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Can governments squeeze bankers' pay?

Robert Peston | 20:33 UK time, Thursday, 3 September 2009

I'm in New York filming a piece on where we are in respect of reform and recovery as we approach the anniversary of the demise of Lehman Brothers.

But I felt compelled to break off for a few minutes to assess the proposals advanced today by the troika of Sarkozy, Merkel and Brown to limit bankers' pay.

And I have to say that at first blanche the measures appear a tad muddled.

What is lacking is any sophisticated explanation of why the three wish to limit bankers' pay - other than their statement of the staggeringly bloomin' obvious that big bankers' rewards, so soon after banks were bailed out to an unprecedented extent by taxpayers, upsets a lot of their respective voters.

I think we know that.

But is it the sheer magnitude of the rewards that's wrong - their contribution to the growing inequality of our societies?

In which case, should there be a cap on the rewards of footballers or broadcasters (especially those who don't deliver, perhaps)?

Or is it that some bankers were rewarded for taking dangerous risks?

Well maybe we don't need the politicians to lecture us on the madness of paying bankers to kill their institutions and the economy: plans are pretty well advanced in most developed economies - both unilaterally by bank boards and enforced by regulators like the UK's FSA - to make sure that bankers' remuneration is more closely aligned with long-term performance and that bonuses sit in a de facto escrow account for a few years till its clear that they're genuinely merited.

That said, stipulating that bankers' pay should fall as well as rise to reflect what's really going on at the bank - which the three heads of government do - won't prevent huge payouts to those who generate huge returns.

Which brings us to the controversial part of the trio's recommendations, which is this: "we should explore ways to limit total variable remuneration in a bank either to a certain proportion of total compensation or the bank's revenues and/or profits."


As my colleague Stephanie Flanders says, there is some intellectual coherence to the idea that variable remuneration should not be too great a proportion of banks' income, so that they make sure that their reserves are increasing sufficiently to absorb future losses on loans and investments that go bad.

But it was not the quantum of bonuses paid out by Royal Bank of Scotland, or HBOS, or Northern Rock, or UBS or even Lehman Bros that depleted their capital resources to dangerously low levels.

What did for all of them was expanding their loans and investments way beyond what was prudent relative to their capital.

Now admittedly these banks were motivated to do this in part by the lovely prospect of all the bonuses that would be generated from the profits they expected (wrongly) to flow from all that lending and investing.

However it was the culture of linking pay to profits which did the damage, rather than magnitude of the bonuses themselves.

Which takes us to the nub of the question.

Do we want bankers to simply receive fat rewards that have no link to the performance of their institutions, in the hope this will make them more prudent stewards? That doesn't sound like a particularly compelling idea.

Or is that we simply want them on slim pickings? In which case, the better ones will quit to form or join hedge funds and other financial boutiques - where they'll be free from the nannying of Sarkozy, Merkel and Brown.

Either way, and as Adair Turner - chairman of the FSA - has pointed out, it's pretty difficult to put a lid on pay in the wider financial industry, especially a globalised one.

Remuneration in finance is like a blancmange. If government and regulators squeeze one part, it will bubble up somewhere else.

If big banks are restricted in the cash rewards they can pay their top staff, they will reward them in other ways - with increased pension contributions perhaps, or cheap loans. Or they'll pay a fortune to the best ones by hiring them on rolling short term contracts, to keep them off the official books.

And, as I've said, the most likely impact of pay reforms with teeth will be to fragment the industry into lots of privately owned firms, which will be insulated from state interference on remuneration.

So the most likely outcome would be a sort of re-arranging of the deckchairs, big changes for individual institutions.

If adopted globally, for example, I can't see how Goldman Sachs could remain a public company. That most generous of payers would surely have to dismantle its balance sheet and reconstitute itself as an old-fashioned partnership.

In other words, what the three leaders are proposing is far less radical than the suggestion of Adair Turner.

His proposal for a new global tax on what he has described as the banks' socially useless activities would attack what he would see as the root of the problem, which is the excessive bank income that spews out all those enormous bonuses.


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  • Comment number 1.

    Perhaps the article headline should be "Will Government squeeze Bankers pay" . . . to which the obvious answer would be NO! . . . even if they could.

    I would suggest that they are unlikely to want to bite the hand that's going to be feeding them all, when they get booted out of power in a few months time.

  • Comment number 2.

    Tie bonuses to the long-term performance of the banks' bonds, or their CDS spreads. Then they might think twice about dispensing 125% mortgages. (nb not my idea)

    Or make the bonuses "hang" for 3 years with total cancellation in the case of a default event?

  • Comment number 3.

    You hint at the real issue in your last paragraph, Robert.

    The real issue is the excessive profitability of financial services driven by lack of any real price competition.

    This is a mature industry (across the board, from mainstream corporate and retail banking, through asset management, to corporate broking and corporate finance) with very little by way of differentiated offerings, and in such circumstances price erosion would normally reduce profitability/return on capital to 'average' levels. The fact that it hasn't is an indication either of anti-competitive/oligopolistic behaviour or of supine clients who fail to challenge on fees.

    A reduction in the grossly excessive percentage of corporate profits accruing in the finance sector would be hugely beneficial for the wider global economy.

    Time either for the competition authorities to investigate or for a customer revolt.

  • Comment number 4.

    In the Thatcher era, the profits made by nationalised industries over and above operational needs were sequestered by the Treasury. Surely the same should apply to the part-nationalised/taxpayer guaranteed banks? If RBS is 80 per cent 'owned' by the taxpayer, it should keep 20 per cent of its gross profit and bonuses should be based on this figure. If the 'brilliant' bankers who brought the banking system to its knees then choose to ply their trade abroad as hedge fund whizz kids, encourage them to do so. They can then ruin some other economy and leave us comparatively safe.

  • Comment number 5.

    You keep hearing about these wonderful brains that will go somewhere else if they get paid less. Let them. There's nowhere for them to go. The power of banks are intimately connected to the power of the State. Bank of America isn't going to relocate to Honduras in any meaningful way, and the Bank of Honduras isn't going to start hiring the big brains made redundant by slimmed down banks. The idea that a Third World Bank could ever be on a British High Street being so ridiculously laughable tells a lot for those who want to learn.

    Why? Because bankers stack the deck, and count the cards. (And own and make the cards. Oh! And the Casino itself!) So there is no chance of them losing. There never has been. Unless, the State, lead by a Roosevelt-type character, and supported by mass discontent, reins them in significantly.

    Look at the recent crisis. Every single major bank in the Anglo-Saxon world, or even every Western Bank, is bust or would be if another major one fell. However, what happens? The State bails them out. And, here's the rub, or the nub, the State allows the banks to change their accounting practices so losses don't have to be registered. (i.e. they don't have to write down their losses and start looking for capital or make margin calls.) That's legally endorsed fraud.

    What happens? The bankers are now making money again on paper, paying out big bonuses, REAL losses are still mounting, but that's fine the taxpayer will be stuck with them along with the poor individuals who aren't lucky enough to be bankers and can't change the rules of the game, or their credit agreements.

    So, why don't we junk this argument about the best brains. They're not. They're good at Maths and lack a developed worldview, or have feeling or courage to see the short and long term social effects of their actions. They certainly don't care about the taxpayers, or the country who will have to clear up their legal fraudulence. (Work out that oxymoron.)

  • Comment number 6.

    'enforced by regulators like the UK's FSA '

    God Help Us !!!

  • Comment number 7.

    "His proposal for a new global tax on what he has described as the banks' socially useless activities would attack what he [Lord Turner] would see as the root of the problem, which is the excessive bank income that spews out all those enormous bonuses."

    No, no, no! It's not excessive bank income that Turner sees as the root of the problem. It's that too much bank income is not wealth that the bank has created, it's existing wealth extracted from other sections of the economy. What Turner believes is that the existing regulation of the financial sector has allowed the game has become more important than the endeavour. And so most of the wit and ingenuity is going into devising ever more intricate and detailed, leech-like, ways of imposing financial services as a levy on productive industry. What he wants to do is to place such insurmountable obstacles in the way of rent-seeking that participants will decide that their individual balance of advantage has switched away from gaming towards endeavour.

    The action needs to be carefully designed so that it impacts on rent-seeking without adversely affecting wealth-creation, but there's no reason to believe that this can't be done. And I should have thought that the vast majority of the population would welcome action that discourages people from making their living from activities that are closer to fraud than they are to production.

  • Comment number 8.

    As I've said many times before - we need some new banks!

  • Comment number 9.

    Robert Peston:

    Legally, Can governments squeeze bankers' pay?....Not really, but, this is a new time and place; So, they think that they have the constitutional right to do it....

    =Dennis Junior=

  • Comment number 10.

    The system 'works' by rewarding these reckless gamblers for dishing out IOUs with little thought as to the capacity of borrowers to pay back nor as to the consequences of their actions, either for the individuals, businesses or society at large. They are not generating real worth, but phoney money. As a result of their actions they have created a society of businesses, jobs and lifestyles that was artificially sustained and completely dependent on lending out ever greater sums of funny money. How no one could see where this leads suggests to me that they were all - the financial sector, the politicians, the economists and the consumers - in complete denial and happy to live with the fantasy for as long as it could be dragged out.

    However, no amount of regulation - or taxation - can resolve the problem - all it is doing is tinkering with a flawed system and it is doomed to fail. The credit crunch was a wake up call, that has not been heeded. The economy is dead and is merely being propped up with, guess what, more IOUs that we have no way of repaying. As soon as this runs out, we will be back to where we were. Indeed, there is no credit being lent because the banks know they are sitting on toxic debt and need as much money as possible to cushion themselves from the fall out, but as consumers cut back, businesses will fail, jobs will be lost and people will default on their mortgages and other loans, property prices will collapse and many will go bankrupt. There is no way out.

    And don't believe that the rest of the world is out of the woods since it was completely dependent on credit to facilitate it.

    We will need a new paradigm - a society not focused around generating ever greater (and false) multiples of GDP, but on facilitating better communities, increased well-being for all, more compasssion, sensitivity and otther-centredness. When we finally realise that then we can begin to rebuild a new world order.

  • Comment number 11.

    Looks like Robert thinks Turner has the better argument. However I do not understand how the banks can happily pay out such enormous sums for what is clearly some very questionable decisions. It must be that the top management benefit from the money making circus. It must also mean that there is little competition in the sector and that margins are absurdly inflated. Bonuses are on a scale not found anywhere in the real economy - ie one who can make two blades of grass grow where previously there was one is more deserving of society than any financial wheeler dealer!

  • Comment number 12.

    Bankers who complain that a Tobin tax is infeasible forget that we already have one. The commission they take on every financial transaction is pretty much a tax for being there not for doing anything. Better the government gets the revenue.

  • Comment number 13.

    Never mind filming about Lehman Bros last year, what about Mark II right now? What is going on with rush to Gold (China? Currency fears USD?) and what is happening with Santander? Not to mention a new crop of US banks looking increasingly likely to implode. We need genuinely independent comment from BBC now more than ever.

  • Comment number 14.

    It is all about timing. Each senior executive is recruited using personal contracts where the rewards, including "top hat" pensions - separate from the company scheme- are specified. It is merely a question of introducing regulations which require the contracts to provide the rewards after a specified period during which the actual effects of the actions of the senior executive can be evaluated. This would include contributions towards individual pensions as well as bonuses.

  • Comment number 15.

    The first 8 comments (at least) above on your piece, Robert, are absolutely on the money, and yes, you are right that putting ceilings on pay and bonuses is totally impractical. It will lead to all sorts of ridiculous things going on (... a bit like, um, the idea of setting capital gains tax and income tax rates at quite different levels).

    As we all know the fundamental cause of excessive rent and profits occurring in a market is because competition is simply not functioning properly, where there is some sort of cartel activity.

    In such a situation the simple question must be asked - by introducing some new structures/legal measures could this cartel activity be curtailed, or is it actually NOT AT ALL possible to get the financial services/banking market to work properly?!

    I think, very interestingly, Turner has basically decided the answer is that certain measures can indeed be taken, but that beyond these, it's a case of..... no, certain parts of the market cannot be made to work competitively. That is why he is starting to propose what I believe are some really substantial ideas of great merit (giving the lie, for the moment, to my conviction that the FSA has been captured by the bankers...... although I'll only believe this when I see these things implemented).

    In the Prospect article he mentions that he kind of had the same challenge when he was looking at the pensions industry - i.e. with the City of London royally ripping off pensioners for years and years (high middlemen costs), with the decent value pension products that were introduced not being promoted by pension companies at all (stakeholder pensions) and failing, and with the pension and investment companies taking a huge share from the value of peoples pensions for absolutely no discernible value added at all.

    He concluded that it was impossible to reduce such outrageous costs by market regulation and proposed that pensions be taken out of the private system altogether i.e. construct a national funded pension scheme, in other words 'socialising' the retail part of the distribution.

    In the same way perhaps, if we cannot arrange for a proper level of competition to exist in financial/banking markets of various sorts, then perhaps the best response is to impose a tax on transactions, which in effect allows 'rent' to exist, but takes some of that to spread to the rest of society.

  • Comment number 16.

    If, as ExcellenceFirst #7 so succinctly puts it, the banking system has degenerated into a leech on the productive sectors of world economies then restrictions needs to be put in place globally. Even the Cayman Islands are seeing the error of their tax haven ways, now demanding money from the Treasury to bail them out. So in response to Dennis-Junior #9, when governments (or taxpayers) own vast sections of the banking system - then yes they can squeeze bankers pay. Just as the public sector always foots the bill when the private sector has to be bailled out by taxpayers money.

    Wee-Scamp #8 has the right idea, in that banks need to be cut down to size, where they can no longer manipulate vast sums of money, and hide accounting fraud with such ease. That RBS could accumulate debts larger than the UKs GDP, let alone Scotland's, then the system has become a monopoly issue. What needs further investigation is the inter-relation between the major banking institutions globally (i.e. who owns interests in so called competitors). Breaking the banks down into manageable, local insitutions would draw back the disinterest of globalised corporations, where resources would be sourced against local priorities.

    The notion that talent will be lost, only hides the vast amount of self-interest this talent has exhibited; that the big earners will go into hedgefund activities is fine as with the increased competition of the increasing array then available they will disappear in their own self-interest. The notion that hedgefunds can in any way be of social/commercial benefit other than to those involved in their perpetuation is demonstrated by the number of ex-Conservative frontbenchers that have ended up on their boards. Is it true that John Major failed as a ticket collector on London Transport because he could not workout the correct change, is he the same John Major (ex-PM) that heads a number of hedgefunds. So much for the talent that would be lost.

    Smaller banks, government exercising the same restraint on taxpayer funded banks as they do on hard working poorly rewarded public sector workers. Let us see the same outcomes for bankers that social workers have been facing, let us see the pay freezes that are so easily applied in the public sector. For goodness sake, let us not see these self-interested greed mongers allowed into the teaching profession, as has been suggested, what could these talented individuals add to the education system (how to falsify mortgage applications; accounts and accounting practices; put personal reward above public service)?

  • Comment number 17.

    bonuses don't work - or rather they do but only for the people getting them - if linked to profit, they encourage cooking the books and reckless risk taking - if linked to the share price, they encourage cooking the books and reckless risk taking- absolutely no need for bonuses - let's "uninvent" them, shall we? - let's go back to a fair day's work for a fair day's pay - you go in, you stay there doing the job for 8 hours, you go home, you draw a salary - doing a big job? - okay, you get a big salary - smaller job, smaller salary - you're doing a good job? - great you get to keep it, and maybe you get promoted in due course to a bigger one (with a bigger salary) - NOT doing a good job? - sorry, you're fired - no need for bonuses - bonuses don't work

  • Comment number 18.

    I fail to understand how you can call traders talented, as far as I can see they , the banks and anyone in the business of money have no talent what so ever.
    All they are good at only because they have a mandate to do so is act like a parasite. Someone somewhere has to lose in order for them to make money.

    the people who will lose are us through our savings, our pensions etc.

    Just so we are all on the same page here, the system was a gnats whisker from collapsing and only some smoke and mirrors prevented it, if they get a wage at all they should be thankful

  • Comment number 19.

    **16. At 11:56pm on 03 Sep 2009, honestgeraldinho wrote:**

    I was trying to be sarcastic, with the answer, the government doesn't have the legal right to squeeze bankers' pay....Since, it is unlawful under the U.S. Constitutional.....

    =Dennis Junior=

  • Comment number 20.

    Banker pay and bonuses have been at obscene levels. But before everyone jumps to accuse me of sour grapes, the problem has been what those rewards were based on. Was it genuine profits? To have 7 or 8 or 9 years of profits all for it to be lost several times over in one year alone suggests the profits made in earlier years were nothing more than the bubble expanding. Only when it bursts does it become blatantly obvious that the banking activities have been a fraud, utterly hollow!

    Over the last 12 months our economies have taken the biggest trashing in history. The scale of losses is so galactic that no one can explain with much clarity the implications for us all. The taxpayer will, (we are told with more than a dash of political hesitation,) have to get used to the idea of more poverty, austerity and pain, even though they had little to do with all those losses. (They were not the ones to blame for sub-prime debt securitisation - the "casino stuff.") Yet, after a year of public debate and anger about bankers, our main European leaders finally take some action!Hooray! Yes, they write a letter.... Excuse me? Er, is that just a letter? Well I can't wait to see all those banker's knees knocking when that one comes slamming through the letterbox!

    How much more evidence do people need, that shows how politicians, business and bankers have no intention of representing anything other than their own self-interests? Or that our glorious leaders/politicians are just monumentally out of their depth and just can't lead?

    The one thing I still find refreshing, is how all our British businessmen and women were saying how German & French (high) labour costs were making them soooo uncompetitive before the crash, but lo and behold when it comes to recovery they are OUT of recession before good old "low-cost" Britain. Have I good grounds for smelling an awfully large rat?

    These people (bankers) took the western and much of the eastern, northern and southern world to the brink. We do NOT know that recovery is genuine, only that it might be. Yet we won't let these organisations go bust, we won't stop them paying big bonuses, we're supposed to take the view they are not as socially useless as some have commented, we're going to let them keep privatising profits. Oh! We may stop some of the casino trading, but we won't stop them using savers money to do it with!?! I really don't mind you "going down," Mr politician, but why do you think you have some (utterly perverse) right to assume you can take me with you? I know you don't want to imagine you can, but there again there are thousands of bankers and quants around the world who just didn't believe they could be so stupid as to lose that much money in one year either!

  • Comment number 21.

    It seems inevitable that Bankers' pay will balloon up to pose a threat to the stability of the economy once more. Execs seem (quite rationally) to view the biggest risk to their business as "risk to the franchise" which means bankers with key knowledge (often not executives) will up and leave the bank to go to the highest bidder. The bank's business will contract until someone can grow into the old role, causing a reduction in revenues.

    But the execs who are bidding for these key employees, only face the risk of reduced upside in their remuneration package. Therefore it's better for them to bid high for these employees and the business they carry with them (with someone else's money) in the hope of increasing their upside, as they are indifferent between the bank making no money (because of reduced revenues) and making huge losses (because of huge risks).

    There is a clear market failure here, we know for a fact that the impact of this is real, and smoke and mirrors with risk adjusted performance measures will never change this fundamental imbalance in incentives for execs. The cost is the massive misallocation of capital and human resources away from the rest of the economy, meaning a less productive economy, meaning a lower quality of life for most of us.

    You could argue that wider market forces (in the shape of pressure from shareholders) should eventually restrain the design of these remuneration packages, but we broke that market with the bailout.

    There are two solutions: 1) fix the market failures by removing implicit and explicit state support; or 2) impose the restraints on pay that the broken market has failed to impose.

    No politician has the guts to do (1), so (2) is the rational option. Yes it won't be great for the financial service sector, but it will be good for the rest of the economy.

  • Comment number 22.

    It's all about risk/reward

    banks should charge an interest rate based on the perceived risk of the capital. (fair enough, in the near past they got completely out of hand and couldn't assess the risks of the dodgy vehicles they were investing in, ie. mostly ladas and trabis)

    What should be done.

    Retail Banking
    Cap interest rates on all loans made within the UK (either from within to without or vice versa or wholely within) to 2% above BoE base rate.
    Banks taking retail deposits must pay 0.25% above BoE base rate or more to savers.
    Investors in retail banking share the risks of each others banks by virtue of the mutual depositors guarantee.

    Investment Banking
    Cannot loan money, shares or any other assets. Can create investment vehicles where all risk is finally resolved in the investors, the value of your investment can go down as well as up.

    Good to see you are still keeping a sense of humour Robert...
    '(especially those who don't deliver, perhaps)?' this from a man who went AWOL for 22 days in August :), yes we are keeping tabs.

  • Comment number 23.

    A legal minimum wage, should require a legal maximum wage to be set to bring balance and fairness to law.
    Perhaps a return to the principle that each company has 3 vested interests. The Owner(s), the Employees, and the Customer(s). Nothing can be legislated against the rights of owners nor should there be after all it is their property, but the rights of the Employees (well a very select few) should be legislated. Oh. We already do. These bankers and more importantly senior managers of our corporate World are all employees. As such, no more than 25 times the average wage paid within their organisation. No bonus should ever exceed 100% of base earnings, and it should be held in pending proof of the 'longterm' benefits of the said employees efforts. Pay a man above a certain amount of money for doing a job, and he is no more motivated by additional multiples of earnings. It makes not a squat of difference to a man who has been paid 30 million over the last 5 years, if you offer him a 100% bonus next year taking his wages to 12 million for that year. He will not work any harder to earn the 12 than he did the previous year to earn the 6. And yet this is the argument that the Executive and Banking classes make for getting the 'brightest' to work for them. Rubbish, absolutely.
    With a 25 fold increase on average earnings, if the bosses want a rise, then they have to distribute the profits to the staff as well.
    An elegant and easily legislated system of protections for society can easily be introduced into law, just as the minimum wage was.
    Get on with it Governments, otherwise soon, we will be at the cliff edge again wondering why so many have "made off" (surely a derivative traders joke) with so much money and yet the tax payer is so poor.

  • Comment number 24.

    The bankers are the focus of the recession,but as a country we have to be honest, that we simply borrowed to much money both as individuals and as a collective ie government.Bankers pay is a red herring to the real issue.

    The real story yesterday was the OECD prediction that our GDP will reduce by 35% (4.7% v 3.5%) more than the UK treasury predicted this year.If this occurs the projected £170bn deficit will be 25-50 billion light.

    If you work out what this value means in job cuts,its at least 500,000 public jobs.If you add in the report that we need more not less jobs in the NHS in the future(Labour quote yesterday),you may appreciate the size of the mis information being peddled on the general public.

    Bankers pay does need addressing by their employers(SHAREHOLDERS).The UK black hole needs addressing by the government.Any thought of protecting the NHS and education from future cuts is simply a joke by both Labour and the Conservatives.Real cut across the whole public sector is the only way we can make a dent into the debt.

    I find it ironic that GB chases down the bankers bonuses,but his own actions are causing a debt mountain to rise that will cause grief and suffering for the UK population for many years to come.

  • Comment number 25.

    These politicians are more transparent than a pane of glass. To announce they are contemplating restricting bankers pay is a purely populist move and designed to hopefully help them to hang on to power for a little longer. It is unworkable nonsense. If a senior banker has not delivered on his watch and the bank is one that has a majority shareholding held by the government(ie the general public) then they have control over what goes on. Idf it is a privately controlled bank then they/we have no business interfering and if it is a PLC then the shareholders can make their own opinions known. If a private bank or PLC bank then has problems for whatever reason there should be no repeat of public funds being used to bail them out. They must go bust if they have to QED

  • Comment number 26.

    Well if the heads of a duly elected governments can't control events such as excessive pay in big social organizations like banks then to me it means that big corporations have taken on the role of government. I think if this is true that chaos will ensue, or has chaos already occurred?

  • Comment number 27.

    Bye Bye City Bye Bey,
    NuLabour dont want you any more
    Bye Bye City Bye Bye

    We have gone from a Property Bubble
    to a debt black hole and
    we done need your taxes any more
    Bye Bye City Bye Bye

  • Comment number 28.

    I wonder if it will be Brown, Darling, or Peter (or a combination of the 3) who attends the G20 Finance meeting in London today?

  • Comment number 29.

    Sarkozy, Merkel and Brown are going down the right road.
    The American government still seems to prefer continue with the promotion of feudalism....but the US taxpayer hasn't rumbled them yet.
    Wake up you American taxpayers.....Wall Street still wants to take 90% of the cake, and leave the rest of you with the crumbs.
    Of course a healthy and prosperous financial industry is important, and those who are productive should be well paid, but there is a big difference between being "well paid" and daylight robbery of the nations' wealth.

  • Comment number 30.

    .... But it was not the quantum of bonuses paid out by Royal Bank of Scotland, or HBOS, or Northern Rock, or UBS or even Lehman Bros that depleted their capital resources to dangerously low levels.

    What did for all of them was expanding their loans and investments way beyond what was prudent relative to their capital. ....

    I think you've missed the central point entirely Robert! If you reward people for taking the risks that nearly always generate most short term profit, and fire them if they follow prudent long term policies that result in lower profits than seen at their competitors, guess what happens? Bankers take the option that is best for them, personally. Fact is, risking the institution (hey, you'll probably be fine for several good years...) pays best and keeps you in a job. Doing the right thing got you fired, and that is the problem that brought the World financial system to bankruptcy.

  • Comment number 31.

    24 & 25
    Spot on, although Bankers Pay is an issue, it is not the biggest issue facing UK's exit from recession.
    It's now the biggest smokescreen to cover the required reduction of public debt. Which has been growing out of control for over 10 years, partly funded by the tax revenue from the City which has dried up. And reduced tax and NI from employees due to rising unemployment, lower tax from companies struggling to survive.
    The government won't reduce this debt as it is part of GB's redistribution of wealth, through taxation to benefits.
    GB will struggle to get re-elected(sorry elected, as he hasn't been yet) if he doesn't cut public debt, he has no chance if he does.
    Therefore he needs a diversionary tactic, like this one.

  • Comment number 32.

    Whilst banks maintain their strategy of hire-and-fire, there can never be any mindset of a long term view amongst any of their employees. Department turnover rates of 30%-40% p.a. are not uncommon.
    After all, if I'm not going to be here next year, all I'm going to care about is the cash I can make this year, surely?

  • Comment number 33.

    Its raining today in sunnyalnwick.

    Why can't the Bankers' pay be left to the boards of the Banks to determine and responsibility for excesses rely upon shareholders to take a more active part in how "Their Bank" is being managed? In addition a new tax appropriate to the payment of bonus could be introduced unless the recipient took the bonus in shares that had to be retained for a minimum number of years. Not rocket science - is it?

    keep smiling

  • Comment number 34.

    Simple observation on the Banking Crisis. Banks going bust cause problems within the economy for two reasons: (1) The punter loses their money and; (2) the drop in the value of bank shares removes value from investment instruments causing a domino effect of failures.

    So why not have a new type of share for banks. The share would be fixed value, that is, it has no potential for capital gain (or loss) but does pays dividends and has share holders rights. This would mean that bank shares ofer no potential for capital gain ot lossfor investors - decoupling the banks from the stock market cycles and the economy.

    Secondly, banks should be "kite marked" accortding to level of the risk they take on the markets. A customer would be clear that in the event of banckruptcy the bank may only replay a percentage of the money invested. A high risk investment bank my pay high returns or lose a large proportion of your money, but this is made clear by the bank rating at the time of investment.

    If the bank goes bust, the economy doesn't suffer beacuse it has been decoupled for it.

  • Comment number 35.

    The financial system needs a root and branch reform. The big banks have taken their customers and their host societies for an expensive ride for far too long. Only in a time of a mega-crises like now are the underlying lies and deceptions of the 'financial services industry' becoming visible for those who are willig to take take notice.
    Offshore banking and tax havens (anywhere between 10-15 trillion US dollars have been stashed, stolen and hidden away by fraudsters, tax cheats and ciminals), massive tax avoidance and tax fraud facilitated by 'our' big banks, deceptive accounting practises, obscene bonuses from speculating with other people's money, the list goes on and on. How such socially useless and destructive behaviour of the banking industry could have been tolerated by the 'political elite' and the
    clueless citizens for decades is an important question to ask. Are we living in an educated and well informed society (where were the jornalists BEFORE the current crises?) or are we living in a dumbed down consumer society that takes no notice of the bigger questions until there is a massive crises threatening the private wealth of the majority
    of the UK citizens?
    Change is long overdue and must happen now, otherwise we will all be watching another financial crisis in a few years time. The UK tax payers will have to pay the bill once more after having been already the source of the banking industries' profits and bonuses in the first place.
    You can find more of the relevant facts and details here:

  • Comment number 36.

    Why are the FSA and the government all so worried about bonuses. It was not bonuses that where the cause of the problem, it was too much risk. The bonuses are a symptome of the disease not the disease itself.

    If you want to stop the banks going bust you need to control the amount of risk that they can put on thier balance sheet. What Turner needs to be thinking about is how can we stop banks leveraging up too much on one specific risk.

    Surely one possible solution is to measure the volume of trading on each bank desk in each product type. When are large increase is seen i.e. what would have happened on the structured credit desk before the credit crysis, the fsa can step in and stop the bank from taking more risk unless they have valid reasons etc.

    This however would take actual work from the fsa to put in a place and would require them employing competent staff. Seems like everyone is hung up on bonuses because they cant be bothered to put the effort in and fix the real problem. It is a complete joke.

  • Comment number 37.

    Welcome back RP.

    The simple answer to the question is no, they can't. 'Bankers pay' is a misnomer, 'financial services pay' is a better suited description and better reflects the current sentiment. Limiting pay in banks will result in the growth of hedge funds, who in themselves strike a chord of fear amongst governments in any event- why would this be regarded as progress?

    This is, again, political rather than economic policy making, a 'London tax' rather than a 'bankers' tax, rule or regulation. Politicians focussing on restricting banker bonuses whilst claiming expenses for their entourage to travel to a 'conference' to discuss the best way forward. Merely jumping on the bandwagon of public sentiment and sniping easy targets with unemployment on the rise.

    Systemic change this isn't. The whole sector will simply move offshore, probably to the far east, and nothing will change, not even the pay that they seek to curb. The politicians are forgetting that there is nothing which ties these businesses, including banks, to this (or any other European) county indefinately, they are here because it is a stable and economically viable trading environment. Whilst that is worth their paying a premium (they would make more profits if based abroad), if the premium to stay here/in the EU becomes too expensive, they will simply leave with significant impact particularly for the UK economy. Those in doubt should look at the gambling industry currently in the process of moving offshore/to other jurisdictions. At what price the lost tax revenues?

    My hope is that in true political style there is a hoo-ha being made about 'significant progress and change' without there actually being anything of substance behind the chat which will act as a limit or real deterrent to the financial services industry. The solution must be tied to systemic changes in liquidity rules and capital leverage requirements to assist stability and ensure long term growth. Overpaying employees did not sink any of the banks, overlending (and reckless) lending did- so fix that problem.

    If people want to pay employees extortionate salaries more fool them, but the day the government (EU) set limits on what people are paid, in any industry, i'm afraid that is a step too far.

  • Comment number 38.

    To my mind, the issue with bankers' pay is much more fundamental than just whacking them because voters are cross.

    From the numbers I've seen (which may not be reliable - I'd love to see what you could dig up Robert!), the percentage of the total profit in the whole economy made by financial industries rose from its norm of around 10% to around 30% before the crunch kicked off and is still well over 10%. I also understand that this isn't just a UK issue.

    Now there's no way that financial industry is contributing relatively 3 times as much to the economy as it was 10 years ago. See FSA Chairman Turner's comments about these activities being "socially useless".

    If this super simple analysis is right, then something is very fundamentally wrong with the whole way our economy is working. (And I say that as an out and out capitalist!)

  • Comment number 39.

    unless I've got this incredibly wrong (and its all too easy to get bogged down in detail shmetail when looking at 'big' problems)
    bankers are making excessive profits because they are allowed - they aren't restricted - in the amount of money they create (loan) relative to their actual capital. They really have a licence to print money, and therefore a licence to make as much profit as they want to 'risk' by creating loans.
    ipso facto - the answer is, to implement rules around loans:capital ratios (the root cause of the excessive profiteering), and not the huge bonuses (the effect).
    If it really is that simple, and I think it is, then so-called world leaders at the G20 should be ashamed at themselves for their vote-chasing proposals.
    ps. more likely the problem is that they know the problem is out-of-control fractional reserve lending, but to fix that problem would require a massive amount of current lending to be stopped, and seeing as though we are all on the never-never (publicly, as well as privately) it would be the same as admitting that the capitalist dream has now reached the nightmare stage.

  • Comment number 40.

    There are two big issues here arent there?

    1) Is a multi-million pound salary ever justified, especially in the wake of incredibly incompetant performance.

    2) Do we believe that by limiting pay, there will actually be a move away by the "wealth makers".

    For #1, I think that a case like Norway is good to look at. High taxation there means that in general, the spread of pay awards is nowhere near as high as it is in the UK. The guy at the top of a company really doesn't expect to earn that much more than the guy at the middle, or at the bottom. Why should he? its just a job, like any other, all jobs within a company serve to keep the company going. Its this weird concept that a "manager" is more valuable than a "worker" that has been an issue for a long time. Of course we should reward talent, but talent can come from all over a workforce.

    On #2, I think this is another fallacy. Where are these people going to go exactly? Does it mean that if they go, the industry they were in will not have any staff? Do you mean they are irreplaceable?

    My own experience has been that fundamentally anyone is replaceable. There is far more supply (in terms of workforce) than demand (in terms of top jobs), so why aren't market forces driving DOWN pay awards?

    You could argue that there isn't the experienced workforce that I'm talking about, but that is only from the point of view of the "top earners". I'd suggest that there are many able and willing replacements for any top position within any organisation. If the top boss of the BBC fell under a bus tommorrow, wouldn't there be a replacement within hours?

    The fundamental problem here is not just one within banks, but within businesses as a whole. The people at the top set thier OWN salaries. The people who monitor the people at the top, are also at the top of other businesses and have a vested interest in keeping thier cronies at the top in other organisations. Its all a great big boys club and sadly its taxpayers and customers who foot the bill for it all.

    I'd much rather see a stronger government facing up to this issue with measures to help curb the excesses of pay at the top of all businesses while taking steps to bridge the gap in terms of social opportunity. I'm willing to stake money that most of the top guys at the banks were publically schooled at Eaton, or Harrow and went to Oxford or Cambridge.

    Britain needs to wake up to the fact that our society is as corrupt as any other, we just like to make it look more civilised.

  • Comment number 41.

    Not only can Governments squeeze bankers pay, they must - or admit that the banks run the country! It is unlikely that the people will not notice that they are being impoverished for the benefit of the bankers and thus it is in the bankers' interest to see that their pay is controlled.

    Further, as the bakers run the government they will probably insist that the high pay of others is also controlled (c.f. Jonathan Ross and Premier League footballers) If this happens we will become a less unequal society, and if it does not they will need permanent barricades around Canary Wharf and the fortresses prisons that the banker call home!

    We have to move towards a less unequal society to avoid the collapse of social cohesion and the rise of extremism - and that is my response to those that say it is impossible!

  • Comment number 42.

    I would like to see some analysis on where LLoyds Banking Group is going now, why it does not want to go forward with the marvellous APS deal, which pieces is it likely to sell as the EU overturns the UK Governments nonchalant position the monopoly effects of the HBOS takeover.

    Further, once all this is complete, will Lloyds be a smaller, less valuable business than it would have been without the takeover of HBOS? Would those institutions with shareholdings in Lloyds and HBOS have actually been better off simply writing off HBOS rather than supporting the merger?

  • Comment number 43.

    Surely if we limit "bankers" pay (so all bankers? or traders? or loan managers? or clerks? or IT technicians? or advertising executives - all employed by the bank) then we would have to limit the pay of all industries (as Robert alludes to).

    Do we hear cries that all employees of GM are 'evil'? That they should pay back all bonus and additional (overtime) pay that they have earnt in the last couple of years? No? But surely they helped wreck the American economy, defaulted on a huge number of debts and had to have a huge bailout from the US tax payer? Shouldn't we then be criticisng "manufacturers" - after all they let it happen by making cars that people didn't want (and making too many of them) this really any different?

  • Comment number 44.

    Surely an appropriate solution would be to split banks into "bread and butter" commercial banking which would be regulated like a utility and prevented from making excessive profits and would not therefore be paying big bonuses but would be provided with government support in the event of problems and investment banks which would not be supported by the government in the event of failure, a fact which would need to be explicit from the outset. They must also not be allowed to become big enough to become a systemic risk particularly as a counterparty to the "bread and butter" banks. The payments at the investment banks could remain at the discretion of the shareholders but these banks.
    Limits would need to be set on "bread and butter" banks lending or investing in the investment banks.

    Effectively go back to what banks looked like under Glass-Steagall in the US, with large commercial banks and much smaller investment banks often structured as a partnership.

  • Comment number 45.

    Confiscation is not the answer - it only increases the power of the state. Bank employees today - you tomorrow.

    The banks only make such huge profits from fractional reserve lending - a fraud. Take away the naks power to create money out of thin air and we will all be richer.

    Gold Watch - $989.57

  • Comment number 46.

    "But is it the sheer magnitude of the rewards that's wrong - their contribution to the growing inequality of our societies?"

    Yes, I'd say it is. I heard the Today programme about super-head teachers being paid £200k (up from £120k) and thought that you don't need to "pay the best to attract the best" as all talented people would do the job for a normal rate (and infact most do already without any need for fanfare - just look at those schools that do not need to be rescued, their heads are doing a great job without superspecial rewards). So the real case against those who need to be paid such large amounts is that they are only in it for the money, not the job itself.

    This is shown by the bankers who demand such large bonuses just for turning up for work, if they were motivated to run things properly, the pay would be secondary to them. Similarly for failing chief executives (eg Royston Hoggarth left BT after failing their Global Services division with a huge salary and an even bigger payoff, obviously he was there to make a difference to BT, shareholders and employees and not just to trouser the cash. Too bad that isn't how it turned out).

    I heard somewhere that schoolkids were interviewed about what they wanted to be when they grew up - years back you'd have heard "train driver", "astronaut" etc. Today 90% of their ambition was to "win the lottery". Society has crumbled away from doing a decent job, hardwork for the sake of it, and been replaced with get-rich-quick. Its no wonder the economy has failed, the housing market is destroyed and everyone is depressed.

    We need to get rid of this evil attitude.

  • Comment number 47.

    Once again it is "kick a banker" week.

    No 36 has it right (or at least partly right) - the issue was never about pay but risk and the failure to provide enough capital to cover the risk - there was a complete failure at the bank, central bank and govt levels to understand the risks and therefore too little capital was set aside - in the race for extra profit, the risk function in banks was downgraded.

    Part of the solution has to be to bring the risk function in banks very much to the front - inevitably this means the people in the risk team will get paid more.

    Bankers bonuses was always a red herring. Once "profit" (and do not get me started on what that means) of a bank is determined that profit was paid out in tax, share dividends and bonuses with a balance used to shore up working capital and reserves. The critical aspect is not how much is going in bonuses but how much was held back - the simple answer is that in the good years banks did not hold enough back.

    Maybe a simple example can show this. Bank makes £1 billion in profit. Pays out £100m in tax, £400 million in bonuses and £300 million in dividends keeping back £200 million (but should have kept back £400 million). Following the "kick a bank" week/month/year next time they make £1 billion of profit the pay out is £100 million in tax, £650 million in dividends and £50 million in bonus. We are all happy because bankers bonuses have been slashed - the fact is that it does not solve the problem because in the second example the bank has still only retained £200 million for reserves when to cover its risk it should have kept back £400 million.

    The point is important because if banker's bonuses are restricted it would be extremely easy for banks to create new corporate structures such that bankers got shares in the business line they worked for and bonuses would simply become share dividends instead - ultimately it would make no difference to the amount bankers took home, no difference to risk and lack of retained capital but the mass media would be running headlines of "bonuses slashed" to make us all feel happy

  • Comment number 48.


    The real problem is that the financial institutions are becoming too big. They are effectively rigging the markets with their levels of trade. They are also operating in a quasi-monopolistic way, which allows them to leach money out of the real economy, their fee structures are a drain on non financial businesses and are becoming a real problem for normal pension funds. There needs to be some real regulation of their powers as they already seem to have the UK government in their hip pocket.

  • Comment number 49.

    Guys, this is old news. When are the media going to wake up to the thousands of jobs that are being moved offshore by corporations using the recession as an excuse? What percentage of job losses are down to companies really struggling as opposed to those using the current crisis as an opportunity to accelerate offshoring jobs ?

    I for one am very worried, these mostly skilled jobs will not come back. When the recession is over we will be left with huge unemployment for decades, until we have civil unrest and eventually the government of the day will have to give in to localisation and protectionism.

    It is time to stop kicking the Banks now and realise what other large corporations are up to.

  • Comment number 50.

    Political grandstanding. The G20 already agreed in April as follows :-

    " We have endorsed the principles on pay and compensation in significant financial institutions developed by the FSF to ensure compensation structures are consistent with firms’ long-term goals and prudent risk taking. We have agreed that our national supervisors should ensure significant progress in the implementation of these principles by the 2009 remuneration round. The BCBS should integrate these principles into their risk management guidance by autumn 2009. The principles, which have today been published, require:
    firms' boards of directors to play an active role in the design, operation, and evaluation of compensation schemes;
    • • • compensation arrangements, including bonuses, to properly reflect risk and the timing and composition of payments to be sensitive to the time horizon of risks. Payments should not be finalised over short periods where risks are realised over long periods; and
    firms to publicly disclose clear, comprehensive, and timely information about compensation. Stakeholders, including shareholders, should be adequately informed on a timely basis on compensation policies to exercise effective monitoring.

    Supervisors will assess firms’ compensation policies as part of their overall assessment of their soundness. Where necessary they will intervene with responses that can include increased capital requirements."

    A figleaf to divert attention away from wholesale failure of governmental regulation!

  • Comment number 51.

    In public they will certainly try and make it look good at least until people stop being angry about it, in private they'll hammer out a deal so that the bankers at least look and act contrite for the time being

  • Comment number 52.


    Good to see you back. Challanging the real issues about business and getting right into issues that effect the majorities!!! Oh no sorry mistaken, you are talking about banking again!!!

  • Comment number 53.

    The defence has already started from the bankers, they have pointed out that the contribution to GDP for the bankers bonuses is tiny compared to the contribution from the public sector - fair enough.

    This whole thing is a wasted excercise for the following reasons.

    1) Banks and wealthy individuals now 'own' the Government through the public debt that has been built up.

    2) Banks will simply circumvent any rules put in place, either by expatriation or through tax loopholes - the closing of which will simply become a further burden on the state (through the Inland revenue)

    3) The hypocriscy of Government will be exposed, why are MP's bonuses, sorry I meant expenses, be allowed and bankers bonuses not, and the footballers, journalists etc as Robert pointed out.

    The end result will be a lot of talk and NO ACTION, it's simply a distraction from the main event and designed to pin the tail on the scapegoat.

    You can't simply apply new wage rules to certain sections of society and not others. It's either full scrutiny for all or none, there is no halfway house.

    So I shall be interested to see how much money Gordon wastes on this futile effort before he gives up.

    It seems Gordon is trying to win the next election by starting a class war - unfortunately Gordon is on the same side as the 'class' he is trying to start a war with!

    People who are angry about bankers bonuses do not earn more than 35k a year and I don't think they see Gordon as their leader.
    Mainly because after 10 years of following liberal policy and allowing less and less regulation which massively increased the disparity of earnings, the Labour party now want to jump back on the 'fair wage' bandwagon - oh but of course not including themselves in that fair wage structure.

    This is the beauty of the system we're in, the markets only discipline the less well off and allow the rich to circumvent the risk. It's a bit like the law in that respect - you can break it so long as you have the money for a good lawyer then you will get away with it.

    Surely it's time to recognise the system is corrupting itself and all those who persist in defending it.

  • Comment number 54.

    30 & 32 Spot on.

    In most large Financial Firms anyone who doesn't tow the party line, will be sidelined, made a scapegoat of left with no option but to move onto pastures new. Even over regulatory matters.
    The problem is Banks have an egotistical structure, interestingly German Landesbanks have a more level committee structure yet they still got their fingers burnt.
    Although as a consultant you can challenge the status quo, and be heard. I've been in both positions.

  • Comment number 55.

    45. At 10:24am on 04 Sep 2009, truths33k3r wrote:

    "Confiscation is not the answer - it only increases the power of the state. Bank employees today - you tomorrow."

    However the current situation is not acceptable either. Surely the solution is to set a standard wage for all and for everyone to live by it - regardless of their position or job. Which means EVERYONE.

    If you cannot confiscate or regulate, and you cannot allow the situation to continue as it is then there is only 1 logical solution.

    The only reason this isn't already the case is because too many fools actually think they are part (or becoming) part of the elite - the reality is that we're all on a sliding scale and unless you already are a multi-millionaire then you will eventually become one of the slaves this system is producing (must work to pay debts and feed yourself)

    It's not difficult to see this and I can't uderstand why so many do not. Maybe the aspiration (or rather desperation) of the people is something I am under-estimating. I mean look at the lottery...

  • Comment number 56.

    The level of bankers' pay or bonuses should only be the concern of those who employ or fund them, who are at risk of financial loss from their mistakes, or their customers in case of high pay being the result of monopoly power.

    It follows that we the taxpayers should only be concerned if we have to fund the clear up when the bankers get it wrong: this is the only convincing argument, in my view, for separating investment banking from the more retail oriented commercial banking, severing the former from all state guarantees. Fiddling around with Tobin taxes and the like will just create jobs for accountants, tax collecters and such like socially worthless professions.

    As to competition, our governments seem to have been raising barriers to entry by increasing reserve requirements, promoting giant banks etc. Perhaps regulations actually need to be relaxed for investment banking?

  • Comment number 57.

    #47, you refer back to #36, but please look at my posting #39.

    all this talk about "risk", and risk management ... that's falling into the trap of losing sight of fundamentals and getting bogged down in the details.

    the problem with bank profits is they are made on the basis of lending money that never existed, for which there is no capital to back up more than a tiny fraction of it. There is nothing to stop banks lending more and more to cover off any risk they might be carrying elsewhere.

    Implement (actually re-implement) the strict rules on the permitted ratios (rules that were implemented post the 1930's depression, specifically to fix this very issue, but were then relaxed in the 80's to dig us out of another economic hole) and the "risk management" disciples would quickly return.

    Trouble is, as per my original posting, its too late. There's too much debt to recall, without everything coming crashing down.

  • Comment number 58.

    As cognova says, (post at 9.56) for an industry to be earning excess profits means there is a lack of true competition. We need to decrease the power of the suppliers (banks) in the market relative to the power of other forces in the market. This could be done by opening up the market to new companies/ new entrants and by increasing the power of buyers in the market. The latter could be done by regulating tarifs, a system which traditionally has been much favoured in France and which the UK also does through Ofwat, Ofgas etc. on utilities markets. It could also be done by imposing EU procurement rules, which are targeted at public bodies, to ensure multiple suppliers are considered before awarding business, on the banking sector, or more precisely imposing these procurement rules on the buyers of banking services.
    And the power of new entrants, and breaking down the barriers for them to enter a market, is enormous in changing abuses of market power. Anyone remember when the high street bank would only open from 10am to 3pm and never on a Sat? the advent of new competitors to the old big four high street banks broke down 'traditional' banking practices. So in the wholesale or corporate banking world the market is crying out for many many more suppliers. The key to enabling this is to break down the barriers which exist at present to them entering the market.
    So there are lots of options available to politicians to adress market imbalances. This will surely be the only longterm sustainable way of avoiding excess profits which in turn will prevent excess salaries

  • Comment number 59.

    47 Good point, and adequate capital is the responsibility of the regulator.
    The FSA ignored this since it's inception.
    Only addressed in late 2008, after the horse had bolted.
    This effectively forced some banks into state ownership.
    Now the timing of this indicates that some people wanted control of large banks, or they were incompetent in their roles.
    Make up your own minds.

  • Comment number 60.

    Much as I am envious of people earning huge amounts of money governments getting themselves involved to this level is a dangerous precedent and at best a cheap shot.
    With regards to a dangerous precedent I feel that government has no business working at this level it does not matter how populist the cause; history is littered with regulations introduced for one purpose that then get used for other purposes (anti-terrorism laws used against Iceland anyone?) and once we have this in place then who is next? First they came for the bankers and no one complained.........
    With regards to a cheap shot all this is as I mention above is a populist move introduced because it is, first and foremost, easy to do and allows them the luxury of distracting us all with nothing more than a sleight of hand so they do not have to take on the difficult task.
    Bonuses really are not the issue in themselves, it is not beholden on us to have an opinion on how one company remunerates its staff; that is a matter for them, their bottom line and their employees negotiating skills.
    The real issue in my mind is that the banks have been allowed to pay bonuses on the sale of a product which was faulty, the fact that the product was faulty has been known for a long time and was entirely under the jurisdictions of the national regulating bodies.
    What really needs to happen is to ensure the regulators do their job correctly so that this kind of product was not possible; businesses would sell safer, more valuable and useful product and if they were doing that then I think few would argue about whatever bonuses people earned.
    We are making this too complicated; manufacturing have had to deal with this kind of rigour for years through such mechanisms as the CE marking scheme. This is no different except in the magnitude of the effects it has if it goes wrong.

  • Comment number 61.

    The financial crisis was caused by bankers irresponsibly selling financial products that they did not understand in a way that did not allow banks to accurately and effectively monitor their level of debt all in pursuit of personal bonuses.

    As the banks ( and the government too) clearly do not want to get rid of the bonus culture and as we have no idea as to what measures, if any,the banks have taken to prevent a crisis happening in the future, it seems just as likely that we will have another avoidable crisis in the future.

    I still believe it's possible for a person on a low salary to rack up massive toxic debts on credit cards, loans etc because inadequate measures have been put in place.It follows that if many people do this large toxuc debts will accrue.

    The only solution I can see to controlling bankers' salaries is to nationalise all the banks under the control of the Bank Of England and to introduce fixed salaries which rise only with inflation and agreed pay rises. In that way the financial security of the nation and the economy will not be threatened in the way it has been.

    It may well be that some bankers will go elsewhere, assuming there are jobs to go to, but then someone else will be paying the massive bonuses and it will be their economy that is threatened.

    Staff at Lehman Brothers discovered to their cost that when a banking system is out of control, bankers too can feel the fallout just like other people.It would be interesting to see how many of their former staff have found now employment and where.

    In the rarified atmosphere of the upper echelons of government and business the pursuit of personal benefits appears to create a massive shortage of common sense.In the past the people lower down the payscale paid the price for boardroom incompetence and greed but now the tables are turning and the public will now be after the heads of ministers, CEOs, board members and major shareholders.As Bernie Madoff discovered,when the price has to be paid it may come in the form of major jail time and for many such a price will be richly deserved.

  • Comment number 62.

    sorry, don't understand ... as an employee, you're paid a salary to do a job to the best of your abilities, right? - right, so what's this "bonus" thing I keep hearing about? ... you know, that people in banking get ... is it like having 1 job but getting 3 or 4 salaries?

  • Comment number 63.

    I listened to Today this morning. The Chancellor was blathering about this subject, and though his torrent of generalisation and confusion I kept glimpsing the things about the World Financial Collapse that I wanted fixed. It isn't the level of bonuses per se that needs addressing.

    The collapse occurred largely because banks, builders and governments wanted to create the illusion of wealth. People with no appreciable income were ENCOURAGED to buy property in the belief that it was a guaranteed route to wealth. Those encouraging them were - in my opinion - close to criminals. Self-certified loans were an incitement to borrow what could not be repaid.

    Some in the financial institutions KNEW that these loans were rubbish, so they wrapped them up and sold them on, perhaps misleading the buyers in the process. They created a false market.

    Some in buying institutions acted beyond their sphere of competence, or failed in due diligence, by buying rubbish investments. They failed in their duty to clients (pension holders, investors, etc). They or their insurers should be in court. They fed the false market.

    The heads of financial institutions, regulators and governments failed to notice "irrational exuberance" in the market. This should not be a surprise: in the early days, before the DotCom crash, New Labour explained how the rules of business had been rewritten; Enron apparently rewrote the rules too; so did WorldCom. Nevertheless, these leaders and the economics commentator were completely surprised by the crash. Did they not wonder at the huge number of people, at all levels of society, that were becoming property owners? Did they not look at the rising levels of private debt? Of course they did, but they wanted to maintain the illusion. I think they should be censured for their - in my opinion - deliberate, look-the-other-way, negligence.

    The real problem with paying bonuses was that they were given to people that had sold mortgages to the poor or unemployed. And other bonuses were given to those that were creative in bundling and selling on the mortgages that were bound to be recalled. And other bonuses were paid to those at the top of corporations who got bonuses for the temporarily swollen revenues.

    There's nothing wrong with huge bonuses for huge (real) earnings. But governments seem to have done nothing to imprison the people that made fortunes dishonestly - apart from Mr Madoff, who clearly didn't realise you had to cover your tracks a bit.

  • Comment number 64.

    "And, as I've said, the most likely impact of pay reforms with teeth will be to fragment the industry into lots of privately owned firms, which will be insulated from state interference on remuneration."

    Is this such a bad thing? Sounds to me like a system where individual firms are less crucial to the overall system and can be allowed to go up in smoke. Maybe if we'd had that in place for the credit crunch, the financial sheep would more quickly and precisely have been sorted from the financial goats and more of the costs would have been borne by shareholders rather than taxpayers.

    What we need to avoid is returning to a system where large institutions take stupefying and unquantifiable risks, get into trouble, need bailing out by taxpayers since they're 'indispensable' and then insult our intelligence by arguing that they must continue to pay massive bonuses regardless of performance.

    Small private firms are free to pay what they like but must live or die by their decisions.

  • Comment number 65.

    48. At 11:36am on 04 Sep 2009, thelastmanufacturer

    I agree - but I don't think it's financial institutions but a select few who dominate the wealth of the world.

    When you're rich you can't loose - when you're poor you always loose.

  • Comment number 66.

    59. At 12:04pm on 04 Sep 2009, islider55 wrote:

    "47 Good point, and adequate capital is the responsibility of the regulator."

    I don't understand why - surely adequate capital is the responsibility of the bank and the board. Why should the regulator give a monkeys if a bank wants to play it hard and loose - oh yes, because of the consequences of failure.

    Therefore your suggestion is like the absurd situation with personal injury claims. Previously it was the responsibility of the individual to 'look where they are going' and now it's the council's responsibility to make sure the pavements are as smooth as glass. So much for individualism and personal responsibility then.

    You are simply giving banks a get out clause so if they fail to do what is in their shareholders interests (i..e not go bust) - then they can simply blame the regulator and we (the tax payer) has to foot the bill for that mistake.

    Surely that makes no sense then?

  • Comment number 67.

    Banks need to pay a lot to key employees because the people doing those jobs know that much of what they are doing is unethical and basically a scam on the rest of society.

    Talented people do not feel good about themselves when they are doing unproductive, unethical things and the nastier your business the more you have to pay the staff.

  • Comment number 68.

    I don't think the issue is bankers pay as such. I think banks need to be forced into more sensible behavior by means such as capital ratios. This in turn removes the scope of top bankers for risk taking, and makes those positions more mundane in nature. So we don't need "top blood" to fill them, and remuneration will reduce naturally.

    Bankers who think they can do better can move to hedge funds where tax-payer bucks are not at risk. Close the door when you go. Shareholders and investors can then choose the level of risk and reward for those people, but the taxpayer is not footing the bill.

    Once the taxpayer is out of the loop, I cease to care what they are paid.

  • Comment number 69.

    61. At 12:20pm on 04 Sep 2009, newshounduk wrote:

    "The financial crisis was caused by bankers irresponsibly selling financial products that they did not understand in a way that did not allow banks to accurately and effectively monitor their level of debt all in pursuit of personal bonuses."

    Why stop there? What about the estate agents who lied about the desireability of property, or the surveyor who over-valued, or the broker who didn't actually search the whole market as promised, or the underwriter who allowed a loan that should never have been, or the householder who lied about their income.

    We're all dirty in this one, or at least enough of a majority to make it effectively 'everyone'.

    This is a situation of absolutes - it's either no regulated pay at all (and the consequences it brings) or it's 100% regulated apy, everyone, everywhere.

    You decide - there is no third way on this one that can describe itself as fair.

  • Comment number 70.

    I hope you're going to mentions the suspicious way that Lehman Brothers was allowed to fail, while others were given the keys to the printing press. I hope also you mention who benefited most from their fall.

    We shall see.

  • Comment number 71.

    Stick a new top level tax on Banks or Bankers and the whole thing works it was down to us paying more or getting smaller returns on our investments.

    Legislation keeping high street banks to basic banking with safety net funds for investors

    Then let the rest fight it out in the unprotected market place - if people want higher risk for higher return, let them have it

    Part of the issue here was that Banks played on the belief they were low yield, low risk.... when all along they were low yield, high risk!

    We don't need 'the best' to run a bank, we just need sound solid management - rewarded well (not stupidly!)

  • Comment number 72.

    69. writingsonthewall wrote:

    'Why stop there? What about the estate agents who lied about the desireability of property, or the surveyor who over-valued, or...

    This is a situation of absolutes - it's either no regulated pay at all (and the consequences it brings) or it's 100% regulated apy, everyone, everywhere.'

    Not so fast writingsonthewall. You can't equate estate agents et al with bankers since bankers are unique in having required taxpayers to bail them out to the tune of billions. Thus estate agents et al have not been paid huge bonuses in spite of such massive injections of public cash. In fact I'd wager that like most of the rest of us who aren't bankers they are not seeing bonuses at all right now.

    That's why bankers are different and that's why they are quite rightly being singled out here.

  • Comment number 73.

    I agree with many of the early comments on this blog. We can see what needs to be done, and many here have offered sensible solutions. The politicians don't seem very willing to curb the destructive influence of their banking masters because they are too well rewarded by the bankers. Many go on to work for financial institutions. As others have said correctly, the banks contribute little of real wealth, have become too powerful, and leech off the more productive parts of the economy. We are all forced to be players in their rigged casino.

  • Comment number 74.

    The Best Way to Rob a Bank Is to Own One:

    Whilst the BBC fails to properly assess the core problems at the heart of the crisis, at least Gillian Tett is prepared to talk about illegal conduct by the finance profession:

    "the Western financial system is stuck with a legal structure that seems ill-equipped to cope.... without some retribution it will also be hard to persuade voters that finance is really being reformed, or has any credibility or moral authority... so, in the months ahead, keep a close eye on what happens to the legal cases in the system."

    Sound advice. But will our ability to act in a preventative manner be squandered, instead paving the way for furious retribution?

    In this crisis we have not hit a pothole (as the mainstream media seem to portray this crisis) but a major change in terrain:

    The sooner we rebuild the foundations, the less painful it will be for everyone.

  • Comment number 75.

    The whole banking situation remains a mess in my opinion. The government has made a total mess when investing our money by not insiting and very tight trading rules. After the suggested post office closures the news that Lloyds are to close the Halifax agency network is another blow to the rural economy and I bet Mr Brown will say and do nothing to help, as usual.

  • Comment number 76.

    Banker’s bonuses and pay packets are not “magicked” out of thin air they have to come from somewhere. Presumably they get their bonuses at the expense of the Bank's customers and shareholders, so each and every one of us has a stake holding in their salaries.

    If they get a good basic package surely any profits should be shared amongst all the interested parties; after all if we did not invest in the banks in the first place they would have no jobs.

    Every banker’s bonus comes at our expense, they are at the end of the day still employees and should be treated as such.

  • Comment number 77.

    72. At 1:38pm on 04 Sep 2009, Robiati

    ....wait a minute Robiati, the bailout was to protect "all of us" - for without the banks there would no longer be anyone in work as the Economic chaos would have been far greater.

    It's true the bailout was injected through the banking system, but that (should) have allowed banks to lend to businesses and homeowners which they would have otherwise been unable to do.

    Estate agents took their bonuses from unrealised future value too (as we were in the biggest housing bubble ever) - so they are no different to bankers.

    ...and then there's the pension holders and property fund investors (that's most of us one way or another) - should they be made to pay back the unrealised profit they have taken from the system? (or at least the ones who sold out near the top)

    Best of all - what about MP's? They have required tax payer bailout (albeit in a slow burning way) through their expense claims and inflated salaries, the difference between them and bankers is they weren't about to collapse (but took it anyway) - and it wasn't an obvious 'lump sum'.

    However they have contributed to the collapse just as much as the bankers.

    As I said before, we're all dirty - you cannot apply a partial brush to this one without unfairly penalising certain sections of society (i.e. bankers)

    I would also point out that 'bankers' means salaried banking staff, not the big fat dividend payouts that the CEO's of big companies take. So what about the CEO of GM, Toyota, Corus, BA etc.
    They have all taken big wedges in the past and now their companies have required (or always required) state assistance.

    The bottom line is that no matter what anyone says the entire capital o fthe world is being sold off to private individuals, a set who are small in number. Bankers are only a small part of this elite.

  • Comment number 78.

    A Modest Proposal - instead of making bonuses related to income or profits for a particular team or business make the criteria the grades that bankers achieve on an annual compliance and ethics examination and 360 degree review. That will sort the men out from the boys.....

  • Comment number 79.

    I find it appalling that bankers and traders can make so much money by taking so much from so many. They treat the economy as a zero-sum game. In their view of the world you can only make money by taking it away from someone else. Their real economy does not have to be, and is not a zero-sum game. You can make money by meeting the needs of society. I can understand why politicians focus on the issue of compensation, but I agree with Robert that it would be preferable, and much more effective, to tax punitively anything that is regarded as a zero-sum game.

  • Comment number 80.

    74 At 2:04pm on 04 Sep 2009, Hawkeye_Pierce

    "the Western financial system is stuck with a legal structure that seems ill-equipped to cope.... without some retribution it will also be hard to persuade voters that finance is really being reformed, or has any credibility or moral authority... so, in the months ahead, keep a close eye on what happens to the legal cases in the system."

    Well I'll give Gillan 10 out of 10 for a stating the bleeding obvious. The law works to protect the Capitalist from the people - not the other way round.

    Surely nobody thinks the law works to protect the little man - have you never heard of Dow chemicals?

    What will happen is that a few victories will be given - small fish like Madoff and possibly some other legal victories for the people - but the majority of decisions will unfairly go against the victims.

    What do you think is going to happen with the bank charges, or the mis-sold payment protection or the Equitable life challenges?

    If the law actually came down in favour of the just then there would be chaos as the state would be torn down for all it's inconsistencies and illegalities.

    When will people realise that it's a peoples law because 'people' don't set it - only a 'few people' set the law and they happen to all be freeloading criminals who only pretend to be caring and nice in order to get elected.

  • Comment number 81.

    The fact is that the public have seen the bankers and politicians for what they are, crooks and thieves. Not only that, they purvey the message ‘Fill your boots, and steal what you can – look how much I got’

    Where will we be in 3 or 4 years time?

  • Comment number 82.

    76. At 2:24pm on 04 Sep 2009, meninwhitecoats wrote:

    "Banker’s bonuses and pay packets are not “magicked” out of thin air they have to come from somewhere. Presumably they get their bonuses at the expense of the Bank's customers and shareholders, so each and every one of us has a stake holding in their salaries."

    Alas in this case the bankers bonuses WILL come from the taxpayer as we are currently paying the interest on the loans the Government have taken out on our behalf (like we were'nt getting into enough debt on our own in the first place!)

    Now the majority of people owe the banks directly, the Government has kindly found a 'second way' of increasing our debts.

    Obviously only 'owning' those is debt wasn't good enough for the wealthy, they had to make sure they captured those who aren't via future increases in taxation.

    Look at it this way, we have spent the last 10 years spending record amounts on the NHS and the system is declining. We have a swine flu outbreak and it takes more than 6 months to produce a working vaccine - why?

    ....because all that money going into the NHS was diverted to PRIVATE INSTITUTIONS, contractors, temp agencies, drug companies, equipment manufacturers, consultants etc.

    This merely serves to make those with richer, and those without poorer.

    It's the same in any public institution, the armed forces, social services, education, transport - and what's the betting they will do the same with energy - whoops, they already did!

    The end result is a decline in real wages - we can't see it because inflation makes sure the 'monetary amount' keeps going up - but the reality is that the majority of us are getting poorer by the day.

    Never wondered why there are more millionaires around than before?
    Never wondered why Government would rather have hyepr-inflation than deflation?

    ...the answers to these questions show how we're all being fooled by the state - or rather the individuals who present the state as being 'ours' when it's infact 'theirs'.

    Governments have found (since 1970's) they can simply move the crisis of capitalism (the diminishing return of profit) on the the people. By spreading it far and wide nobody notices how we're all being ripped off. It's only when big collapses like this happen that we realise this.

  • Comment number 83.

    #73. At 1:54pm on 04 Sep 2009, simondav wrote:
    "... The politicians don't seem very willing to curb the destructive influence of their banking masters because they are too well rewarded by the bankers. Many go on to work for financial institutions."

    Exactly right. We must eject the cosy political Labour/Tory/Liberal political consensus at the next election because frankly they're all in a chummy gentleman's club with their pals in the City.

    We need to have people in power who are not completely in hock to big business, as far as I can see the only credible non-lunatic alternative is the Green Party and I'll be following their policies with interest as I intend to vote for them unless they propose anything remarkably preposterous.

  • Comment number 84.

    It's OK for some, eh Robert? The BBC must have money to burn in sending you to America! Don't you realize it was because of our banks' fascination and perceived invincibility of the US that has brought our banks and the UK generally to its knees?
    Similarly, the Americans' current view of the order of the world and its pre-occupation with war has got so many of our servicemen killed for reasons I cannot fathom. Just what Iraq and Afghanistan did to the UK I'm still working out!
    So, enjoy yourself in New York, Robert, but please spare a thought for the rest of us back home with relatives in the forces and money in UK banks!

  • Comment number 85.


  • Comment number 86.

    The best thing to do is to calculate the amount of funds lost in retirement accounts and hand the bill over to the remaining banks and require a plan to repopulate those lost, stolen, mismanaged accounts. That should take care of the bonus issue for some years. Would suggest investigations be started related to potential criminal charges related to financial meltdown as an incentive to the bankers.

  • Comment number 87.

    86 ghostofsichuan, That's exactly what's required!

  • Comment number 88.

    They don't have to limit the amount of renumeration bankers receive when they get it right, just limit their oxygen quotient when they get it wrong.

    Might teach them the meaning of risk.

  • Comment number 89.

  • Comment number 90.

    77. At 2:31pm on 04 Sep 2009, writingsonthewall wrote:

    ' ....wait a minute Robiati, the bailout was to protect "all of us" - for without the banks there would no longer be anyone in work as the Economic chaos would have been far greater...

    Estate agents took their bonuses from unrealised future value too (as we were in the biggest housing bubble ever) - so they are no different to bankers.'

    If you want to know why bankers different, follow the (public) money, as a banker might say.

    The problem here is not simply that bonuses were paid from unrealized future value but that, for too many bankers, they were paid with taxpayers' bail-out money despite massive losses having been realized. If you seriously believe that bankers are no different, find me an equivalent scenario outside of banking?

  • Comment number 91.

    90. At 4:07pm on 04 Sep 2009, Robiati

    Excellent, a challenge - and there's nothing I like more.

    British Leyland 1974
    The BBC (yes really, a private company originally sold to the public in 1926)
    Railtrack (which is effectively a nationalised company)
    Johnson Matthey

    ..and to come?
    Rail franchises (starting possibly with the East Anglia line)
    More car industry
    British Airways?

    ...oh and of course not forgetting all the millions of people who have been let go (and then signed on to the state provided benefit) when companies fold or reduce headcount.

    It's not always as obvious as the recent crisis, but are you going to tell me that in any one of the companies listed above that the board did not take excess wages prior to the company failing?

    Through your whole life (and mine) there has been a deliberate divertion of public money into private hands. Even if it's not as dramatic as the banks failures, it's been going on throughout - see my NHS example above in #82

    WE ARE ALL BEING SOLD OFF TO PRIVATE SLAVE OWNERS - it's just so subtle nobody notices....a very cunning plan.

    Unfortunately (for them) on this occassion they have 'whipped the slave close to death' and may actually begin their own downfall through a violent backlash - just as the slaves did.

  • Comment number 92.

    What does society really need? what do people really need? Somewhere to live and something to eat, thats about it. As our economy dose not produce anything any more the only things left to create wealth out of are houses and food, so we all end up paying most of our money to keep a roof over our heads, and we are all overweight! The banks have played their part in this situation, is it of much long term benefit to society? Will the economy be viable in the long run if it continues to be run along these lines? Well I for one don't think so, and thats what regulation should be aimed at.

  • Comment number 93.

    A 90% tax rate on all incoem of any sort (regular, bonuses, dividends, capital gains) above (say) £250,000 in any given year would limit pay levels at the highest end.

  • Comment number 94.

    A big part of the excessive bank lending was surely down to commissions paid to sellers on the sales of mortgages, loans and other 'products'. My understanding is that these are paid on commencement - perhaps this should be a target for capping, or at least, deferred commissions based on the life and reemption of the loan.

  • Comment number 95.

    This will probably kill the markets on Monday (or tonight for the Dow)

    You've got to love them for trying to put a brave face on it:

    "The unemployment rate rose after dipping to 9.4% in July but the Labor Department said the job loss figure was the smallest in a year."

    .....and that year being the worst for job losses since records began?

    Oh how they try to spin their way out of trouble, but actually make the problem worse....

  • Comment number 96.

    They were paid hundreds of billions in bonuses, yet caused a losses of tens of trillions in global wealth and caused 100 million people to become unemployed worldwide.

    They got both lower barriers to capital flows across borders and no regulation for derivatives trading.

    They made a great deal of money in the early deregulation years and plowed that back into further financial influence to keep the circus running.

    There was never anything right about it.

    Their complacency then extended to taxpayer paid bonuses, and disgruntled everyone across the board sufficient to move government to put a cap on bonuses.

  • Comment number 97.

    I think the subject and many of the responses are depressing in the extreme. It is indeed repugnant that despite only surviving the events of last year thanks to being underwritten by the taxpayer, and only continuing in business because of implicit or explicit taxpayer guarantees and access to government sponsored cheap funding, not one of these banks is even paying lip service in trying to do the right thing about how they conduct their operations in the future.

    However, what amazed me the most about the events of last year was the fact that not only did the politicians not understand was was happening, but neither, let's face it, did the bankers, the central bankers, the regulators and certainly not Joe Public.

    Regrettably therefore, it is not really suprising that there seems to have since been a collective amnesia about what caused those events amongst those who stand to lose the most (short term) by learning the lessons i.e the bankers through their heads I win tails you lose compensation packages. More depressingly is the credence this gives to the anti-capitalist loonies who think it all would be fine if we could just turn the UK into some great collective, presumably with them in charge, divvying out the food, while the bankers laugh at us from Switzerland.

  • Comment number 98.

    I think the principal to reward bankers based on value and profit should stand and I welcome any action that is taken to remedy the situation that caused this crisis. The reason bankers pay should be moderated is because banks are part of our financial system and everyone is tied into this system one way or another. If this were not the case, then governments would not have to bail them out. If a footballer earns a lot of money and as a consequence the football club goes bankrupt later due to lack of reserves, that is a prudence choice by the board of the club but more importantly, the club is in a free market and will probably only affect the shareholders, creditors and club fans if it goes under, much like any other company. If a bank has problems, it affects our taxes, savings, government policies and the economy in general. I dont have a choice about whether a bank collapse affects me or not, it will one way or another. The old answer of separating the investment "risky" arm from the depositors arm probably has a lot of merit if we want to operate such a free market position.

    Can we control bankers pay? yes, we can. Because however which way a bank descides to cleverly avoid tax and regulation loopholes to reward top performers, the fact the variable pay amounts to more than a certain amount of reserves or profit is accountable and measurable.

    Having said all this, Im not against large bonuses for performance as long as its a measured long term profit to the bank. If a bank uses up all its profits as bonuses, then that banks loan and credit books should be smaller as a result. This is in part what the new regulations proposed are suggesting. My main concern is that these sorts of activities should only be allowed in a free market where if the bank collapses, its no worse than a large company collapsing and so be it. We should not all be tied into the banks and have them taking risks whilst governments effectively underwrite them with tax payers money.

    My real worry, is that the actions the UK government will take will be too open and wooly that the effect is that banks can carry on almost as they have been until now. I dont want to see a political action which amounts to pleasing the public with tissue thin policies.

  • Comment number 99.

    I correctly called the top and bottom on the DOW, called the likely level of the bottom 9 months before we got there and was out by 500pts, called the top on crude the day before it turned.
    In 2003 I called the housing market a bubble and complained about the numbers of 'liar loans'.
    So what am I worth. 1/3 of the lost trillions. lol

    Why with the collapsing of the banks are their staff still paid so much.

    The main shareholders are your pension funds. The fund managers get mega bonus'. They know that if the bankers bonus' are reduced, their own will follow. And as we know, turkeys don't vote for christmas.

    Unfortunately the only way around this is tax, but that risks dis-incentivising the real wealth creators, entrepreneurs. The changes needed to tax and company law to get around this problem would see the UKs elite and employed wealthy being hit hard on their tax management/avoiding schemes. So it won't happen.

    After reading Robert's speech on the future of media news I thought I'd add some more grist to his mill.

    An economic and social paradigm shift is evident. We have the technology for many to work from home over the internet, African engineer competing with Glaswegian engineer, being paid by the task. But our employment, planning, company, tax, etc laws are designed for a world of manufacturing and administration factories, economies of scale and dormitory suburbs, paid employees and company directors. But that world is over for us.

    Since the dissolution of the monasteries we have been one of the earliest to adapt to paradigm shifts. But we are failing this time. The stimulus is being used by our competitors to create green generation, improve transport, a fiber optic network to every home, building family homes. But here it is being used to cover the day to day running costs of the state.

    There are 1000s of new business' based on the new paradigm waiting in the wings for the govt to change our outdated laws. The UK is the richest nation in terms of wind and wave power. Yet our planning laws prohibit this necessary industry from taking off let alone developing. It doesn't stop there. Homeworking will never take off until the homeworker can freelance. But for that s/he must be able to advertise their availability, skills and price. At present any website offering such a directory is classified as an employment agency/business with all the admin that entails. So today such websites, and widespread homeworking, which would lower costs while raising wages and quality ofr life aren't cost effective in the UK.

    A homeworking society is a small town/village kitchen garden society. It has a much lower GDP and works less hours per week. Working times to fit the family not as it is now. Less distance travelled but more journeys. More walking. More bicycling.

  • Comment number 100.

    57# I agree. If you want to be technical you are talking about the difference between BASEL I and II. Basel I had fairly crude loan to capital ratios and was replaced by Basel II where capital was to be allocated based on real credit at risk models - problem was that it was the bank's own credit at risk models that determined how much capital was to be allocated. Maybe it is better to go back to the crude but more easily understood arrangements of Basel I.

    66# To be strictly accurate it is the regulators who should set the minimum capital standards and make sure they are adhered to, you are right the directors of banks need to set there own capital reserves (as long as above minimum) - if it is not enough it is their fault.

    93# those who do not study history are condemned to repeat it. In the 1970s we had a top rate of income tax of 83% (or thereabouts) plus an unearned income surchage of another 15% meaning some people paid 98% tax on income above what politicians thought was "rich". The rich paid a massive amount less tax, as a proportion of total govt tax receipts, than they do now. All the evidence from around the world is that increasing taxes to the level you suggest simply reduces govt income. What is less certain is what level of tax is too high - ie increasing it to that level reduces govt income. Chances are if top rate tax was 10% raising it to 15% would increase govt income and based on Thatcher tax cutting policies of 1980s raising top rate tax to 60% is likely to reduce govt income (when top rate was reduced from 60% to 40% govt income from rich went up). I am sure they are many economists with different views as to what level of tax is the tipping point. For what it is worth my guess is that increasing tax to 50% will actually reduce govt tax income whereas reducing it to 35% might increase govt income


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