Bankers bonuses!.
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Original post by chefdave
In a free market prices are set at the margin, there are plenty of other competent people who'd jump at the chance to be in Hester's shoes for a fraction of his remuneration. It doesn't matter how good you are you can always be replaced.
Like who?
How much of "fraction" are we talking?
Original post by chefdave
In a free market prices are set at the margin, there are plenty of other competent people who'd jump at the chance to be in Hester's shoes for a fraction of his remuneration. It doesn't matter how good you are you can always be replaced.
Shame Labour couldn't find these "competent people". If you were competent enough to be in demand why would you work at half pay when your counterparts elsewhere are taking 6m paychecks?
Original post by chefdave
In a free market prices are set at the margin, there are plenty of other competent people who'd jump at the chance to be in Hester's shoes for a fraction of his remuneration. It doesn't matter how good you are you can always be replaced.
Why work for RBS for a "fraction" of £1.2m when you can earn $21M per year at JPMorgan?
Original post by Michel Foucault
Like who?
How much of "fraction" are we talking?
How much of "fraction" are we talking?
We have a potential pool of ~30-40 million UK citizens to draw upon as well as an additional 440 million EU workers. If the low paid have to compete with European economic migrants for their livelihood why can't we subject the uber-rich to similar conditions? Are they immune to market forces?
Original post by Callum828
The last batch of decent bosses caused a recession. I think we can do without them.
I think we can all agree on Fred the Shred of RBS, but by and large, this recession was caused by the government of the day.
It may suit all popular prejudices to blame stinking rich greedy bankers but there was a very real and far more important political element, political failure, in this financial crisis as well.
The root of the crisis was good housing debt turning toxic.
That's what happens when a bunch of idiot US and UK politicians start believing they’ve found the pot of gold at the end of a rainbow in the form of never ending (end to boom an bust) hyper inflating housing markets.
It should be remembered that the banks that got into most trouble were primarily operating in the mortgage markets alone. Though they almost certainly didn’t realise it, it was the failure to control housing inflation that meant they were being caught between a rock and a hard place.
It’s at times like this you look for some responsibility from the politicians and their appointed central bank. What we got here in the UK was idiot Brown removing house prices from the inflation calculation.
He then fell out with the governor of the BoE (because King insisted on telling him what he didn’t want to hear) and then claimed the whole monumentally stupid bonanza could carry on forever because his financial genius (PhD History of the Scottish Labour Party) had ended boom and bust forever.
So the banks were left with a choice of either compete (remember illegal not to in a free market) into the inflation with 125% mortgages that relied upon all that inflation continuing or step back from the market which is rather difficult when mortgages are your only business. As we now know, for the likes of B&B and Northern Rock, both options were fan s***ters.
Interesting that in the aftermath of the crisis one of the first measures that’s been taken is a new BoE committee charged with monitoring inflation in individual sectors of the economy (i.e. property) to ensure it doesn’t happen again.
So, why is this failure clearly being recognised but hardly being spoken about by the politicians such that popular myth makers like the Daily Express and other media can still get away with the lie that 20% house price inflation is the dog's b*******.
And oh how the left, with their idiotic prejudice against dirty words like investment, speculation, profit, and prosperity, jumped in feet first to have a go at hedge funds and casino banking - they couldn't wait – and they couldn't have been more wrong. There’s one inconvenient fact here they conveniently ignore, it wasn't casino banking that got the banks into trouble.
It was the supposed steady eddie stuff (Gordon’s never never land of ever rising house prices and we’ve abolished boom and bust) retail banking, mortgages and property markets that did for the banks.
Indeed, it was those banks with their casino arms, such as Barclays, that were able to ride out the storm and not resort to taxpayer’s bailouts when their retail divisions went belly up.
No surprises that the banks that were screwed were those 100% into property and mortgages such as B&B, with their heavy exposure to buy to let, and Northern Rock, with their heavy exposure to easy mortgage money that dried up. We've got a heck of a lot to thank the casino hedge fund speculation bankers because they probably saved the crash from being a whole lot worse.
Here in the UK, less than a fifth of the debt is down to the bank bailout. Something all those banker bashers would do well to remember and also to consider what the heck the other four fifths of the debt was spent on.
I mean at least if Brown had launched a manned mission to Mars we could say well that’s where all our money went.
As for France and Germany, they don’t do stupid housing markets and, in Germany especially, there is very much a culture of 'not to borrow' that’s why the Germans refer to the crisis as Anglo Saxon (i.e. the idiot British and Yanks).
Perhaps now, like most of the World, we can go back to selling goods and services as the road to prosperity and Gordon Brown can go back to always losing at Monopoly.
Original post by chefdave
We have a potential pool of ~30-40 million UK citizens to draw upon as well as an additional 440 million EU workers. If the low paid have to compete with European economic migrants for their livelihood why can't we subject the uber-rich to similar conditions? Are they immune to market forces?
Yes...but how many of those people would have the requisite skills and experience to run a multi-billion pound bank employing well over a hundred thousand people?
Of course people like Hester aren't immune to market forces. Market forces are the very reason that his bonus was justified.
Original post by Michel Foucault
Yes...but how many of those people would have the requisite skills and experience to run a multi-billion pound bank employing well over a hundred thousand people?
Of course people like Hester aren't immune to market forces. Market forces are the very reason that his bonus was justified.
Of course people like Hester aren't immune to market forces. Market forces are the very reason that his bonus was justified.
The Prime Minister is paid a paltry £142,500 p/a in comparison and he's responsible for the entire country not just one taxpayer funded bank. I don't see a shortage of people willing to take on the PM's job even at that level of pay, what makes you think that RBS would be any different?
visual of the debate
Original post by Amhorangerdgerriug
Although I'll probably get negged to high heaven, I think that in banks run privately (i.e. not RBS) people should be able to pay their employees whatever they like, and we are in no position to tell them not to, it's their money at the end of the day. In taxpayer funded banks, however, I disagree with such large bonuses.
No, private firms should theoretically be able to pay whatever they like because people have voluntarily traded with that bank.
Public, or nationalised banks should not have privately decided bonuses, infact I think there should be some democratic choices in there, since they got their money from the taxpayer via theft (sorry, tax) without their consent.
Original post by chefdave
The Prime Minister is paid a paltry £142,500 p/a in comparison and he's responsible for the entire country not just one taxpayer funded bank. I don't see a shortage of people willing to take on the PM's job even at that level of pay, what makes you think that RBS would be any different?
Did you read what I wrote properly?
I never said anything about a shortage of people willing to do Stephen Hester's job. What I said was that there are very few people who would be realistically capable of doing Stephen Hester's job. The same applies to the Prime Minister's job.
Original post by Michel Foucault
Did you read what I wrote properly?
I never said anything about a shortage of people willing to do Stephen Hester's job. What I said was that there are very few people who would be realistically capable of doing Stephen Hester's job. The same applies to the Prime Minister's job.
I never said anything about a shortage of people willing to do Stephen Hester's job. What I said was that there are very few people who would be realistically capable of doing Stephen Hester's job. The same applies to the Prime Minister's job.
I second that. LAst year the CEO of lloyds took several months off of work due to fatigue.
That says a lot
I don't see a problem with bankers being paid what they are paid.
Much of the attacks on it largely stems from jealousy or envy.... also banker/business bashing is the "cool" thing to do these days in Britain, overtaken the previous bashing target of lawyers and Polish plumbers. Oh well, it will pass and someday the target would be some other profession.
Much of the attacks on it largely stems from jealousy or envy.... also banker/business bashing is the "cool" thing to do these days in Britain, overtaken the previous bashing target of lawyers and Polish plumbers. Oh well, it will pass and someday the target would be some other profession.
I'm not an economist, but my gut feeling is that if a bank goes completely belly up and costs the tax payer billions in bailout packages, the executives who were running the bank at the time should not recieve a bonus on top of their pay. If the bank does fantastically, then great, go nuts. if the bank goes tits up, it's the responsibility of the chief executives, and they should recieve a penalty accordingly.
Regarding whether we have any say in what a private bank pays it's employees: the problem (as i see it) is that if private banks pay enormous bonuses and government-run ones dont, then all the leading execs will just flee the taxpayer owned banks for the more lucrative deals.
Regarding whether we have any say in what a private bank pays it's employees: the problem (as i see it) is that if private banks pay enormous bonuses and government-run ones dont, then all the leading execs will just flee the taxpayer owned banks for the more lucrative deals.
What I find interesting and bizarre is the focus on bonuses. Modern banking is parasitical by design, it can only grow wealthy by leeching off the real economy.
Yes, until they get rid of the implicit taxpayer guarantee. They are only able to make such large profits because they can borrow cheaply on the money markets because lenders believe the taxpayer will bail them out, which allows them to pay larger bonuses. We need to create a regulatory regime where banks can fail without bringing the economy to it's knees. People blame the current crisis on capitalism but had we had a capitalist solution most bankers would have lost their jobs.
Original post by Callum828
The last batch of decent bosses caused a recession. I think we can do without them.
Yeah, and Heston isn't one of those people?
Original post by AlmostChicGeek
Yeah, and Heston isn't one of those people?
Did he not work in finance prior to RBS?
(edited 12 years ago)
Original post by Callum828
Did he not work in finance prior to RBS?
Presumably, however, not every one of the big bosses in the banks caused the recession, Clydesdale bank for one thing is fine, so the head of there should still be in charge.
How stupid do think the government are to head hunt someone that partly caused the recession?
The root of the crisis was good housing debt turning toxic.
It was never good debt. The fundamental problem with the world economy was that house prices were too high and kept going up. The central banks did not take house prices into account when formulating policy. So we ended up with a massive inflationary house price bubble that once is popped banks realized their balance sheets were not backed by goods and services, or down payments but inflated house prices.
Since the credit crunch the government, banks and central banks have been trying to prop up the housing bubble.
It is truly shocking that the central banks do not account for house prices when formulating policy. They account for CPI or your 'daily shop'. This is insane when one considers that most bank loans (money creation) are used for mortgages. So we have credit created out of thin air to buy houses. And then the central banks just ignore this fact.
The principle of bonus's are fine, as long as they are correctly incentivised, which they are generally not.
But are the bankers correctly paid for their services? That is to say, does their wage (including bonus) equal the value they add to the economy as it should do in any efficient market?
If not, then there is something going wrong that is distorting the market. As it happens I think most of them are overpaid by a factor of 500-1000%.
You could probably replace most of the financial industry with a big arbitrage calculating computer and save billions of dollars a year that could be spent on something more useful.
But are the bankers correctly paid for their services? That is to say, does their wage (including bonus) equal the value they add to the economy as it should do in any efficient market?
If not, then there is something going wrong that is distorting the market. As it happens I think most of them are overpaid by a factor of 500-1000%.
You could probably replace most of the financial industry with a big arbitrage calculating computer and save billions of dollars a year that could be spent on something more useful.
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