Bonuses for bankers

Originally posted by Easy Livin Sorry, I still think there is a lot of misinformation here. I think it's convenient to jump on a bandwagon to criticise  the "system" without accepting responsibility for it. As I explained previously, bonuses are the "at risk" portion of a person's salary. If you simply paid them the higher salary without any incentive to earn it, would that really be better? A company may be making loses and still need to pay contractual bonuses (to current and former employees). The fact is that if they have met or exceeded the targets they were set to generate in terms of income for the company, they get the contractually agreed bonus. Those who failed and caused the loses don't. As I also explained, sometimes reducing losses is actually meeting an agreed target. That is the real world. Oh and as for blaming the government. Lets remember that the government is a reflection of the people. The party in power got the most votes and were democratically elected by you and me. The "I didn't vote for them" excuse doesn't wash as the problem emanate from all sides. If you didn't vote at all but could have, you are even more culpable. If you think you could do better, stand for election and persuade the electorate that your way is better. As I probably have already said too often, I don't seek to condone or justify the way things are, but I do get irritated by those who seek to blame others for the issues without accepting their own share of the responsibility.

Probably worth remembering that all the main parties on the ballot paper are supporters of the system, so the electorate has little choice. They could of course form their own political parties and challenge the status quo. How successful do you think that would be?

I challenge the premise of the question.

It's not for me to decide how much bankers should make just like it's not for me to decide how much hot dog vendors or florists or manicurists make. They should make whatever people are willing to pay them.

What I do object to is banks getting bailed out by the government because they are "too big to fail". I imagine bonuses would go down a bit if bankers knew that they would have to suffer the consequences of their business decisions.

But imagine the situation if they had not been bailed out. If a bank such as RBS/NATWest or HBOS/Lloyds/TSB had been allowed to fail, everyone in the country would have suffered. Bear in mind what happens when a company goes bust. Those with deposits in the bank could potentially have lost their money, those borrowing money would have found their loans and mortgages being called up. Wages could not be paid as the payment system could not operate properly. And it would not have been just the bank going bust that would have suffered. The whole banking system nationally and potentially internationally would have been at threat. It's a real house of cards situation. 

Originally posted by Easy Livin But imagine the situation if they had not been bailed out. If a bank such as RBS/NATWest or HBOS/Lloyds/TSB had been allowed to fail, everyone in the country would have suffered. Bear in mind what happens when a company goes bust. Those with deposits in the bank could potentially have lost their money, those borrowing money would have found their loans and mortgages being called up. Wages could not be paid as the payment system could not operate properly. And it would not have been just the bank going bust that would have suffered. The whole banking system nationally and potentially internationally would have been at threat. It's a real house of cards situation.  Like them or loathe them (and who actually likes them!?) banks are a cornerstone of our society. What is needed is tighter regulation of speculative activities (including commodities trading) globally.

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

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

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

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 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.