, closure of tax havens and complex off balance sheet structures and limits on gearing will be far more effective than yet more 'bonus rules' that can be manipulated.
Banks with then have to compete by offering an efficient service for the matching of investors and borrowers, rather than mortgaging the future for short term gain.
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The thought that we should pay the bankers bonuses so that we get the 40% tax and benefit from their spending power is nonsense.
If we don't pay the bonus the money doesn't disappear. It will generate 28% corporation tax instead of 40% income tax.
Some of the money could lead to higher dividends for shareholders (some taxable) which helps repair the damage done to our pensions. Some could increase the funds the banks have for lending to home owners (reducing the interest rates and giving more spending power to Joe Public) and small businesses (more taxes from small business and less insolvencies).
A lot more good would come than giving it to the Bankers to spend in St Tropez/St Moritz or on a new BMW/Mercedes/Porsche or on Prada/Boss.....
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This may, or may not, be fine. If the bonuses are to vest only when the profits are "real", then those profits should not be "booked" until they are capable of vesting. This will ensure that the Chancellor is likewise limited.
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#17 sagamix
OH IRONY OF IRONIES!
Was it not 'betting', by our bankers, that got ALL of us into this mess!!!
You surely are having a giraffe?
BTW 'wot banker bashing'?...I would say that the consensus of opinion on this blogsite says...'we ain't seen any to date', just New Labour rhetoric (as usual).
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I don't usually get riled up about people that earn more than me because I'm doing pretty well. But in the last year I have seen the value om y savings drop by around a third compared to the currency of the country I'm currently in the slow process of emigrating to.
This crisis has cost me dearly. The fact that a major part of the cause of this devaluation is the financial bailout irritates me terribly. And for the banks to go back to paying the people that did this the equivalent of decades of my earning potential, it's an insult.
And tell us again, Gordon and Alistair, how this is a global phenomenon and how Britain is uniquely well placed to weather the storm and come out of it strong?
The only good thing either of them could do for the country now is step down and call for a general election, but instead they cling to power until the last moment. Pathetic.
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The G20 / Bank for International Settlements have already issued Sound Principles for Compensation : see [Unsuitable/Broken URL removed by Moderator]
So, its not a question of Labour bashing the banks but Labour implementing the recommendations of the G20 that Gordon has just signed up to.
You talk alot about bonuses. These are paid from profits, presumably. Profits are often assessed on valuations. Shares in lieu of cash are valued relative to business value. Values can be inflated / deflated. Who is policing the valuers. If trades lead to losses, how will the 'bonuses' be clawed back? Where is the debate about clawing back bonuses made on the back of inflated trades leading up to the current disaster. If the banks are holding 500 billion sterling of untradeable securitised loans enthusiastically levered onto their balance sheets by the Lambo-slickers, how will the Lambo-slickers be made liable for those initial trades? Isnt this what we would expect the politicians to be dealing with? Or , is it rather that the wholesale failure of regulation by governments is leading to this ' we'd rather look forward, not back' attitude.
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How much is the state's (i.e our) stake in the banks worth at current share prices? How much did the state pay for these stakes? Will the tax-payer lose, break-even, or gain?
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I've just watched Alistair Darling giving his speach to the Labour Party Conference.
A half empty hall; a half-hearted applause from the Labour party faithful; a lack-luster performance; and a rather bored response from his colleagues at the back.
I can't help feeling some sympathy for Mr. Darling. I had the feeling at the end of the speach that he should have just sighed and said:
"Oh...why do I bother....?"
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this government is incapable of letting a bandwagon pass by without jumping on it.... this should have been addressed when the banks were bailed out but GB/AD failed to grasp the nettle...now they realise it will be popular with the self deluded fans at the party conference and with the public at large...This has been flagged so often, I bet all self respecting bankers have already made the necessary arrangements to avoid the inconvenience!
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Allow bonuses - but legislate to allow an acceptable multiple of earnings within a business whereby the highest paid director can only earn a set multiple of wage of the lowest paid member of staff.
Lets' say a multiple of 20 times so as not to stifle achievement and ambition within the company. The lowliest member of staff may earn 15K, so the CEO can take home 300K. Anything more than that ceiling gets taxed at 100%.
Want a pay rise or a bigger bonus? You'll have to raise the wages across the whole company.
A quick stab at the current multiple of the RBS: 10Million for Chief Exec, lets say 15K for a teller gives a multiple of 666 times. Hardly equitable by any rational justification, and what an interesting number!
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Comment # 1 from SilentHunter2 is bang on.
The Banks have been taking the mickey for 18 months, pocketing both taxpayer bail-outs and Bank of England QE while continuing to starve the economy of credit at a fair price. They are profiteering (a.k.a. fixing their balance sheets) and blaming us, the "irresponsible borrowers" (a.k.a. covering up their own incompetence). They didn't just declare toxic debts - they chucked all their debts at us and the government swallowed their sob story, with no due diligence and no ongoing oversight to stop fat bonuses.
So it's not just the banks that are to blame - so is the innefective government. And for them to now try and strike a populist chord by attacking banks when it is Brown and Darling's incompetence that got us into this mess is breathtaking hypocrisy, even by the dark standards of a New Labour spin machine controlled by Peter Mandelson. Caledonian Comment
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The problem with politics is the real issues get forgotten in the headlines. Banking bonuses had only a small part to play in the melt down. It was over exposure to debt and the complete lack of control of the banks over the huge risks of debt not being paid or their assets ever significantly devaluing. All this is in the past and steps can be taken to address the balance over time.
My concern is the lack of honesty of Gordon Brown on the public services. When times were good,all the extra money was thrown into the pot and spent, some of it should of been prudently saved for a rainy day. The naive assumption was growth would always be good and public services could always have real term growth.
The bankers made errors, but equally Gordon Brown has been guilty in mis information to the general public on the true reality on our situation and spending to the hilt even after the full disclosure of the banking crisis was known, at least the banking system corrected their ways when the true extent of the problem was known.
Even today 12 months after the disaster the government is spending money in the full knowledge that tax receipts for this year have collapsed and are unlikely to return to previous levels for at least 5 years. I don't believe the general public have twigged that we are probably 20 % less well off than 2 years ago and a massive restructure of our public services are required to balance the books. This restructure will not be a temporary blip, but a fundamental restructure that will last for years.
The banks mistakes were driven by greed,but the destruction of our public finances was due to vanity, the vanity of career politicians who let ideology get in the way of common sense. I can understand the greed but the latter is beyond my comprehension.
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RP "some would say that Genghis Khan was a caring, sharing leader."
Don't knock Genghis! He didn't leave his empire in the same mess as the once Great British...
Does Brown remember how many times he said "No More Boom or Bust"?
It should be tattooed on the credibility vacuum’s forehead.
I feel heart sorry for the kids coming out of university. Job prospects are dire. And now if they can find a job, they will spend years having to pay off Brown's national debt as well as their student loans.
All the taxes and debt Brown has collected in the last 12 years and what exactly has improved???
I'd emigrate, but have you seen how bad the Euro rate is these days.....
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They could have actually limited it to just the partial state owned banks propped up by the tax payer such as Lloyds Group and RBS. In my opinion they have gone a step further so Barclays, HSBC etc. are all included. It is now a level playing field so give them some credit. It is now a question of how a fair bonus culture is judged and the banks themselves not encouraging short term risk policy for creditation. Next week, I am keen to know who the Conservatives are proposing on this as we have heard very little noise from them other than critism. Do they for example think the FSA should do more/or are not doing there job properly (which I find hard to beleive with the contrainsts put on them) or we shoud let the BOE make more decisions?
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Instead of all this hot air about paying bonus, I would like more information about these faceless bankers and why they expect to get bonuses this year.
I just don't understand what they do to justify the large sums of money, what are their skills, why are they so unique & rare, why can't banks risk losing them, how many people are we talking about.
For example - footballer and Grand prix drivers - I may not agree with the sums they are paid, but they have names and I can see their skills, their abilities I can understand why they have value, but these bankers are they the same people who were employed last year when the banks failed, if so why and if they are new people - what contracts have they been employed on and why
Shouting about bonus is just a smoke screen to make the MP look good, nothing has changed in the City only a few of the faces and if you look closely enough the faces haven't really changed only moved aound a bit.
But what makes me really angry is the fact that nothing about this will make the slighest bit of difference to my life or the lives of most people.
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RBS should be using their profits not to pay bonuses, but to buy themselves back from the Government. The same goes for the other banks which we bailed out. It means less money going to ordinary staff (which, across the sector, has become the norm) but it means that the objectives are clear for those at the top. Those in there to make a fast buck can gradually be lost due to "natural wastage".
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Is the problem not that the bankers are paid too much but more they work for the wrong bank.
The fact that all the High street deposit takers are now merchant banks is the issue. The high Street banks are integral in how we live. 40 years ago when i started work cash was king. There were no cheque cards, a hole in the wall was a novelty and the UK had one credit card. The merchant bankers still made large bonuses. but did not work for the high street.
The problem is they both work for the same company now, and we can not do without the debit/credit card from these institutions. I f a company wants to play in the "casino" let them but they can not be on the High street.
That legislation would make sense, rather than trying to fly the first part of an incomes policy without the decency to regulate prices. If they get away with bank bonuses where next; MPs pay probably not, but call centre workers, who knows.
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As a prime minister Brown is basically a 'dead duck'. I think most of the country realise that. It's a shame, because as person, he does not seem a bad bloke, but to much has happened on his watch ( both as chancellor and PM). The country also, does not like the fact that Brown, to them, was not elected by the people, to lead the country.
So what now ?, if he has any sense, instead of blaming the world and his mother for all our countries wrongs, he should call a general election to wipe the slate clean, so we can all start again (hopefully this time with lessons learned ).
We know the banks are greedy, we know Politicians fiddle their expenses, we know the house of lords is an anchor slowing change for better down, so should be done away with. So lets change these things and move forward.
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to quote you Robert "So if only the chancellor can shame Barclays and the other big banks not to use the lure of fabulous bonuses as a recruitment tool, Royal Bank will find it so much easier to attract and retain all those invaluable traders and financial engineers (which, I suppose, warms the cockles of all us, as de facto owners of this bank"
show me hard evidence that traders and financial engineers are skilled and they need saving from moving from one company to another,because given a days training most of us could do 99% of what there people do and given 6 months in the job could do it all !
the other point that needs to be made is it is all very well capping the bonuses now, what about all the loot that they have run off with already?
so they might not be able to buy a Lambo cash on the nail now, but that wont worry them, because they have ten lambos sitting in the garage already from the last ten years or so.
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How sad it is, that despite all of the public outrage, all of the financial meltdown, all of new laws etc, that at no point has any iota of decency or morality been kickstarted in these bloated fatcats.
Instead of facing the reality check, they have wriggled and writhed to make sure that they continue to rake in as much money as they possibly can.
Take for example Stephen Hester, CEO of Royal Bank - A self confessed very wealthy man, who (he says) does his job because he enjoys the pressure and complexity of it. Yet Philip Hampton (chairman) states that to incentivise Stephen, he must set a salary of £1.2 million a year (plus all of the usual high calorie expenses and perks), and a give 3 year bonus of £9 million, otherwise Stephen won't do the job.
These people are utterly addicted to money and power. They most certainly do not NEED any more, and all of them could 'survive' on very much less, but they don't because they are totally driven to grab as much for themselves as they possibly can.
Unfortunately, they have been under the influence of money for so long, that they utterly believe they are worth every penny that they take.
Do not look to politicians for saviour - they are completely addicted too.
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Mellowtraveller
Think you might be on to something. Did Goodwin not cut his pension to about £600k. Can we check if it was 666,666 per annum?
Not being of any particular religious persuasion - I looked into this and it seems there can be more than one antichrist!
Characterised by someone sitting at the top of a "temple" and claiming to be our saviour.....any ideas who that could be?
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Mellowtraveller
Think you might be on to something. Did Goodwin not cut his pension to about £600k. Can we check if it was 666,666 per annum?
Not being of any particular religious persuasion - I looked into this and it seems there can be more than one antichrist!
Characterised by someone sitting at the top of a "temple" and claiming to be our saviour.....any ideas who that could be?
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There's one very logical reason why Gordon and crew ably assisted by their complicit media are 'bashing' the bankers - Bread and Circuses. No more than a distractionary measure designed to take any focus off the catasrophic state of the UK's finances. The more you report on this Robert the more you help them achieve their aim ..... or is that the idea?
10. At 11:04am on 28 Sep 2009, myopicaardvark wrote:
"but all I want at the end of the year is a recognition of all the hard work I put into this place."
Absolutely, I could not agree more. It is utterly shameful to single out an innocent element of society and heap scorn vitriol upon them. It's the scourge of modern society. Now give me my money back and you can share all of your company's losses between every single hard working employee no matter where they are in your company's hierarchy and that'll put a stop to the unfair criticism. After all, if the banking sector were treated the same way as all other businesses you'd be unemployed right now.
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I run a small asset finance business, serving the small business community and more or less the first thing Lombard (owned by RBS) did after receiving trillions of pounds of tax payers money was to cut off businesses like mine, which has made it very difficult (and expensive)for many small businesses to get vital funding for vans, plant and equipment. Those left lending are doing so at rates of 8-9% flat! NuLab were so naive when handing out the billions, most of which has gone to shore up balance sheets, and on write offs that will enable big future profits on the basis of getting rid of all the dirty laundry whilst bad news was expected. What has not happened is new lending to good small businesses and it is a disgrace
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At 12:54pm on 28 Sep 2009, teaboy100 wrote
"Stephen Hester, CEO of Royal Bank - A self confessed very wealthy man, who (he says) does his job because he enjoys the pressure and complexity of it. Yet Philip Hampton (chairman) states that to incentivise Stephen, he must set a salary of £1.2 million a year (plus all of the usual high calorie expenses and perks), and a give 3 year bonus of £9 million, otherwise Stephen won't do the job."
What we were never told and I would be very interested in knowing was this the salary that Stephen Hester asked for to do the job or was this the salary that he was offered by RBS?
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Oh what a sorry mess we are in.
Is it no surprise that we are constantly told that the only thing that motivates a city banker to spend his day furiously flipping fictional ownership of other people's money, is, you guessed it; money.
Not only do they horse-trade our homes, pensions and savings, but they also horse-trade themselves.
What a morally, spiritually (and soon to be financially) bankrupt nation we are.
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Labour you messed it up, all that money gone. I like what you did with schools and hospitals....But when there is money in government everyone around them PFI etc all get greedy and rich, price fixing begins, the gravy train is joined. Private companies do it and so do public companies. We kill the golden goose.
Someone explain to me where Labour went wrong and why the Cons would be any better. As i see it the main crime was Labour boasting about growth and laughing at the Cons about how they could keep spending because the economy kept growing.
What they should have been doing was prudent spending with some rainy day saving but if theyd done that this fickle public would get rid of them. We wanted the good times not someone saying 'hold on to your horses....' We were all working, we were all spending and we all liked it. The banks screwed up by not realising what they were doing was phoney, and the government screwed up because they didnt see that it was all fake. It was in their best interests to turn a blind eye....What would the Tories have done differently.
We want our cake... We get what we deserve...Well no we dont, we get what the bankers deserve, the bankers seem to carry on fine.
The problem is as banks take short term gains, turn them into large bonuses,spending goes up....great,Tax and spend, but a lot of that money went on houses and second houses where the short term increases could not sustain the long term demands of the loans. Once a gain people were having to pay too much for houses. Fools were buying buy to let like sweets.
So how do we exclude house prices & mortgages from (the market) temporarily wealthy city traders.
Personnally I think the answer is dont play the game. See buying houses for financial gain as immoral. When a seller says i want a million for a 4 bed detached, say no. When a bank offers low interest on a massive mortgage say no.
But this cant work because someone will always want more and everyone will follow like sheep. Everyone, the bankers, the government and the public wants more and more.
I know ive rambled here, can anyone pick the bones out of what im asking?
Save me from the wealthy privileged Tory boys, who benefit from the banking system, becoming the government. Maybe it is time for the Libdems...see what youve done labour youve ruined everything!
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Brown, (and Labour) can try and say all they like about bankers bonuses. But, as most have twigged, it will amount to precious little in terms of meaningful action.
The economic crisis, caused by appalling business incompetence, amongst other things, seems to have sent the Germans out to vote for......the party of business in their latest election!
Perhaps someone would kindly explain why they think a general movement to the "right" in politics will make things better? (Surely, banking in particular needs to have it wings clipped in the legal and regulatory sense? A Centre-right party won't have the idealogical motivation to deal with this adequately?) So bonus bashing will simply fade away after the next election!
Thing is the bankers have already anticipated this. Meaning they already assume they have NOTHING to worry about, that our fabulous elite will be letting ordinary people down, as per usual and we can all go crawl back under our stones?
British people, they deserve all they get! (I happen to think we should NOT have to feel sorry for students or anyone, unable to find a job this winter!) Still, I suppose if you're all right jack that's fine...
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We don't want to bash the bankers and the financiers. We just want our money back, lall of it, back dated 10 years. £trillion.
The so called "banking crisis", "credit crunch" can also be called "looting" and "robbery", does not just happen overnight. For UK politicians, Blair has to bear as much blame as Brown.
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The idea that bankers should receive any bonus is obscene.
They already have a job,courtesy of the taxpayer, that's a bonus.
On the day the Chancellor is tinkering with bankers bonuses we have council workers in Leeds being told they need to accept a drop in wages of up to 30%. The contrast is beyond belief.
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The feeling among most of us must be the length of time it takes the government to achieve anything.
Twelve months on and they are still bashing the banks whilst pouring billions into them to keep them propped up. There seems to be little progress on how to get some of the money back from them that's so badly needed to boost the economy now.
Yes they've stalled the recession for now by printing money but as everything continues to deteriorate this can't go on and something will give. Whether it is a sterling crisis or inflation time is running out.
There is a distinctive feel of meloncholy about Labour's conference and the rows of empty seats show how many have given up on Labour's empty promises.
Fighting back may be the slogan but no fire in their bellies shows clearly they have not the stomach to take up the impending fight with the unions and others over the necessary cuts in public spending.
Bashing the banks and bashing the Tories is a sign of a party that has given up so they should stop wasting everyone's time and call an election now. The longer they stay the worse things become.
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Am I the only one hoping for a hung parliament next year? no pun intended.
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Or maybe as the country is in the biggest mess its ever been, we should try out proportional representation for a few years instead of the left right left right left right frogmarch, and all work together to solve the problems?
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Labour always seem to be playing 'catch up'. They decide to bail out the banks with taxpayers money....OK so far, because it would ease the credit famine and stimulate the economy...but why didn't they lay down the terms and rules while they had a firm grip on the bankers' essentials? Once again, they have been totally outwitted and are now faced with trying to claw back money the bankers have already allocated to their salaries and bonuses. Fat chance of that! the bankers are back to business as usual and have the money in their coffers. Darling will be lucky to get a token gesture of restraint...the horse has bolted.
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If Cameron and Osborne were at the helm, the situation would be much worse. I must be one of the very few who are actually thankful it's Brown in 'control' not the cons, they have stated they would not intervene in the banking crisis so would they be telling their friends in the banks to cut their bonuses, I think not. What idea's have the cons come up with for fighting the recession, nothing but mud slinging and hiding their heads in the sand. I will welcome any moves to restrict greedy bankers wages and redistribute OUR wealth, thought I doubt none of the parties are too interested in redistributing the wealth.
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It's time to stop hounding the bankers. If we're going to clamp down on top people's bonuses, particularly packages agreed in advance where the recipient will get a bonus regardless of success or failure, then we need to look at ALL industries.
NuLab win no vote from me over bank-bashing. It's an easy target. Perhaps they should have looked at the bonus culture 30 years ago when it started. After all, they've been pulling an awful lot of tax at 40% on the back of these bonuses.
As I see it, Brown is acting a bit like a posture mattress: bending according to who's lying on him. He'll bash the banks as long as the electorate is crying "greedy bankers!" and "stop the bonuses!" But if he is re-elected (perish the thought) he'll be stymied by the loss of the City culture and its tax contribution. So will anyone else taking the reins.
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"Which remains something of a sore point for millions of taxpayers, who are more-or-less aware that almost no bank would be standing today if it weren't for the £1.3 trillion of support given to them by the state in the form of special loans, investment, guarantees and the creation of new money."
Exactly how did you come by this information ?? From what I understand, there were and still are quite a few solid banks around that have *NOT* needed the bailouts or the "funny money" !! In fact, they would do far better if such didn't exist, since that would have cleared the market of all the deadwood and allow the rest to have a bigger market share !!
So continual bashing of the mythical "bankers" will not get that pantomime duo, Crash Gordon and Comical Ali, re-elected !! Perhaps, they should try another tact !!
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Gordon was happy to talk about "light touch regulation" and praised the city for years when it was helping him to finance NU Labour with its many flawed social engineering projects. Now it's time to bash the bankers if only in a verbal capacity. Real change won't happen though because come next spring he'll be shuffling in the back door with Tony Bliar to work for these cowboys.
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Will the last person that leaves GB...please turn off the lights!
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I would suugest a law taxing @ 95% any bonus payment that took the receiver over 20 times the average earnings for their company would be positive in this situation.
The little people would not pay punitively on their "earned" bonus and the targets of our ire would find little point in demanding contractual huge bonuses as HMRC would get most of it to give to Gordon to waste.
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slicker @ 27
yes, it may be just rhetoric ... but I very much hope not
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#52. puzzling wrote:
"..bankers..we just want our money back, all of it.." and then "Blair has to bear as much blame as Brown."
I am sure that most of the developed World shares your feelings about bankers - however, if you are looking to blame particular politicians, which I agree that Bliar/Brown have much to answer for, but also consider who set up the regulatory environment that gave rise to this excessive exuberance - The Tories under Thatcher (and then the Banker - factually correct) John Major. Without the Tory dash for financial services would all this have happened, and further would it have been so bad if the financial services sector was smaller and under better regulatory control?
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If only we could find a modern day equivalent to
Robin Hood/Dick Turpin/Guy Fawkes all rolled into one!
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I've just been listening to the new Norwegian PM praising Gordon Brown at the Labour Party conference. Astonishing really because the UK and Norwegian economies are like chalk and cheese.
Mind you, along with the USA Norwegian companies dominate many of the supply side sectors in the offshore oil and gas sector so perhaps he was expressing his gratitude to the UK Govt and their chums in the City for having been so industrially incompetent. They're also probably delighted that the well known Spanish electricity company Scottish Power is doing a deal with a Norwegian Govt funded company that's developed a tidal turbine to install some units around Scotland. Come to think of it the Spanish PM was there as well praising El Gordo as well.
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In the next parliament, the debt issue will surround the speed and manner by which our £37billions bank investments - maybe more soon - will be turned into a vast profit. Arguably their under-lying worth is in excess of £80billions.
If Tories do a "tell sid" sell-off, they'll have to offer massive discounts. Which'll reduce the size of our debt recovery. If Labour gets back, they're likely to sell our Bank shares in slices and over several years. That'll realise more cash, but miss the glamour of a public giveaway sale.
As for regulating bankers' bonuses, that needed international agreement to be effective. And that's secured at G20 in Pittsburgh. Good.
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I have never heard such a load of old waffle from this clapped out government.
..."we are leading the world in sweeping away the old short-term bonus culture of the past" - Gordon Brown, February 2009
..."I think it is sometimes forgotten that bonuses are a big source of extra income tax" - Gordon Brown, June 2004
How times change!!I rest my case!!
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lukeo1980 wrote:
RBS should be using their profits not to pay bonuses, but to buy themselves back from the Government. The same goes for the other banks which we bailed out. It means less money going to ordinary staff (which, across the sector, has become the norm) but it means that the objectives are clear for those at the top. Those in there to make a fast buck can gradually be lost due to "natural wastage".
I agree completely and being ordinary bank employee myself with a family, I am very relieved to still be in a job. There should be no bonus to ALL bank/financial based employees until the tax payers are paid back. It is also in the banks interest to this money pay back ASAP because the sharevalue will remain flat until this is full acheieved. Going forward FSA regulation has got be tightened as much as can be legally bounding and agreed.
At the end of the day the government did not want tax payers to be making business decisions with vast sums of money or intervene themselves but they were not going to allow us suffer a Lehman Brothers crisis of our own...
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One day soon the sun will stop shining.
The starving unemployed masses will seek out the well fed city elite.
The reality of desperate people will be seen in the fancy restaurants of London. There will be no safe place to spend their ill gotten gains.
The momentum of the poor man's revolution will shock planet westminster as the real world descends upon them.
Talking tough will not help you then Gordo.
Actually doing something might help.
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DebtJuggler...'If only we could find a modern day equivalent to
Robin Hood/Dick Turpin/Guy Fawkes all rolled into one!'
I think the problem is we have got these types governing us and our money.
Guy fawkes tried to burn down the houses of parliament and he is a hero, the Taliban blow anything up and they are terrorists, Capitalism does something which neither of the two managed and it isn't classed as a terrorist and is still seen as a viable ideology.
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30. the_near_side asked:
How much is the state's (i.e our) stake in the banks worth at current share prices? How much did the state pay for these stakes? Will the tax-payer lose, break-even, or gain?
Our stakes in RBS + Lloyds are worth about £34billions, which is about what we paid for them. No one knows what our gaurantees will be worth, because they've not been agreed yet. When they are, we'll get shares in exchange. Northern Rock valuation awaits a court case: government argues that NR was bankrupt, some shareholders argue it had a small residual value.
Nobody knows what underlying values remain in these banks. But my guess is that the present bundle could be sold in slices for more than £90billions, once they can pay dividends again.
That'll yield a very fat profit and help to pay down public debts.
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And over in Germany.........
"Together with the FDP, Mrs Merkel is expected to push for a new era of deeper economic reforms and tax cuts for Europe's biggest economy. Mrs Merkel's Christian Democratic Union (CDU) and the FDP benefited from dissatisfaction over spiralling national debt and stagnant income levels.
The CDU retained its position as Germany's largest party with 33.5 per cent and the Free Democrats jumped to 15 per cent.
The result marked a humiliating blow for Germany's venerable Social Democratic Party, which took just 22.5 per cent."
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68 leftilkly
You are so optimistic. When do you really expect the banks to be able to stand on their own feet then? This year next year or sometime never.
And what about those billions of toxic assets which now belong to the taxpayers and are literally worthless? Possibly look at 2050 when inflation has gradually eroded their value to zero. If you're waiting for the taxpayer to make a profit out of this mess please don't hold your breath.
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Banker bashing is populist drivel designed to detract from the hideous amounts of debt racked up before 'the crunch' by GB and his NuLab chums.
Its designed to distract from goondog's lack of prudence and his bust not boom.
Its designed to distract from the over regulated world we now live in where virtually everything we do needs to be on register for which we pay a fee to some quango or another.
Its designed to distract from the number of people who are unemployed.
Its designed to distract from the number of people who spend a lifetime on benefits
Its designed to distract from the fact that this bunch thought they were running a fast moving consumer goods business but didn't realise we didn't want the product any more.
Its designed to distract from the idiocy of climate change conferences followed by G20 discussions about return to sustainable growth
Its designed to distract from the fact that we have far too many unelected government ministers and unchallenged government appointees and have become about as democratic as under George III. I feel like shouting shouting 'no more taxation or fees without representation!'
Bankers bonuses. HA! populist drivel unchallenged by the BBC.
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.........how about this for an idea, when the bankers return the money plus interest lent to them by the tax payer so that they had a job to go to in the morning, then they can start paying themselves bonuses again? Up until then, they get zilch. Or am I being a bit simplistic?
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I am the partner of someone who works for one of the banks named in this article.
What the spin doctors and media band wagon fail to realise (or report - I guess it does not sell newspapers!) is that the vast majority of people who work in the banking industry are NOT these massive bonus traders and actually work in operations, customer supports and so on. Because the bonus incentive structure worked in the trading departments policy extended to all employees and so most employees get paid a lower than average base salary with a bonus incentive once they have completed their work to a satisfactory standard.
so.... in effect the bonus is really a defected part of their salary.
Our situation is that through no fault of my partner (who received an above expectations evaluation and saved the bank money in early completion of a major project) would have recieved a "pay rise" in a end of year bonus now has to work for the bank for the next 5 years to get that money. (is this not financial enslavement)
This cap on bonuses would be fine if the salaries were adjusted to compensate.
These essential workers are being punished for bad management of the compaines they work for. Think of a simualr situation, if train drivers got money docked from their wages everytime the trains were late - there would be uproar!
And whilst everyone now seems to think bankers are the anti-christ, if they all went on strike for being underpaid the country would come to a complete stand still instead of the constantly complaining train drivers who actually get paid almost twice as much as the operational workers in the retail banks!
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@ 76
big FAN of people bringing the banking system to the brink of collapse and trousering enormous sums of the money for their efforts, are you mrs bloggs? ... excellent!
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RE: 73. leftilkley
"Our stakes in RBS + Lloyds are worth about £34billions, which is about what we paid for them."
"Nobody knows what underlying values remain in these banks. But my guess is that the present bundle could be sold in slices for more than £90billions, once they can pay dividends again."
Can you back that up with anything? You are assuming they will triple in price. Over what period of time? Don't forget that those stakes were bought with borrowed money - so we are paying interest on that borrowed money every single day, whether the share prices rise, fall or stagnate. Perhaps the price of RBS shares really will triple, but if it takes fifty years, that's not much use to us, is it?
"That'll yield a very fat profit ..."
You have no idea. Let's suppose we believe your numbers. And let's ignore all the interest that we will have to pay on the money the government borrowed in order to buy those shares. A £90 billion-ish sale, deduct the original £30 billion-ish purchase price, yields £60 billion or so in profit. Sounds impressive doesn't it? Unfortunately, if we believe our current chancellor's figures, when government borrowing finally peaks in a few years time, that £60 billion profit might be just about enough to pay the interest for one year.
"... and help to pay down public debts."
No. Not even one penny.
Scary, isn't it?
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Bonuses and residual values of the banks is all flim flam.
Designed to keep us looking enviously on.
Look at the bigger picture.
We the taxpayers have bailed the banks out.
The banks in turn have toxic debt on their books.
That in itself is double talk meaning the banks have got companies owing them loads of money.
The banks have already given the companies loads of money.
The banks did not have the money to give them.
No matter though it is in the banks remit to lend money they do not actually have. It is what they are licenced to do.
Now, in hard times, they are asking the taxpayers to bail them and the debtor companies out.
Meanwhile no other companies can trade, compete properly, against those debtor companies since they are being supported by the banks - us.
What a mess we are in.
Cart and horses driven through the Enterprise Act 2002.
All to keep banks up and running.
Meanwhile the productivity of the UK is being ruined.
We have a millstone round our neck called the banks.
How to get rid?
A real real tricky question. But I am thinking about it..
The only way currently to level the playing field is for all nations to have banks creaming off wealth. Presumably the bankers will be expanding overseas and eventually everybody, except the bankers, will be afflicted.
It could be that this is the way forward. The third world will begin to look attractive since there are no bankers there yet.
There is another way of course. We all become bankers. Some will be more equal than others though..
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The real reason they are hitting out at the bankers is because they think it will garner votes.
Nothing will happen to the big boys in the banks, the minions WILL be adversely effected.
Typical new Labour, worthless action causing unintended consequences, hurting the least deserving and letting the real culprits go Scot free.
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I think massively overpaid ministers, top civil servants, top ranking council workers and heads of regional development agencies should also be included this list many earn over £100K plus trips overseas and obscene expenses for doing absolutely nothing.
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"Banker Bashing" is a clear vote-winner.
The public detest the way that City staff have pocketed so much of the nations' wealth, whilst causing so much mayhem.
Why should a City worker earn any more than 250k per year?
Why are they worthy of a country-estate a year?
Soldiers, doctors, surgeons, rig-workers, policemen, energy workers etc....all have an important role in modern society, and for far less money than City workers.
Ludicrous favoritism and gambling in the financial sector has brought the country to its' knees, so bashing bankers is alright with me.
The public will warm to Brown and Co if they bring some hard sense to the City, regardless of any past mistakes.
There are a lot of young people ready to step into the City for a chance to earn over 100k.
"bankers gorging on the carcass of the economy" (Peston line), will simply not do any more.
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I think massively overpaid ministers, top civil servants, top ranking council workers and heads of regional development agencies should also be included along with the bankers many earn over £100K plus trips overseas and obscene expenses for doing absolutely nothing.
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Apart from being divisive within, and a source of envy outside the firms that pay them, extrinsic rewards such as bonuses don't do anything to improve performance - see http://www.alfiekohn.org/books/pbr.htm for example.
As Dan Pink's video at http://www.ted.com/talks/dan_pink_on_motivation.html shows, if the work is at all creative, then extrinsic rewards make people perform worse. If extrinsic rewards only improve performance when the work is dull, repetitive and devoid of creativity what does this say about bankers and their seeming need for humungous bonuses?
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#79 Dear Mr Mix
Methinks you doth assume too much.
I am aggravated by many things.
Potential cuts to primary education might be one.
Extrapolation might be another.
Yrs Mrs Bloggs
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Mrs Bloggs @ 87
ah okay, I'm sorry - by "populist drivel" then (if you're NOT a fan of the City bonus system) you obviously mean the Government are just coming out with "hot air" to win votes ... the PD bit ... but you would support appropriate and serious measures to tackle the problem, regardless of which party puts them forward - in which case, we agree!
(sorry again)
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I am amazed by the comments calling for an immediate election. The Tories will loosen the regulations on the city making the problems we have more and more likely. They would have spent nothing helping British business just as they did nothing in 1981 and 1992. We are all sleepwalking into a disastrous Tory govt.
Big big big mistakes to give them the reins of power.
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Now if I go down to my local bank and ask for a loan the charge is lekely to be in the region of 9% (if I am lucky - on a Credit Card more like 20-24%), so if we have "loaned" the banks £1.3trillion should we not be getting £117billion in interest alone. With a deficit heading towards £175billion does that not in someway reduce it to £58billion?
To say the banks have changed their ways is like a politician saying my claim was made in error. If the CEO of RBS is heading towards his £6million bonus as the RBS share price moves ever upwards to its ridiculously low target of 79p they same old practices are in place. Most of the world lives on credit, we take more from the planet than it can provide (I believe we had this years lot by 24 September) so in all things we are a generation of pillagers. Throughout the market place of world activity the notion of more is good is unsustainable; world ecenomies reliant on price inflation producing fictitious wealth. Whole areas of economic activity based upon the gamblers' instinct or spiv want something for nothing. From the so called bastions of our industries/financial institutions to the gluttony of our administraters; from the world of celebrity glitz to the sporting wag - every self-interested individual busily grabbing more. Instead of relating the monopoly money figures why not relate it to worker hours (lets say in a country like Kenya) which puts this greed into relationship to its actual worth. Mr Goodwin's pension (of £600,000pa) takes the Kenyan worker (earning about £40pm) approximately 1,250 years to produce or 1,250 Kenyan people one year to pay for his pension. If we factor in the ever increasing number of greed merchants it takes the majority of China to fill their pot.
A footballer (let's say Rio Ferdinand earning £120,000pw) needs 13,000 Kenyans slogging away; a media celebrity (let's say Jonothan Ross earning £5,000,000pa) relies on about 10,400 people. Now I have watched both in action of late and nobody can convince me that their activities warrant 23,400 people working on their behalf. Start actually discussing the "world theft" that western materialism entails; start looking at the necessities in life rather than perpetuating the money game - I realise that you and yours are reliant on your inflated salary, and us bloggers have the psychological release of pent-up rage, but in terms of what you actually comment on are you really worth all those Kenyans?
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#88
Dear Mr Mix
Again, you assume far too much.
The current head of the FSA was in charge of regulating wholesale markets in his previous role. Most of the problems of Northern Rock, Bradford and Bingley, Alliance and Leicester, RBS and HBOS were caused by overdependence on wholesale funds which melted away as US rates came close to UK rates and oil prices rose to $140 per barrel.
I can be therefore be irritated by bonuses that have been paid to characters at the institution that should have been providing some regulation.
"The FSA paid out £19.7m in bonuses last month, compared with £13.9m the previous year, with one official receiving £90,000. The regulator, which is cracking down on bonus payments across the banks, defended the increase, saying it had about 250 extra staff in 2008 compared with 2007, and that it had to pay more to attract and retain the highly-qualified people needed to improve regulation in the wake of the financial crisis."
And lets face it, the simulations carried out by the FSA indicated clearly that Northern Rock would be in trouble if funds dried up and did nothing.
"News of the bonuses came after the Financial Times reported that Northern Rock's vulnerability to a crisis in wholesale lending markets was identified by the FSA in a "war game" back in 2004.
The regulator's risk simulation exercise showed Northern Rock's business model posed a systemic risk that could in turn hit HBOS, the mortgage lender rescued by Lloyds last autumn. The FSA declined to comment."
Yrs Mrs Bloggs
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Robert,
Why did the Bank of England suddenly increase its reserves by 400%, or £24 billion in the second quarter of 2006?
Aren't we supposed to believe they didn't see the credit crunch coming?
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Forgive the link to a rival site, but I'd like to put forward this evidence in support of my previous comment:
http://blogs.telegraph.co.uk/finance/files/2009/08/reservie.jpg
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The bankers do need reigning in but how about stopping MPs bonuses..... in the past two months, around 100 MPs have travelled to 15 countries at an estimated cost to the public of £750,000.
Seven MPs went on a £70,000 trip to New Zealand to investigate binge-drinking!
Another group went to Labour-dominated delegation of six MPs, two peers and two aides, flew business class to Fiji via Australia for their 16-day visit to islands including Tonga. The stated purpose was to look at how the islands are being affected by climate change. There was a major climate change conference held at the time but none of the group attended...and two days after their return Fiji was actually expelled from the commonwealth..
They still don't get it!
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mrs bloggs @ 91
ah ha ... interesting ... thank you
so what is your view on the mega bonuses paid to key players in the investment banking industry in the City, and on Wall St - you baulked at my assuming you were a FAN (for which I apologise again) so how about we hear it from the horse's mouth? - sounds like "not irritated" might cover it but I don't want to, you know, start assuming again
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The people who caused the problems were generally not bankers. They were investment bankers (not bankers who lend money to businesses), traders (who are not bankers) and "rocket scientists" who invented ever more complex financial instruments(and who again are not Bankers). I've been a banker for 25 years and by all means blame the Boards of Banks who did not have the wisdom to control these high risk elements of their trading operations but to generalise bankers as fat cats, making short term lending decisions for short-term financial gain (i.e.bonuses)is not reality. Bankers who lend money have for many years had lending targets balanced by quality controls that stopped bonuses getting paid if the lending did not stand the test of time. SORRY TO ARGUE AGAINST THE POLITICAL CR*P COMING FROM ALL THE MAIN POLITICAL PARTIES BUT BLAMING THE VAST MAJORITY OF BANKERS FOR THE BEHAVIOURS OF A TINY FRACTION OF GREEDY TRADERS ETC,IS IGNORING THE FACTS AND SIMPLY THEM TRYING TO GET THEIR OWN 10 second SOUNDBITE ON THE NEWS FOR THEIR OWN POLITICAL PURPOSES. Robert Peston's remarks, re Xmas bonus's for bankers to buy a fancy new car, may help him sell a few of his opportunistic books (how much has he made out of this crisis,DOES ANYONE KNOW THAT) but is utterly garbage reporting.
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hg @ 90
yep
if a person is adding X of Economic Value through the work they do, and is extracting Y in Net Pay for doing it, then ...
(1) if X is bigger than Y they are making the rest us richer
or:
(2) if Y is bigger than X they are making the rest of us poorer
and thus:
almost EVERYBODY in the UK is a net TAKER ... case (2)
(some more than others obviously ... e.g. Bankers)
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shire @ 96
do stop it - yes we know it's investment bankers - well, them plus rogue mortgage salesman, plus hybrids like Northern Rock, plus dodgy insurers like AIG, plus craven negligence by the ratings agencies, plus collusion by the central banks via lax monetary policy, plus cowed, incompetent regulators, plus ... oh you know
but hey, if you want us to say YOU weren't to blame, then fine ... I'm sure you weren't
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Labour will never cut front line services such as bonuses to bankers,without whom the hole Gordonzi scheme would crash [courtesy the tAAAxpayer]
The great Gordini [master of the forbidden AAArts AND GREATEST ILLUSIONIST SINCE TOMMY COOPER]will do the decent thing and stay till he can take his hole s crew with him to never never land
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http://www.youtube.com/watch?v=KHYnahPkJI8&feature=PlayList&p=15B36B4D5748B51A&playnext=1&playnext_from=PL&index=4
FOR THOSE who wonder where the great gordini learnt his forbidden AAArts
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This is not an issue of just 'bankers' pay and remuneration, it is an issue of all senior/executive remuneration across the whole economy.
If Mr A owns company B he is entitled to as much of the earnings from company B as he sees fit, it is his property and his right.
If Mr A works for company B and has been gifted (by virtue of his position, expectations, and influence on the judgements of the remuneration committee) a substantial shareholding, he will be rewarded as an employee and for his part ownership as a normal shareholder would.
If Mr A works for company B and he owns no share of the company he is just another employee.
So, it is simple to set law in place to manage the reverse exploitation that is controlled by the minimum wage laws.
No employee to be worth more than 20 times average wage within the company. Full stop. Easy rule, job done.
Want a nice pay rise Mr company exec A, then a pro-rata increase across the working population is required.
Bonuses should be restricted to a 50% share of annual profits and probably better still based on a perentage of performance above target rather than actually being paid to achieve what you said you would.
If an exec deserves a bonus, then the people that made the performance targets on which his bonus is based, deserve and should receive one too.
All bonuses should be vested within the company for 5 years either as shares to collect dividend distributions, or as cash acruing interest at CPI rates. Same offer to the exec's applies to all the staff.
Watch all the risk taking ebb away from British corporate society then. Watch also as the average tennure of board rooms doubles or trebles as these senior people realise that they cannot play to a half full house for a year and expect to earn sufficient to retire on.
Perhaps then, these people will be dilligent and have the interests of the whole company ahead of personal short-term pocket filling.
I re-iterate, if society needs a minimum wage to prevent the exploitation of others as human nature tends, then we need a maximum wage to do exactly the same, but from a top down perspective rather than a bottom up.
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Labour Conference latest:
'Rest assured, Box-ticking is safe under Labour. In the last twelve years we have invested over 3000% more in box-ticking.
In Education alone there have been over 2000 new initiatives, requiring over 27,000 new boxes to be ticked.
In the NHS we now invest over 30 billion a year more than under the Conservatives to ensure that there are enough management levels to generate the absolute maximum of boxes to be ticked.
The Civil Service now employs over 400,000 more people than in 1997, generating a staggering 83 million more ticked boxes every year.
This is a magnificent record of achievement under Labour.'
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I get very fed up with the line "the city makes all the money and pays all this tax hence the bank bonus's are good'.
This just shows the poor management of the economy over (Tory and Labour) the last 20 to 30 years that has let almost all other industries fail for the apparent (and now refuted) easy pickings of finance.
If you want the UK to become simply a gambling state no better than Monte Carlo carry on. What a way for such a great country to end its days. The rest of us will emigrate to find sensible careers. wopuld someone remember to switch off the lights.
Yes we must rebalance the economy and that will imply a smaller far less important 'city'. I simply propose to insist that any bonus's paid by the banks is matched by the same bonus paid to the tax-payer.
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How much does Tony Blair earn from a city bank - anyone remember? And for what exactly?
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Forgive me if I say something stupid, but....
If the banks tell us that they NEED to pay those enormous salaries-plus-bonuses to get the good people in, exactly where have the geniuses they attracted with all their money-waving got us?
Perhaps it is time to look for people who are less interested in filling their own pockets, and more in the general interest of the company they work for, and in contributing to the welfare of the society they live in. Like parlementarians. Oops......
Wealth creation does only benefit a nation if it contributes to everybody's welfare - not just that of the top one percent or so....
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What seems to have been left unsaid, is whether bonuses are really valuable as a recruitment tool as the banks claim.
It is arguable that recent history has shown them to attract precisely the wrong kind of candidates - gamblers, risk-takers, and ego-maniacs. Perhaps rewards on a vastly smaller scale would deter these udnesirables and leave the posts open to the kind of career bankers who used to run the business in saner times?
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I find it bizarre that people seem to have forgotten that it was the american banking and lending system which actually caused the problems this the banks debts to begin with. I am concerned that we will discourage london from being a financial capital, and the banks will go to germany thus making the situation much much worse. If we fail to pay bonuses to top bankers when other countries will then how are we to expect the banks to pull us out of this economic down turn?
Like it as not these individuals are prety much the only people to help us out. they are in extremely high pressured jobs and most are 'burn't out' after a max of 20 years. London is almost the premiership of the financial world hence the exorbant salaries. Not everyone gets it right all of the time.
I just feel sorry for the banking staff who work really hard have an extremely high cost of living working in london and thought that they would be getting a small bonus to help pay off their debts or go on holiday with. It seems because of all of the anti bank bonus comments that they will not get this little help. Because lets not be nieve, it'll be these individuals which will suffer not the directors or senior management otherwise known as the 'high flyers'. I work for the NHS and I see regularly the effort which is put in with no bonuses, so I understand previous comments which resent but at the end of the day I and everyone else knew what they were getting into when they took their job on, which is not true for all the hard working individuals for the banks.
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joe @ 101
no employee to be worth more than 20 times average wage within the company. Full stop. Easy rule, job done
exactly ... all this stuff about how it's fiendishly difficult, how they are all so clever, they'll just "get around" it, is so much tosh - a smokescreen ... it's for the birds
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Sorry to say that all this 'bonus posturing' is a lot of flannel because there is no sensibly workable structure in it. If any party comes up with anything thats a solid plan for re-construction or re-regulation before parliament resits then I'll be surprised if I spot it amongst the smoke and noise. The rewards at stake mean that whatever rules do get thrown up some very clever legal/consultancy bods are going to find an efective way around it and trying to get more detailed doesnt work either because the incentive chasers will always be a step ahead.
Creating tin-pot rules is easy but illusory as culture change is hard and its a cultural issue to believe you can only get performance using raw selfish bonuses. The banks are largely going to have to unwind their (our)situation themselves
Might be better to focus the politicians 'intellectual capital' on creating and frameworks to recover or save other bits of the productive economy. Found myself yesterday musing that in the current mire Mandy was starting to sound like a 'leader amongst men'. Could I be more pessimistic ?
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"And the bits of their banks that are doing so well this year, the investment banking bits, are profiting from the frantic scramble by governments and companies to mend their finances - which in a way is to say that they are making hay from the resolution of an economic and financial crisis after having made a very special contribution to the creation of that crisis."
Here I think the nail has been quite firmly been hit on the head (hoorah!). Isn't it quite frightening that those that created the problems are the only ones benefitting from Quantative Easing, will benefit when the state owned bank shares are sold, will benefit when the BoE assets are sold and will benefit when from EVERY SINGLE financial transaction.
Recently I have wondered how many financial transactions it will take for the "rescue package" money to reach the man in the streets pocket - ie the ones paying for it. Each one generating a commission, a bank charge and of course government tax.
It certainly won't be 1 or 2 transactions but certainly a multitude.
We are witnesses all to the biggest swindle in history, not only have some been duped into getting into record debt we are all now in debt twice over thanks to our government, paying double the money to those who caused the problem, WITH NO WAY OUT.
I find it quite telling that given the choice of getting money to businesses in need directly with little to no bank charges (for example by a state owned bank ???) the choice has been to channel money through the market - not even bothering to bring in legislation of ANY kind to stop the abuse we have seen over the last 10 years. No medium sized business, never mind small, has a chance of obtaining these funds - man in the street ? NOT A CHANCE.
Our politicians are either utterly incompetant or totally in cahoots.
With an eye on the stock market reaching new heights I remember the dot com boom/bust only in 2000-2001 (No more boom and bust anyone ?). I remember an older bewildered trader on CNN commenting about the wild stock prices for companies with no profits on their BALANCE SHEETS. Are todays companies making a profit ? Why is the stock market so high ?
"Will we ever learn ?". Yes we know what will happen, but in this "Democracy" we have learnt short term profit comes before everything - including our vote.
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#104 Please see the BBC article here:
http://news.bbc.co.uk/1/hi/business/7186975.stm
I note that good old Mr Blair the ex Labour PM, that's Labour who are supposedly for the UK working man took on a part time job at J P Morgan for $5 million and I quote "Mr Blair said he planned to take up "a small handful" of similar roles with other companies in different sectors."
If you wrote a fiction novell with this plot you'd be laughed out by the publisher for being ridiculous,,,
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Let's face it - this is mainly populist rhetoric. The bankers who caused the crash have probably all left the city. Those who are left are paid a bonus because the bank is in profit and this is a thank you for their hard work during a year. Working in the city is not easy and making money there is the main focus.
The reason the system failed was the massive overload of debt on to the system that was encouraged and aided by Labour and the FSA and the lax manner in which they regulated but also applied inflationary boundaries for the setting of interest rates. This is continuing as the parameters still do not take into consideration house price inflation this could happen again in a few years.
Regulation or lack of it created the crash - greed by bankers is stopped by regulation and the massive failure of the FSA and loose economic policy created the bubble. Bashing bankers is not the best route, plus they should impose a 60% bonus tax and shares as bonuses need to be exercised immediately or tax paid on them immediately at 60%. That would stop them! But it is a tax of jealousy so not the best route to go in a progressive economy.
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If the banks become properly regulated, then the bonus problem, which has generated so much popular anger, will largely disappear.
If you are allowed to lend money which you do not have, which can then be recycled back to you via the wholesale money market, and yet your shareholders and depositors believe that their money is absolutely safe, you almost literally have a licence to print money. Since most people do not understand how this trick works, they think you must be very clever and deserve very large rewards and paying part of this in bonuses, reinforces the idea that you are very clever and have worked very hard.
The world now knows the danger inherent in allowing banks and other financial institutions to operate in this way and we must insist that governments put in place regulations which ensure that publicly owned central banks can control private banks in the public interest. This will mean that bankers will find it much harder to make money and large bonuses will no longer be paid.
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#107 DanNHS
"I find it bizarre that people seem to have forgotten that it was the american banking and lending system which actually caused the problems this the banks debts to begin with."
Er no. If you look at the BoE records you will find that £800 BILLION of short term wholesale lending was lent to banks progressively in the UK over 6-7 years. Much of that inflating the property market. That's the UK not USA. The fact that Eastern countries would no longer provide those credit facilities was the reason UK banks failed.
Repeat UK WHOLESALE LENDING FROM EASTERN COUNTRIES.
Prior to 6-7 years ago wholesale funding was minimal, this is WHOLEY down to practises in LONDON.
Never mind the loonacy in the commodity markets, remember oil at nigh $200 a barrel and grain at £200 a ton ???
Markets don't work - as soon as commodity markets boomed the whole trade system collapsed. It was unsustainable much like the property market, which still hasn't reset. Companies were forced to buy raw materials at twice to three times the price 6 months ago and goods now made from those raw materials cannot be sold for a profit.
Markets have utterly failed. How can it be right for a hedge funds/banks/investors to buy millions of barrels of oil yet never take delivery, never have to process, never have to distribute and never have to take ANY RISK ?
All done in the name to short term profit, profit which ultimately has brought the man in the street nigh to ruin. It's time for a change, I won't be voting for any of the major political parties they are either corrupt or totally clueless.
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Firstly I should fess up to not believing a single promise that comes from the Labour government. There have been a lot of strong words and promises made by them over the last couple of years that have amounted to nothing.
But beyond that: the reason for the government not trying to influence bankers pay (so they say) is because the talent will vanish to other countries if salaries/bonuses are depressed here. So now we are supposed to believe that bankers will of their own volition, out of conscience, not pay themselves the fortunes they have in the past - and thereby push their talent away themselves. It's hard to believe a business would work like that.
However it does put the government in the position to say "Well, we didn't make you do it, we only asked nicely - and anyway there was an election coming up, we had to say something!"
Sadly, Labour just wants votes - and that's the whole story.
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#107 "London is almost the premiership of the financial world.....hence the exorbitant salaries."
Regrettably the word gullible springs to mind. Just because a bunch of self-serving banker hogwash is put out into the real world, does not mean you shouldn't question it, carefully!
By any definition, if they were in "the premiership" they have been well an truly dumped out of it - just that they still believe they deserve the same salaries! They have made losses, taken bank bailout and several have found themselves being nationalised. In my book that makes your average (cautious) taxpayer a far better person than a banker!
Their (supposed) profits made in the half-dozen or so years before the crash were OBVIOUSLY!!! just hollow! In just one year, 6 years worth of profits were wiped out! In other words we would have been better off WITHOUT those bankers opening their doors for business, for YEARS previously?!
I imagine your post wasn't serious and you were merely being ironic?
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Has anyone noticed that Robert Peston and David Tennant bear a quite startling resemblance?
This mess is going to take a bit more than a chap in a TARDIS to sort it out. The way things are going, we are due to exchange a one-eyed occupant of 10 Downing Street with another party leader who also happens to only have one eye. They won't job-share, so can anyone tell me, in case the unthinkable happens and the new, user-friendly "Be Nice to People" party holds the balance of power after a General Election - do the BNP actually have an economic policy?
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#114 JackMaxDaniels
Great post!
VOTE OUTSIDE THE BOX.
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In the world of high finance if you hit your targets you get rewarded with huge bonuses that dwarf most people's ordinary salary. However in the real world the rest of us exist in, if you hit your targets you get to keep your job!
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Everything with Labour seems to be like this:
1. Create a massive problem through your incompetence
2. Finally cotton on to the public mood
3. In a show of pork-barrel politics annouce some ham-fisted legislation of one kind or another.
4. Drop said legislation on the quiet when it is found to be unworkable.
We all want revenge on the bankers, but much better to have avoided the problem in the first place.
Another example of pork-barrel politics is the extension of the scrappage scheme. This is just bringing next years car sales into this year. As soon as the scheme is stopped sales will fall off a cliff. But that will be after the election of course....
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The bankers earn plenty without needing a bonus. And most of them won't leave if the bonuses are taken away from them. Where are they going to go? By all accounts, the moon has a very good view, and the more of them sent there the better.
I'd legislate that all bonus recipients must give the lot of it to Save The Children after a hefty tax to pay back every single penny of Bank Aid provided by every human being on this planet! For the bankers who fancy a change, how about building in some free plumbing for free water across East Africa? All the wildlife and families they could save from drought! Go on bankers. One good turn deserves another.
Well, they claim to be good for society, so let's see them do some good.
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114, that's well worth a read - Excellent post !
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#116 spareusthelies, you clearly have missed my point that if we have a go at the bankers to the current massive extent that all these points are, then they will move elsewhere, and the UK without the financial markets would be disasterous. What would our major industry be then? Tourism with the weather and seemingly unforgiving nature of all the individuals which inhabit it. The EC have long wished for the hub of european banking and finance to move to germany.
I should also point out that in some banks profits are still being made just not a good as the previous years. With regards to the 'Hollow' comment, are you nieve to believe the accounts of any of the large companies?
#114 - Are you implying that Leyman bros demise was not down to the USA property market? and that the knock on effect within the stock markets and the depression which had been created due to the lack of credit availability was not down to the USA banking system stopping the lending, are you really that nieve to think we are that separated from the markets within the usa that they weren't the cause?
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It would be nice to tax the bankers lightly and let them have their bonus's after all they do bring a lot of money in, but we could tax the banks retrospectively as the shares are cashed in and tax them on them present value not the value they were given at
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The Bankers shall NOT inherit the Earth!
If that's alright with them.
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#123 Where would we be without the banks? (I haven't missed the point,) I'd say we would probably not be in debt to the tune of £30k for every man, woman and child in this country.
Yes, I acknowledge the tax receipts would have been substantially, in other words £billions, lower without the banks in previous years. But then I disagree we should have an economy that does really well for a small section of society for a few years, only to condemn the entire country into economic decimation for a decade or two. What we are talking about is a time frame. Are you really saying it's sensible to be really well off for 6 or 7 years, but in debt-ridden poverty for 10 or more? My choice would be that we do business and politics that isn't of the "dreamt up in the school playground variety" and we live within our means all the time. I find it sickening that the taxpayer has had to bail out the banks. And those responsible to the taxpayer, i.e the government, have failed to actively sort out the banking sector. Inparticular by refusing to separate the casino operations from the High Street operations. Unless they do this there is an obvious risk that we will lose, big time, again. And for what, because people like you are scared of losing what is a failed industry? Where were you when our (un-subsidised) manufacturing industry was going up in smoke (receiving zero taxpayer assistance?) Why should the banks receive bailout, in the £trillions and manufacturing only a few beans, if anything?
The picture is much broader than thinking it's sensible to be a bit of a scaredy cat in the face of some posh bankers demanding that they, and their "skills," need to be treated with more importance than is actually the case.
The POINT is we would be better off WITHOUT the bankers!
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LOL, Brown HAS FLipped!!!
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This comment was removed because the moderators found it broke the House Rules.
#126 LOL!! If only we all had enough money to never need a mortgage, or maybe never owned our homes and rented all the time ;-)
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I have long thought that these bonuses were thefts from the shareholders, and anyone else who found the advice they had been given was bad - and costed them. Maybe even a fraud on the Revenue, although that is a bit extreme. After all, these people are in a fiduciary position with regard to other stakholders.
If the bonuses had not been paid out, they would have been company profits and taxed accordingly, then taxed again as dividend income.
With all the excitement about bringing off-shore banking into line, it should not be difficult for the Treasury to recover some tax from any bonus funds secreted abroad!
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126. At 3:26pm on 29 Sep 2009, spareusthelies wrote:
#123 Where would we be without the banks? (I haven't missed the point,) I'd say we would probably not be in debt to the tune of £30k for every man, woman and child in this country.
I agree with this. The bankers are little better than drug dealers in that they have got more people addicted to massive debt, usually just to buy a basic home. The have also gambled with other peoples' money and lost in many cases, and expect their losses to be picked up by the tax payer. It would be a great gain to society if they were based elsewhere and their damaging activities greatly limited. I do not include the more junior staff who work in the high street banks who generally do a good job in difficult circumstances.
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if the pm is serious surely board meetings can be held at various banks now owned by the great unwashed and as majority shareholders we can make policy. and where we dont hold control we can call in the loans we gave them if they dont keep in line as for the ones not in joe public's debt they will always require a FSA approval to trade so a simple change in law and gordon is now your auntie hazel
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Banker's bonuses, although totally immoral, are not the real problem. True, they may have been structured in a way that caused Banker's to behave irresponsibly but that is easy to fix, especially if you are the majority shareholder of the establishment in question. The real issue must be to split the 'casino' operation from the 'retail' banking operation and add a little sensible regulation to the latter. This is eminetly possible if, as above, you are the majority shareholder in the establishment. This will result in the retail side being reigned in to some form of stability and remuneration will naturally converge to a sensible level. Let the casino operation do what it likes, if it goes belly up then just let it die. As for Banker's leaving the country etc, who cares about these incompetents, no-one can serously consider them worth keeping can they?
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#123 DanNHS
"#114 - Are you implying that Leyman bros demise was not down to the USA property market? and that the knock on effect within the stock markets and the depression which had been created due to the lack of credit availability was not down to the USA banking system stopping the lending, are you really that nieve to think we are that separated from the markets within the usa that they weren't the cause?"
Er no. I don't recall mentioning Lehmans or USA bank lending.
Lehmans was nothing other than a catalyst, if wholesale markets wished to lend to the UK they would have done - but they didn't because in their eyes we weren't/aren't credit worthy.
Let's reverse what you say and say Lehmans never failed and the bank lending continued. House prices continued to spiral and good old Gordy continued with his "No more Boom and Bust",,, how high would house prices be before systemic failure ?
£1 million a house ? £2 million ?
Would the failure then be some other bank's demise ?
Naivity is not realising that if the £800 billion of UK wholesale debt hadn't been lent in the first place then there would have been NO PROBLEM for the UK banking system at all. In fact we would all be far, far better off with much lower mortgages and a far higher standard of living (due to lower mortgage repayments). There "might" have been some systemic risk due to international bank investments, however those costs would have been far lower and wholey the USA's responsibility.
Stock markets have been over valued, no justification for the high stock quotations based on poor earnings and a too strong currency in reflection to national debt/trade gap. A currency maintained on the back of a high interest rate compared to the Euro. It was just a question of time before the currency dropped like a stone and the debt burden became too high to repay - payments funded mostly from continuous lending.
As regards a depression - we haven't had a depression YET. We are again living off credit in the form of Government debt and BoE money printing. Only when this runs out and taxes kick in will the true picture start to become clear of where this country is. But with our currency already devalued by over 50% against the Euro (I used to get paid in Euros at 55-60 pence a Euro, it's now 90+ pence) I expect inflation will kick in hard and interest rates will have to be raised as the currency slips further.
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J @ 134
Lehmans was nothing other than a catalyst
catalysts are very important, Jack ... no catalyst, the whole thing doesn't happen ... GCSE Chemistry, n'est ce pas?
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fizz @ 133
bonuses may have been structured in a way that caused Bankers to behave irresponsibly but that is easy to fix - especially if you are the majority shareholder of the establishment in question
you'd have thought so, wouldn't you? ... think people have generally fallen for the "We need to pay absurdly large amounts of Dosh to attract The Talent" line
and some unfortunates are still peddling that hogwash
amazing, isn't it?
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I cannot be bothered with this blog anymore. We have gone in circles many times. It seems that the posters here know more about what is right than either of the political parties and Mr Peston combined.
So why hasn't a main politican come forward and jumped on all these things that we have been saying for months? The total silence from any opposition is the most worrying aspect for me.
Is it because they feel that GB is doing such a fine job of wrecking his chances that they just sit back and let him waffle or something deeper and more sinister like we haven't got a fighting chance anyway.
Has Labour used up all the Conservative aces? Has Labour sussed the Conservatives and used all the tricks that they would have if they had been in power?
Look, all I want is to live in a country that has a fair legal and monetary policy for all its people and not just those higher up the social ladder.
Have we had this from Labour, no. Will we get this from the Conservatives, no.
Will someone else please come forward now before it's too late. Please...
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#96 - Glad to see a post from someone in the real world that can knows the difference between the 'bankers' that the majority of the posts here refer to and the 'bankers' that do the day to day work. As you say any bonuses they receive boost their salary which is not large in the first place compared to market levels.
#98 - How condescending! There are hundreds of thousands of workers out there in the finance industry that are fighting to keep their companies in business by providing a service - some owned by the government, some not. They have the same issues you have - mortgages, loans, low interest rates on savings. But they have to continue to provide the best service they can to pay the bills. None of them, I'm sure, appreciate the constant slagging off that you seem to want to give. No they don't want you to say it's not their fault - they know it's not. They want you to stop carping on about the same thing over and over again and tarring 'bankers'all with ther same brush. Get a grip!
#121 Earn plenty - I can assure you that the majority don't.
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Has anyone noticed the hypocracy of New Labour in respect of the banks?
Having decided the banks need 'fiscal responsibility' and they must maintain cash reserves in future, I guess it's not so clever an idea after all, isn't it patently obvious that our government should take a dose of this medicine too?
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sausages @ 138
you may be right that my post (98) comes off as condescending ... it's bad if it does, and I'll work on that ... but your praise for post 96 is misplaced - perhaps you got a bit swept up by all the CAPITAL LETTERS
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Yep, #123, just imagine, no (dodgy) mortgage lending means, no need for debt securitisation, no need for Collateralized Debt Obligations, nor any need for Credit Default Swaps and hey presto no sub-prime!?
Sub-prime maybe an American issue, but derivatives trading, toxic debt and bank bailout came to Britain and trashed the economy in the process. And the Government is having a hard time deciding that these industries should be regulated, even just a bit. When what they need is Legislation, not Regulation!
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Colleagues,
In the following comment I do not blame the average worker in banks, but certainly blame senior management in banks and those parts of investment banking and bank trading rooms that do engage in high-risk speculation, using the deposits of their own customers. How crazy is a system that allows a small elite to speculate with multi-billions of pounds of their own depositors, leveraging the sums up to 30 or 40 times, and when it all goes wrong expect the tax payer to foot the bill, pay hundreds of billions to stabilise the banks, and then expect millions of workers to go into unemployment to re-plenish the state and the bank's coffers. All of this whilst they continue to receive mega-bonuses and seek to evade taxes wherever they can? All banks in the UK would have failed without the combined impact of direct state assistance for some banks, state guarantees for all banks, continued access to 0.5 interest rates and quantitative easing pumping 175 billion pounds into the system.
Such madness cannot be repeated again.
Please find many more arguments why reining in banks is absolutely necessary, unavoidable and very good for fairer societies here:
http://globalinsights.wordpress.com/
P.S. I liked Gordon Brown's speech today. Yes, he made mistakes and unfortunately trusted the City of London in the past, but I hope he will never be so foolish again.
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The bankers will always win in any open or regulated market.
So what is the solution?
Simple.
A non convertible currency available only at state run banks.
Before folk start off about how unfair it would be and that it would never work. What is the alternative? The present system?
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Wow, more banker/bonus bashing from Mr. Peston and a number of contributors who frankly don’t have the first idea of what they are talking about. And yes, my user ID does give away my position.
A few comments for anybody who cares, feel free to skip if you don’t.
1) Feel free to blame the banks/bankers (and I liberally use both those words) for the mess we are in. Blame does sit there, no question. But also blame everybody out there that borrowed time and again against rising house prices, and over and above what their incomes justified. We are all responsible for our personal finances and while I would love to ration personal lending by IQ, we live now in a "liberal" society where I doubt such practices would be deemed socially acceptable. We made the mistake of believing house price rises were sustainable - borrowers didn’t care and just borrowed more.
2) As to the death of CDOs and all the complex stuff some commentators mention and don’t really understand? Well, a 4bn pound new issue came to market this week. I traded it. Lesson from this? Don’t label all products in one bracket - i.e. CDOS were rubbish, but there are many other types of financial innovations that, believe it or not, are actually good for you. More than good for you actually, NEEDED by you. 70% of mortgages in 2007 were funded by this complex product – try removing that completely for a laugh.
3) Bonuses? As mentioned by the more financially competent commentators, these have been restructured heavily with much deferral. Yes, bankers can earn a lot of money but the fact is many of them were highly successful over the period. If you have been successful you get your just rewards. And yes, believe it or not there remains a lot of competition for successful financial professionals - so banks have to pay… and probably pay more now to compensate for the coming tax increases. Remember, there are other financial centers that compete with London.
Ps. Buy a bright yellow lambo? I have got more taste than that
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137. At 6:45pm on 29 Sep 2009, moneywhatmoney wrote:
I cannot be bothered with this blog anymore. We have gone in circles many times. It seems that the posters here know more about what is right than either of the political parties and Mr Peston combined.
I know how you feel moneywhatmoney. Have a look at groups like money reform party and other like minded people who are trying to change things for the better. The main thing is not to allow the private banks to create new debt money from nothing (legal forgery), and only allow the government or Bank of England to create new money. The Bank of England has created new money through quantitive easing, but they have adopted only some of the solutions required and their priority has been to save the banks, when the priority should be to protect the depositors in those banks. The present system relies on finding an ever expanding army of people prepared to take on more debts which is unsustainable. We have devised a solution of 100% registered money which would allow the banking system as a whole to lend out up to the total amount of deposits within the system and no more (different form 100% reserve money which would not allow banks to lend at all). The present fractional reserve system allows a £100 deposit to be multiplied up many times throughout the banks, you are probably already aware of this. In reality there is no reserve limit at the moment, the only limit to debt money creation is the number of willing borrowers. We have hammered away at the three main political parties and the Bank of England with little success so far. This is because of powerful vested interests, ignorance, out of date economics, and because some politicians are in the pockets of the financial elites. We have also tried to educate the media and the general public in what is quite a complicated subject.
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ABS Trader @ 144
I agree with a lot of your post, in particular that not ALL complex, innovative products are a scam - sub prime and securitisation, for example, are both great ideas - problem was in the bonus driven excesses - so yes, let's not throw out the baby with the bathwater as they say - good point - where you go wrong, however, is when you defend the "We have to pay really Big Bucks to attract The Talent" - that's self serving eyewash which has been trotted out for far too long - the fact is the job (trading) does require some intellect and some energy, but it's not particularly difficult (is it?) in the grand scheme of things - just about any reasonably bright 21 year old could be trained up within a year or so to do most of these jobs - there's a massive pool of people who both COULD do it, and would be HAPPY to do it, for say 100k max - a properly functioning free market, therefore, would lead to this happening - that it doesn't demonstrates that we have a protected cabal in operation - it's quite hard to get into the game but, once in, what we get is a group of individuals who jealously guard their arcane knowledge and personal contacts, and hence artificially inflate their value - I don't blame the individuals, it makes sense what they do - makes sense for them, anyway - needs to change though - the other myth which needs exploding is that if the pay comes back to earth, we will lose the business overseas - this is nonsense of the nth degree - think about it - for any other industry, the challenge is to keep costs DOWN otherwise the business moves to lower wage places overseas - yet in investment banking we are supposed to turn that on its head - Alice through the Looking Glass stuff, isn't it?
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Suggested read for all - "End the Fed" by US Senator Ron Paul. Your wealth is being stolen legally!
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This comment was removed because the moderators found it broke the House Rules.
#135
"J @ 134
Lehmans was nothing other than a catalyst
catalysts are very important, Jack ... no catalyst, the whole thing doesn't happen ... GCSE Chemistry, n'est ce pas?"
Er, NO.
A chemical catalyst is defined as "(chemistry) a substance that initiates or accelerates a chemical reaction without itself being affected"
Lehmans was affected,,, a lot. And most chemical reactions will occur without the catalyst anyway, just higher energy conditions are required.
I meant the English Language term (GCSE) "•something that causes an important event to happen; "the invasion acted as a catalyst to unite the country".
#146 Sorry ABS Trader, I don't agree at all that any of these wiz bang instruments are needed at all. They never have been needed, just opted for by banks as a means to their own ends - to make as much money as possible.
Trying to say "buyer beware" is an appropiate approach for mortgage selling is quite frankly very disturbing and something I think the FSA would not look kindly at, never mind the general public. After all a careless attitude has ended in the tax payer shoring up banks,,, something I have no doubt we will see in the near future as lawyers hit banks for miss selling. Due dillegence affects all of us, claiming the a client was stupid is no defence for incompetance.
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#95
Dear Mr Mix
My issue is this... anyone can have an opinion on anybody elses remuneration package. For example we could do an analysis of the increase in Local Authority Chief Executive pay or the cost of allowances now paid to many local councillors for doing a role they were happy to do voluntarily in the past BUT there are many aspects to the recent difficulties that are not covered by 'bankers' bonuses.
Another example of failure was the ratings system. Perhaps someone should curb the bonuses of those working at Moodys or Standard and Poor.
http://www.guardian.co.uk/business/2008/jul/08/creditcrunch.economy
http://www.guardian.co.uk/business/2008/jul/08/creditcrunch.economy
AIG was not a bank and yet through AIG financial services it helped to 'insure' trade in 'sophisticated' financial products.
You might like to take a look at this to see who got bailout funds in the US and how much
http://bailout.propublica.org/main/list/index
You will see firms like General Motors who in addition to making products that were not appealing and paying more than they could afford were lending money to people to buy cars at silly rates over long periods of time.
How would regulate the remuneration of mortgage brokers or estate agents or even managers at Marks and Spencer who are still offering 0% interest rates on their credit card for 9 months which might be OK to start with but just enables people to buy now and pay later.
How would you deal with those that invested public funds in Icelandic Banks despite the fact that you would have had to be crazy not to question how banks in a country with a population smaller than Birmingham could possibly offer 12% interest.
I could go on and on but nevertheless, I consider this to be in my terms populist drivel and hot air as you put it, that distracts from some much bigger issues including having sufficient electrical generating capacity and access to reliable gas supplies.
Bankers bonuses pale into insignificance when you consider the impact of insufficiency of these basic needs which enable us to live securely and comfortably.
I've no doubt that someone will refer back to past policy. This does not help us for the future. We are where we are. We cannot change the past but while we focus on registers for child minders or those that work with kids or anyone's pay we don't focus on those things that underpin our welfare and security or ability to communicate with those we do not know and get access to information that we didn't know existed.
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How can Gordon Brown give out this rubbish when Ed Balls is having Thousands of pounds of refit to his office, Labour MPs have got to start living their own policies.
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Following the tradegy of the lady plagued by street thugs and the eventual
death of her and her daughter in Leicester, One is promted to ask " has our Police force become the 4th emergency service "?
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All things considered, I believe there is still a lot of bashing to do. My company is technically based in England, but all its activity is in the Euro zone. Here is what I received yesterday from my (English) bank, and my answer:
# I thought I would let you know about an exciting new product being launched by BankX on the (pretty soon).
#
# Over a 3 and a half year term, BankX will pay 15% credit interest if the FTSE is greater or equal to at the end of the term. If the FTSE has dropped at the end of the term, BankX will still pay 3% credit interest and guarantee 100% of your initial capital investment.
#
# Please let me know if this is of interest and I will be delighted to provide you with more information. There will only be a limited amount available and will be allocated on a first come first served basis.
#
Timeo Danaos et dona ferentes.
You don't seem to have quite digested the fact that if I had bought £100 in the FTSE one year ago when it was at (I'm rounding) 5,000 I would have, as of yesterday's closure, £103.20 today, but that I would have had to spend €126 (plus commissions) one year ago to get these £100 and that today's pounds would be worth €113.11 (minus commissions). In other words, the FTSE can go anywhere it wants, as long as you don't include the currency differential its vagrancies and capital guarantees are pretty irrelevant to me.
Besides, if I understand well, you're suggesting to me to BET on the way this (for me) irrelevant index goes. I remember having read, a long time ago, in one of the Berkshire-Hathaway annual reports (out of memory) "The only risk that Charlie and I are ready to take is eating cottage-cheese one day after the "sell by" date on the box" - signed Warren Buffett. My understanding of making money is either making products or providing services that people are willing to pay for, or lending capital to people involved in such an activity and getting a share of the cake when they generate cash.
I don't really see how you can propose a 15% return (excluding Ponzi schemes) when the base rate of the BoE is hardly above zero, especially linked to the FTSE, unless:
a) Your product is a repackaging of Camorra-grade, top risk, toxic assets
b) Your analysts are expecting a lot of inflation, which is a feeling I completely share.
c) Both of the above
Rather than an exciting new product, I'd rather buy into a boring old one that would pay me an interest that follows the ECB rate.
Good try.
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Cast you mind back to 2006 0r 2007. Gordon Brown was being interviewed on BBC Radio 4's Today Programme. I paraphrase the content because it was long ago, and don't offer any direct quotes, but this is how I remember the conversation went as I travelled in to work that day.
Question: Mr Brown, what advice would you offer your children if they wanted a mortgage to buy a house in today's market?
GB: The Labour Government does not intervene in the Financial Markets.
Alright, GB was asked a very leading question, and the housing market was at its height and very overblown. The question was about mortgages on multipliers of 4/5/6/7 times earnings that banks were handing out to those with less than satisfactory credit records, and to those people who were getting increasingly desperate to get on the housing ladder.
GB was very specific... Labour Govt doesn't intervene in the Financial Markets.
Roll forward to today and the Govt is making lots of noise about intervention, but through Robert Peston’s forensic analysis apparently there is little substance.
In my opinion, if you want to protect society you probably don't do it through restricting bonus, but you can restrict bonuses through other measures.
My answer is for Govt's/Parliament to present primary legislation to restrict the financial products that financial institutions can offer and ensure that affordability for financial products is a key factor in the lending decision. The borrower’s entire financial position must be considered and if they are over extended then further borrowing must be denied.
Do I think this will happen? No. A govt that is so wedded to borrowing is unlikely to consider such tools and mechanisms to restrict their friends in the financial sector. Boy... how little the current Govt understands about how to identify financial shysters and miscreants.
If the Govt is brave then debt repackaging would be a thing of the past and Bankers would be back to sensible lending policies that sustain economic growth and not undermine it. Sure the bankers would still earn nice little bonuses but not at the expense of the rest of society.
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jack @ 149
I meant the English Language term (GCSE) "•something that causes an important event to happen; "the invasion acted as a catalyst to unite the country"
yep - that's a better fit than my Chemistry analogy - but still, the "catalyst" (in either sense) or the trigger (a bit too short and sharp, but anyway) or the Lightening Rod (urgh) or whatever is still extremely important, isn't it? - that was my point - a bit of a banal point now I see it in the cold light of morning
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Mrs B @ 150
right, I do believe I'm starting to "get" you (and an exciting experience it is too!) - so I agree with most of that post - and here's a couple of good points coming back your way:
(1) even if bank bonuses weren't particularly important (and I think they ARE ... as per 2 below) it doesn't follow that you shouldn't address them, does it? - if you can solve, say, 5 pc of a problem for starters, why not do so? - like when you sit an exam paper, the advice is always do the easy questions first, right? - that way you free up time and energy for the harder stuff and you can, you know, really concentrate on it
(2) but bonuses are important, very much so - the big ticket front office stuff I mean, not ALL bonuses - the point I think you're underplaying ... and massively, if I may say so ... is the extent to which the causes of the crisis were behavioural as well as structural in nature - behaviour of the public, obviously (the borrowing beyond their means etc etc) but also (which is moot for our discussion) the behaviour of the key players in the industry (investment banks of course, but not ONLY investment banks) - and what do you think is a major driver of the behaviour of this latter group of people? ... you know, the key players in the industry ... personal remuneration I'd have thought, wouldn't you? - and what features very prominently indeed in most of the remuneration packages on offer? - would it be bonuses?
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What a farce! Spin at its worst. Instead of regulating and punishing the banks they come up with this silly story of punishing a few griedy bankers. In a free market it's absolutely stupid to expect to regulate what a company pays its employees even because alternative ways will always be found. What we really need is regulation on how the bank should rob their customers. Any bank's client can tell stories of hidden charges, high interest, difficulty to obtain loans, and so on. So get real for once, please.
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#158
Dear Mr Mix
This is an amusing and lighthearted but serious piece - enjoy...
http://www.huffingtonpost.com/2009/09/18/marshmallow-test-video-a_n_291086.html
Although we hope that adults can behave well and exercise restraint and consider the impact of their actions, rules and regulations tend to help. For example, most people drive more carefully because of speed restrictions or drunk driving laws or rules about driving and using a mobile phone. They behave even better if rules are enforced say through speed cameras or use of parking attendants.
If they get mixed messages say an Attorney General that doesn't follow the rules she helped to introduce or 'light touch regulation' then its less likely that anyone will behave as you or I might like them too.
If people that own dogs that savage small children can get away with saying 'I don't understand it, Bonzo was great with kids' or parents of trouble makers can say 'he's a good boy, we don't have any trouble with him at home' you have to ask what differentiated the UK from say India, Australia and Canada.
In my view, it wasn't bonuses though I am sure that those that benefited were delighted by their good fortune, it was the environment which was established. See the attached link.
http://www.dailymail.co.uk/news/article-1142866/Meet-Labours-City-cronies-The-roll-bankers-rewarded-Brown-Blair.html?ITO=1490
OK I might write an article like this in another way but when you combine this with the 'light touch regulation', fees paid to the FSA by financial institutions and muddled responsibilities of the tripartite regulatory regime established by Gordon Brown you have to ask who was minding the hen coop.
Was it foxes?
Did the farmer care when he had a battery farm just up the road generating income tax, stamp duty on trading transactions and house purchases, enabling VAT takes through expansion of domestic credit, corporation tax on financial services profits and finding the wherewithall to fund PFI schemes through private sector borrowing on behalf of government?
And how important were bankers bonuses three years ago when say the income tax take could easily have been 10 billion per annum which could help pay for say working family tax credits.
http://www.telegraph.co.uk/news/uknews/1485442/Brown-poised-to-deliver-Blair-ousting-Budget.html
The environment could have been different
http://www.ft.com/cms/s/0/5b7620e2-4c86-11de-a6c5-00144feabdc0.html?ftcamp=rss&nclick_check=1
but then there'd have been far fewer mortgages available for far fewer house sales with far less stamp duty and VAT on new kitchens bathrooms washing machines and carpets and that was in no one's interest was it?
Churn was key to government spending. On the back of a match box I calculated that the reduction in housing sales probably reduced stamp duty take on sales by about 5 billion per year. No wonder the government wanted banks to lend again.
Furthermore there'd have been far fewer fees paid to re-mortgage when 'deals' came to an end - 1 million mortgage arrangements at 1000 pound a shot is a billion. How could banks like Northern Rock have operated without these fees.
If you accept that it would be right to question the nature of returns from Icelandic Banks, I am sure you would accept that the growth of Northern Rock's business should also have been questioned and dealt with.
Its why we have regulators, isn't it?
Finally, with a bit of help from a merchant bank (a few fees and bonuses along the way), I could sell off RBS's Citizens Bank in the US. This would go along way to restoring its balance sheet but that would affect the global reach, size, nature and dare I say it profitability of the mothership and all those that benefit from that, including you and me...
So again I say, bankers bonuses are a distraction.
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#144, "feel free to blame the bankers..."
I see so we're all to blame, not just the bankers, because people borrowed the money you lot were "pushing?"
First the banks were involved in pension mis-selling, then endowment mis-selling and then mortgage mis-selling, (only mortgage mis-selling has not been identified by media headlines in the same way as the previous issues, yet.)So in your book mortgage mis-selling is something that you roundly blame on the borrowers? But the fact that bankers were conveniently easing standard lending criteria from 3 times salary to 4 then 5 the 6 then 7,8 and so on, was all the fault of the borrowers and not the banks deliberately pushing/selling more poor unsustainable debt? Why do the High Street bankers have SALES TARGETS if they are not actually trying to sell, bully, pressure their customers into taking more of a product that is sensible???
Why do you think the banks became so heavily involved in securities (CDO & CDS) trading? You seem to be trying to say that they did it for the "good" of all those people who wanted to borrow billions. When in fact they were doing it for the purely selfish reasons of Profit and bonuses for shareholders and staff! Pull the other one why don't you, it's got bells on it!
Banker bashing is something you deserve.
People (bankers) like you are ALWAYS trying to weasel out of your responsibilities, mainly because you're totally spineless. You even gleefully admit to still trading this toxic rubbish. Why daren't you go to your bosses and suggest to them, maybe it's no longer a good idea to pedal this sort of stuff? Like I said, spineless (living in denial and unable to take responsibility.)
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Mrs B @ 158
enjoyed reading that, thank you - many very good and worthwhile points - but (you knew there'd be a but, didn't you?) I think we're in danger of losing the particular in the generality - I'm all for the Big Picture but when I take what you've said in the round, it seems to boil down to the bank bonus culture is kinda nothing to get worried about because there's LOADS of other stuff to be worried about too - and I can't buy that, I'm afraid
cue some quick scenario analysis:
(1) when the mortgage broker pushes a deal on someone who can't afford it and fabricates the papers if necessary, what's a major part of his motivation? (answer at bottom)
(2) when the investment banker bundles up a load of the above loans and creates an opaque and overly complex Asset Backed Security out of them, what's probably driving him? (answer at bottom)
(3) when the ratings agencies skip the due diligence on the above ABS and give it a triple A rating when it should really be junk, what is egging them on to do that? (answer at bottom)
(4) when the saleswoman in the investment bank flogs that ABS to a wholesale customer for whom it's totally unsuitable, what's the name of her game? (answer at bottom)
... BONUSES!
ha! - get out of that, Mrs Bloggs
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Polls and sentiment across UK are sending a huge message to the Labour Party.
That message is being seriously misunderstood. Anyone, that would vote into power, the party of the business people who actually, deliberately went about wrecking the economy so they can sail bigger yachts all weekend and bank bonuses abroad, tax free, whilst living on expenses and sacking and laying off a million plus people is insane.
Those seriously considering a vote for the Conservative party because they think Labour caused these economic problems are looney left. Really and simply, they do not understand what the private financial industry has done and will walk away with 'Cameron Free' if it is allowed.
No profits or bonus or rises or anything, 'til the country's accounts are sorted out. Then all these business leaders need to go back to school, learn proper economics and business practice and sign binding charters of responsibility to the nation and its laws and governance. Many won't and they are not needed. They really are not needed, bye, bye.
These leaders of finance knew exactly what they were doing, exactly what they did and exactly how to get away with it all, literally. The lot of them - and putting back in their place. Henry VIII had similar problems with a bunch that thought they ran the show. Very interesting history, it is. The Banks require reformation and guidance. Government control and monitoring of boardroom activity and intentions. It is a question, plain and simple of who is in charge. I did not vote one of these Bankers in. I will vote to get them out.
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Dear Mr Mix
I'm delighted that you can see that there are many inter-linked aspects.
Perhaps you could include car salesmen who benefit from increased sales prompted by the scrappage scheme funded in part by the government and no doubt for some people by financing schemes not cash.
In any event, I have not said that bonuses are good or bad.
Some are well structured. Some leave a lot to be desired I am sure. Some are too short term in their perspective and some will use the wrong indicators to trigger payment. Some will benefit the little guy as much as the people at the top. Some will be used to pay for builders and new boilers and new cars or just day in day out living as part of a trickle down economic feed. Some will be squandered on wine, women and song.
What I continue to say is that they are a distraction
In particular BANKERS BONUSES, the subject of this blog, because, if you look at some of the problems in the US, mortgage brokers/arrangers such as Countrywide Housing - a big mortgage broker were not owned then by banks and none of that is covered by the 'regulation' of bankers bonuses.
Indeed until this time last year Goldman Sachs etc did not have a banking licence. They were covered by the SEC. They applied for a banking licence to have access to TARP funds.
The bonuses are an output from a system lead from the very top to maximise transactions or speed of money through the system which at every stage generates revenue for the Treasury to spend. I use the word spend rather than invest since much of what is currently deemed to be investment is actually spending - here today, gone tomorrow.
You can if you so wish go to any of the UK banks websites and look at the information provided to debt investors. You can see the spread of the age of the debt, the level of arrears, the loan to value proportions etc. In fact you will see that the amount of money that might be at risk is miniscule so my question is what exactly made debt investors concerned about the quality of the UK loans in any given 10 billion pound package from these banks?
When the pound collapsed by 10 % against the dollar during 2008 from a high of 2 dollars to the pound to 1.79 by September and 1.48 by December, why as a fund manager or investor or manager of China's surplus would you continue to shunt money into the UK when you might lose more than you'd ever gain in currency movements?
Perhaps there were better returns to be had elsewhere in the world. If you look at differential interest rates, exchange rates and the price of commodities by the end of 2007, there surely were and those managing pension funds on our behalf were, in part, seeking those returns to make up for the loss of 5 billion per year when dividends from UK companies shareholdings paid to those funds were taxed.
Yrs Bloggs
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Dear Mr Mix
By the way, I do not see our discussion as a duel. I do not feel trapped nor do I feel a need for the last word. I too might have been happy to accept what appeared to be conventional wisdoms but none of what I read over a nine month period quite stacked up and when I started rooting about in source data I discovered that not everything was as it seemed.
For example, I know several people who were considered to be sub-prime borrowers. These guys are not the problem. They took out 30 year fixed rate mortgages at 8% which was what they had to pay given their credit history. They did their sums and could handle the costs.
A trillion dollars of US debt on Iraq
US interest rates that came to equal those in the UK over 3 years
The increasing levels of government debt in our own nation
The vast sums of money squirreled away in savings accounts and pension funds and companies reserves that has to find a home and make a return for its owners
The sheer size of the income in mortgage fees that almost equated to profits
The debt racked up by companies owned by private capital companies
The vast mountains of T-shirts in US or UK stores that are all made overseas
The concept that cheap is good
The reduction in demand by replacing large numbers of lightbulbs with CFLS and what this can do to turnover
Anyway I'm off to the shops
I need to do my bit
Have a great evening
Yrs Mrs Bloggs
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mrs bee @ 163
trapped? - I should jolly well hope not! - we're just talking, right?
and it seems to me that you've shifted your position - you kicked off saying that bonuses were merely one of many things to worry about, and so shouldn't be getting all this attention - and now, influenced by my compelling arguments about how bonuses are a central issue, it looks like you are concerned about everything EXCEPT bonuses! - my powers are on the wane - disappointed (in myself)
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Dear Mr Mix
Yes, we are just talking and yes I do have concerns about a range of issues.
So as we are talking, I'll tell you about one of them.
I will use underpants and T-shirts as an example....
In the past, I always bought my underpants in M&S. Nice white ones. They weren't cheap but they lasted a couple of years and I could turn them into dusters at the end of their decent lives. They didn't shrink. They didn't develop holes, the elsatic didn't come away from the fabric and they were probably made in Leicester. They lasted longer than six months - the current timescales. The same sort of underpants now are made overseas and disintegrate quick time but last time I bought some I was able to get five pairs for six pounds.
Now how many packs of these underpants have to be bought just to pay minimum wages for one person for one day?
How many pairs of underpants have to be bought to pay the overheads of the enormous M&S stores in our shopping centres?
How many T-shirts at 5 or 6 or even 10 pounds a shot?
How many people now actually work on the shop floor?
The last time Mr Bloggs wanted to try something on the changing room was closed because there weren't enough staff.
When I wanted to pay for said underpants, I had to hunt for an open till.
How much VAT was earned from said underpants?
What happens to profits and corporation tax and dividends?
How much cotton has had to be produced to make these and the endless round of replacements?
How much fuel is used to transport endless pairs of T shirts and pants around the globe?
How do other retailers react? In fact, is M&S's approach a reaction to other retailers cost cutting? Is this the only way they can continue to sell underpants or T-shirts and remain in business?
How much of this stuff ends up in landfill because sure as eggs is eggs Oxfam does not recycle old T-shirts or underpants?
What impact does this kind of low cost trading have on wages and benefits?
How can those working in these stores buy anything but these low cost items?
How did the endless development of new and bigger out of town shopping centres impact on this trend?
What happens when we have enough T-shirts or jeans or skirts or trousers or coats or handbags or shoes or even underpants and don't need to buy any more or can't because the cost of basic items such as food or transport or heating bills has soared because there's an increased world-wide demand for commodities in part to keep making the self same goods designed to be discarded in three or six months?
What happens in the US when gas prices double to four dollars a gallon and an economy dependent on the internal combustion engine slows? - people don't travel to the malls to buy this stuff because they can make do because they've got loads of stuff in the cupboard and they've got to pay for the mortgages that came to the end of their low fixed rate initial three or five year periods. They also don't travel to the hairdresser or the nail bar quite so often too.
How do those in the UK that can claim a range of benefits to have some security react to the low wages on offer in these retail emporiums?
Who is prepared to fill the positions?
Now I get to this last point because the last time I was in central London this is what I experienced...
The young woman who served me soup was from eastern europe. The young man that served Master Bloggs was from the Indian sub-continent. The ladies on the till in were originally from West Africa. I was served by someone from North America in one shoe shop (unfortunately rather nice shoes made in the far east did not fit) and someone with a French accent who barely spoke english in another. The lady I paid at the till in M&S for said underpants was from New Zealand or Australia. The two parking wardens I overhead on the street were from West Africa and were conducting their conversation in their first language. Eventually I was served in a book shop by someone who had clearly been brought up in South London.
Please don't get me wrong. I like the rich tapestry this offers. I like the opportunity to talk to all these individuals and the tolerance that this engenders.
I even like the fact that people in another part of the world have access to employment.
But, the impact of cheap on our economy and environment is massive and that is why I spend time thinking about such matters.
Someone, no doubt, gets a bonus for all of this but I doubt its a banker!
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wasn't it gordon who allowed them to pocket this money, sounds like another promise that will somehow fail as the bankers and accountants will find ways getting around it to feather their nests
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There are valid reasons for bashing banks and bankers. A mother in despair over debts drowns her 11-year old son "whom she adored" and then attempts to take her own life. Imagine the harrowing ordeal endured by that poor boy! Imagine the wretched state of that poor woman then -- and forevermore!
How can it be that a debt of a quarter-million pounds can outweigh the value of even one promising young life?
The boy would have grown up and earned far more -- contributed far more -- to this world, to this nation, and even to his mother's creditors.
How many more martyrs to greed must we have before there is serious reform of social safety nets, before women have access to credit for what they provide society FREE OF CHARGE, before Mothers and Motherhood are recognised as a credible career, a vital professional choice?
This woman clearly had coping skills insufficient to her plight -- but any of us who owes anything knows how effectively debt collectors can hound & intimidate the very clients they depend on! Even clients with pretty decent coping skills!
This tragedy illustrates social Darwinism completely run amok.
We need better policies: real efforts to provide genuine "life crisis insurance" if you will; a safety net that actually SAVES lives; coping counselors that are responsive and proactive -- and banks and bankers who do not treat human beings and poor households with contempt.
Every rags-to-riches story is a story reinforcing the concept that pretty much any destitute household may yet give rise to a great fortune, or a great discovery, or a great destiny. We see it time and time again.
It is time to really have 21st century solutions -- solutions worthy of our technological advances, of our medical advances, of our so-called democratic progress -- so that this terrible tragedy is the last such tragedy, anywhere on earth.
It is absolutely unconscionable to drive a woman to murder her own beloved son to escape economic persecution. It is not too far away from the drama of the woman with the disabled daughter driven to self-immolate by bullies. The bullies were vile, debased yobs; the bakers and debt-collectors are presumably refined & educated persons. But what, ultimately, is the big difference in result?
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A power play is under way. It is about wealth and who gets it. The cost of finance has become prohibitive - it is a rip off. Theft!
Underlying the polarisation occuring between left thinking and right, is the age old argument of 'to whom does the wealth belong'. Finance, ie Banks, Lenders, Pensions providers and so forth have manipulated a dominant position within society and business. The same now applies to basic utilities including day to day banking and housing. Those managing business 'believe' they are actually important, more important than the rest and thus justify themselves huge reward. Human nature, this class of people are simply jumped up clerks and administrators, easily replaced from a huge pool of talent and vastly over priced and over rated. Shareholders and customers in these milche cow industries are being ripped off in vast measures and no one can afford it any longer. There is the problem to be addressed, a generation of FAT CAT scroungers who rob customers blind. They simply transfer wealth way beyond the value of their service. It is time to cut out the fat. l want those profits back in my pocket or with the exchequer in taxes, not funding a class of loons who are ripping me off.
This is a cost, an expense the eonomy and nation should no longer bear. It has become a burden. Finance does not generate wealth, it makes those in that industry wealthy and influential. Their time has past. This method of business is a liability. The wealth belongs to the home owners who are a target for every financial scam under the sun. If i'm going to be robbed ever more, l prefer it to be by the taxman, l do not wish to finance morons and their yachts. Which is what is taking place.
30 years ago a 2 bedroom flat could be purchased in London for £20,000. The last 30 years have been an incredible bout of greed. For 30 years it has hicupped along rather well, but cannot continue as is. The wealth that is generated must now go into ordinary peoples pockets and the middle men and agents who grew fat off the back of inflated prices for everything, need to lean up. The balance needs to tilt back the other way. The next generation of wealth must go into consumers pockets instead of fat salaries, perks, expenses, bonuses and offshore accounts.
Prices need to come down and that means the middlemen, agents who sit raking off profit and reward need to be cut down to size. The costs of doing business as usual today is a liability that has wrecked the economy. The government did not cause the problems that exist, Commercial Finance went out of control because it was TRUSTED to know what it was doing and be responsible. Where in the world ever, have those with hands on others money been honest and fair. Everyone, all of us, made the same mistake. Trusting a bunch of Barrow Boys to be honest. The economy was inflated. Incredibly, government didn't do that, we all did it, and there are easy and difficult wys to sort it out. l prefer the easy way.
Put Finance to work for reduced costs and reward. Bring down commercial interest rates through the floor and keep them there long term. Bust to boom, turn it on its head.
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herosrest, No. 168, You are so right!
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Banks are casinos and are run by gamblers who us other peoples money to gamble with and if they win they get bonus and if they lose they get bonus because the house always wins its the people who deposit their money that loose, Brown and Darling along with Blair know all about it they will not be leaving their jobs and have to look for work or sign on they will have huge pensions and a seat in the house of Lords with all their cronies so that they can lobby for companies who will give the back handers but you will not see one of them looking for hand outs or their families going hand in cap for food and clothiers for their families. In the mean time bash those unpeople those with little of nothing because that is what politic parties do best, please grow up Robert before its to late. The benefit money in this country is given to JP Morgan Europe branch before it come to the poor this was done by Major worked for them and Blair gave them the right to take money from the poor here before he went to work for them. No banks will leave here it is so easy to work here that is why the USA has its major banks here it is not a democratic country Britain never was and the idea that the rich allow wealth to trickle down is cod wallop or spin which ever.
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mrs bloggs @ 165
ah globalisation and planet care, yes I guess they're amongst the biggest issues de nos jours - yes, no question - I'm an optimist, though! - I reckon there'll be a few BIG advances and new inventions which will help us out - we're due one about now, I'd have thought - thing is, every generation thinks they're special, don't they? - thinks the world is reaching The Limit of this that and the other - and they are ALWAYS wrong - don't see why we should be any different, do you? - I bet you ... bet you any money ... that in a couple of hundred years, the world is TONS better than it is now - hey, I hope you don't think I'm complacent, though - I'm not - and definitely not about bankers bonuses, for example - speaking of which, I liked your attempt to draw the link between bonuses and the quality of M and S underpants - liked it vey much, actually! - wouldn't surprise me one iota if, soon as bonuses are capped, we see a significant improvement in both the styling and durability of men's briefs
ps: loved your slogan Don't Go Cheap!
yes, loved that
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Assistance for the financial system, was conceived in sin, having been wholly unnecessary had very highly paid executives in the financial sector, with most to benefit from the system's survival, met minimal standards of competence and self-preservation. It's an expensive and unfinished debacle for taxpayers, forced to shoulder hundreds of billions in costs. It is not all right to overpay these people and then bonus them into stupidity. Enough of the madness.
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We may have avoided a meltdown. The least we should now expect is a serious conversation about where banks should be active and how to avoid rebuilding the same system that just collapsed. The message should be clear: High-risk activity (GROWTH of profits) and outsize bonuses and outsize risk, must be separated from guaranteed deposits and the taxpayer. This message is not being sent.
What is taking place is an utter waste of time, effort, trust and energy. Never again! Never again. If, after the fuss of banking reform, a redefined relationship between banks, customers and government does not redefine what banks do with our capital, all have failed. Even our youngsters in school understand there is trouble ahead that we have brought to them.
Never, ever again, must this happen. It matters not who gets sacked, ruined or voted out if they don't fix it now! Today. It is only a game to many who don't care. They are dreaming of other matters. Big fat bonuses.
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Peston, what I really don't understand why you and others like you never make mention of the shockingly fraudulent practice of the fractional reserve system which has been perpetrated by the banks for so long upon the public and which is at the CENTRE of all our woes (inflation, deflation, credit crunch etc).
There is a national awareness that is growing and it strikes me as odd and not a little curious why this has not even appeared on your radar?
Or maybe it has and maybe someone with your experience in the finance world is fully aware of it and its repercussions when it finally becomes the centre of attention. Woe betide the thieving financial conglomerates then ...
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An effective way to avoid future bubbles and financial crisis would be to stop with tax deductions on the money we borrow and to start with tax deductions on the money we save.
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All the city's complaints about taxing them will drive away business/tax income is rot. I have lots of customers in retail being bombarded by big companies wanting them to sell/adminster their products/services. The spin is that customers will come into their shop to buy the service (low profit margin to retailer eg 1-2%), but the footfall will increase the sale of their other products eg newsapaper, sweets, etc.
What actually happens is that people use the retailer to get a bus pass, pay a bill, etc and buy virtually nothing else. Sometimes the queues formed in the morning for some of the services puts off genuine customers who only want a paper, sweets, etc. One retailer told me he stopped some of these services and within a week saw an increase in his business on more profitable items on which he controlled the profit margin, without the hassle of customers asking questions about services he knew little about.
Imagine the big company is anyone in finance. Do people really believe these guys will keep their bonuses in this country, if they exploit tax laws to limit the amount they pay? If they do spend, they won't be buying many British goods, because we hardly produce anything. If they renovate a property(ies) they don't employ thousands of people. Most of the money will go on expensive materials produced abroad..because we don't make anything. Remember their sole aim is to make the maximum return from the minimum investment and if its other peoples money, all the better.
Consider if all these bright sparks were tasked to come up with something useful..say creating long term jobs, or improving the NHS by reducing costs, etc useful things..people weren't born to make money..cause we invented it. If these folks are intelligent, they should be pushed to helping society in the same way, the bone ideal should be made to work for their benefits.
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