Bonuses for bankers

Originally posted by Gerinski I'm not an expert either, but I don't think we're talking in circles that much. With re-insurance, an insurance company faced with an in principle bankrupt threat such as a major disaster affecting most of its insured customers can survive without needing support from the government, from my money, or without screwing its customers. This is not the case with banks, when they screw it they screw it and regardless of such schemes, they often take along their customers with them (for example the protection scheme in Belgium covers only up to 100.000 euro, any further amounts are not insured and you just loose them), and then it's nice for them having the government backup with the motivation that 'they are too big to let them fail'. Banks have needed our money to be rescued from the excessive risks they took, that is a fact, therefore I don't see it the same as the re-insurance case, as far as I know not one of my euro-cents has been used to rescue insurance companies.

I'm not an expert either, but I don't think we're talking in circles that much. With re-insurance, an insurance company faced with an in principle bankrupt threat such as a major disaster affecting most of its insured customers can survive without needing support from the government, from my money, or without screwing its customers.

Originally posted by Padraic Originally posted by The T ^But Pat, all evidence points towards you. YOU are responsible for the crisis. Funny, still haven't received my bonus check in the mail.

You won't - I think the standard form of payment is a bag containing 30 pieces of silver.

Originally posted by Gerinski  In a 're-insurance scheme' on the other hand, the re-insurer will carefully judge the risk it is taking, and will not allow excessive risks being taken by the insured party. It provides a more self-regulating mechanism.

I'm no expert but isn't this how banks work anyway - unlike the simplistic view presented in Frank Capra's It's A Wonderful Life, no bank has deposited funds equal to the loans they give out - they loan out more money than they hold in deposits. This is exactly what you are proposing - spreading the risks (ie loans) to other banks - they borrow the money they lend, the repayments on the first loan funds their repayments on their subsequent loans, all they have to ensure is their interest rates to the customer are higher than the interest rates they get charged. This is why the LIBOR rates are so important to the banks, this is why toxic assets are so bad for them. 

Originally posted by Gerinski Originally posted by Dean Originally posted by Gerinski A similar principle should be mandatory for banks so if they do something wrong their customers do not loose their savings and they do not need to be bailed out by yours and my money. This already exists - in the USA it is the FDIC, in the UK it is the FSCS, Belgium and all the other EU countries have their own systems. These are funded by the banks. It did not work well enough when it was needed, the EU Central Bank has had to inject 40 billion euro into the Spanish banking sector to keep it from bankrupcy.

Well, quite - that's a bail-out. The "insurance" schemes only kick-in to protect investors money after the bank goes bust. The bail-out was not to save customer's savings, it was to save the banks.

Originally posted by Gerinski A similar principle should be mandatory for banks so if they do something wrong their customers do not loose their savings and they do not need to be bailed out by yours and my money.

This already exists - in the USA it is the FDIC, in the UK it is the FSCS, Belgium and all the other EU countries have their own systems. These are funded by the banks.

Originally posted by The T ^But Pat, all evidence points towards you. YOU are responsible for the crisis.

That's what I found too.  I did several months of research on this a while back and found it was not some secretive group of bankers.  It was indeed Pat.

I'm still trying to sort out how I'm personally to blame for a global financial crisis.

Originally posted by ExittheLemming At the risk of sounding glib, why do we merely mutter curses when our chosen horse pulls up lame but strike heroic moral poses when our pension funds go teats skywards in the marketplace? All investments are speculative and subject to the performance of any underlying stock at any moment in time. Most of the comments to date in this thread consist of those faintly risible protestations to the effect that 'my continued investment is guaranteed but only if the market conditions are favourable but if they are not, I blame the traders and professional financiers for this unfavorable climate' Contrary to popular belief, your savings and investments are insured by banks (to which you pay squat) Let's allow all who invest our money go to the wall and attempt to extract our losses from zero shall we?

I'd agree with all of what you said if it were true that everybody who was affected by the events of 2008 had tried to ride the tide of dirt cheap credit, hoping to get rich the easy way.  But nothing could be further from the truth.  I am not sure how much you appreciate the level of interdependence in the world economy today.   All the more reason that govts should be prudent and contain risk to a minimum instead of fuelling more risk taking by speculators with easy money. 

Coming to my own case, I predicted the stock market crash of 2008 even though I was not aware of the magnitude of the financial crisis yet because I saw penny stocks going for crazy valuations and knew the market was headed for a steep fall.   My colleagues didn't listen to me and they lost money when their investments dropped from a cliff.   So far so good (or bad, however you put it).   But the impact also extended to widespread fall of demand and economic growth.  It so happened that I had just finished my apprenticeship and was looking for a job in the industry then and much to my dismay, I found the going very hard.   At least I was fortunate not to have been one of those engineers who had been offered a job in campus by IT majors only for their employment to be kept on hold for months, if not more than a year or so.   How am I or those engineers supposed to be only owning responsibility for excessive speculation or investment risk?   How are we supposed to be taking up hypocritical positions?  I don't see, at all.  The crisis affected many who had absolutely nothing to do with it and continues to because there is next to no political will to come up with any meaningful solutions.


Edited by rogerthat - March 06 2013 at 09:48