Bank Bonus Tax

[Cambon]

Mark my words. Come next spring, the three state sponsered banks will suddenly start doing well as the run up to the general election takes hold, and the government stops interferring.

 

http://uk.finance.yahoo.com/news/lloyds-shares-reach-cost-of-uk-investment-reuters_molt-878d9245a099.html

 

Lloyds share price when above statement was made was hovering around 50P. Today over 64P.

RBS share price when above statement was made was hovering around 30P. Today over 45P. That is over 50% increase.

 

Shame the government are still interferring though.

[Slim]

http://uk.finance.ya...8d9245a099.html

 

Lloyds share price when above statement was made was hovering around 50P. Today over 64P.

RBS share price when above statement was made was hovering around 30P. Today over 45P. That is over 50% increase.

 

Shame the government are still interferring though.

 

 

 

Barclays, not state sponsored, 291 to 365 - 97%

 

FTSE 100, 5315 to 5727 - 92%

 

Your point?

[Cambon]

 

Barclays, not state sponsored, 291 to 365 - 97%

 

FTSE 100, 5315 to 5727 - 92%

 

Your point?

 

Your figures???? FTSE up just under 8% and barclays just over 25%.

 

After mach bashing of the banks, unibrow and the one eyed git have been quiet about them recently so the price has shot up. In the case of RBS, it is just short of the government strike price where if they start to sell their shares they make a profit. Lloyds id just over their strike price. The share prices will continue to rise over the next month because the two gits will keep quiet about it. Then, suddenly, just before the election they will be saying "look at the value of the taxpayer's holding in the banks. the country's deficeit will be paid off. The country is saved. Isn't labour wonderful."

 

If they had not interfered this would have happened ages ago and the government would probably have little involvement. But they would not be able to use it as a propagander tool.

[manshimajin]

RBS share price when above statement was made was hovering around 30P. Today over 45P. That is over 50% increase.

 

Shame the government are still interferring though.

Or looked at slightly differently, RBS is now worth 5.3% of its pre-crash peak price compared with 3.5% when the statement was made. Not exactly a massive increase in value compared with where they used to be. TBH the bankers really messed up in the UK so any slight improvement looks big in percentage terms even if it is minimal in value terms when compared with where they fell from. IMO it is hardly the basis for handling out big bonuses.

 

Whilst I do not like over-regulation the banks certainly brought interference on themselves by their own incompetence at risk management.

[La_Dolce_Vita]

Mark my words. Come next spring, the three state sponsered banks will suddenly start doing well as the run up to the general election takes hold, and the government stops interferring.

 

http://uk.finance.yahoo.com/news/lloyds-shares-reach-cost-of-uk-investment-reuters_molt-878d9245a099.html

 

Lloyds share price when above statement was made was hovering around 50P. Today over 64P.

RBS share price when above statement was made was hovering around 30P. Today over 45P. That is over 50% increase.

 

Shame the government are still interferring though.

The government has to interference. The costs in not doing so have just been seen in the financial crisis. The finance sector thought they had free reign to take risks as they saw fit and which were excessive. Whilst the finance sectors exists there has to be control and interference to prevent them taking risks which could have detrimental consequences for the economy and for the people.

 

Even if there was no financial crisis, it makes sense to prevent the finance sector from having free reign to do as it wishes. It's too dangerous.

[manshimajin]

Shame the government are still interferring though.

The government has to interference.

 

Even if there was no financial crisis, it makes sense to prevent the finance sector from having free reign to do as it wishes. It's too dangerous.

The rationale for what is described as 'interference' (and which is actually regulation) is that the alternative was to let the big now state-supported British banks go bust. This would almost certainly also have brought down Barclay's. Maybe that would have been a good thing but unfortunately it would have done untold damage to the UK economy - to the folk who create real wealth and employment rather than simply to the banks who administer the wealth generated by others. Incompetence results in regulation.

 

I think that there is an issue as to how much 'risk' the UK government (or the IOMG for that matter) should underwrite for the banking sector in future. If this is not strictly limited, growth of the UK financial sector also means growth of potential 'risk' for the UK taxpayers. For any economy there must be a maximum amount of risk that it can prudenty be wiling to shoulder. One suspects that the current banking debacle came pretty close to that point!

 

The other issue on bonuses is the fundamental question of why, given that very large bonuses have been proved to be not only a dangerous but aso a very unpopular and inequitable practice, Boards and senior management internationally do not have the competence to reign in an inappropiate form of remuneration and put in place a more ratioal alternative - particulalry if they wnt to rebuild the capital bases of their businesses? IMO the answer may be that they themselves are major beneficiaries of this system and would stand to lose financially themselves if a more rational system was implemented.

[Alias]

The other issue on bonuses is the fundamental question of why, given that very large bonuses have been proved to be not only a dangerous but aso a very unpopular and inequitable practice, Boards and senior management internationally do not have the competence to reign in an inappropiate form of remuneration and put in place a more ratioal alternative - particulalry if they wnt to rebuild the capital bases of their businesses? IMO the answer may be that they themselves are major beneficiaries of this system and would stand to lose financially themselves if a more rational system was implemented.

Because the employee wants that form of bonus and they have to compete with other businesses willing to offer them that type of bonus? It seems harsh that the form of renumeration should be regulated - effectively cutting the person off from their bonus for years. Who's to say you expect to still be at the bank in a few years?

[La_Dolce_Vita]

 

The rationale for what is described as 'interference' (and which is actually regulation) is that the alternative was to let the big now state-supported British banks go bust. This would almost certainly also have brought down Barclay's.

I have to disagree with your outlook if you think that the bail out of the banks was regulation or a form of it. Regulation is supposed to be something that prevents such crisis as has happened. But the bail out is something very political and not something that regulation should be.

 

I am all for regulation, as much as possible. But not for bailing out companies - bail outs are absolutely disagraceful.

[manshimajin]

The other issue on bonuses is the fundamental question of why, given that very large bonuses have been proved to be not only a dangerous but aso a very unpopular and inequitable practice, Boards and senior management internationally do not have the competence to reign in an inappropiate form of remuneration and put in place a more ratioal alternative - particulalry if they wnt to rebuild the capital bases of their businesses? IMO the answer may be that they themselves are major beneficiaries of this system and would stand to lose financially themselves if a more rational system was implemented.

Because the employee wants that form of bonus and they have to compete with other businesses willing to offer them that type of bonus? It seems harsh that the form of renumeration should be regulated - effectively cutting the person off from their bonus for years. Who's to say you expect to still be at the bank in a few years?

I was not actually talking about regulation in relation to bonuses. I was making the point that senior managers in banks around the world should now be finding alternative remuneration structures that make more sense in the current financial environment.

 

Whether employees want that form of remuneration is not relevant if it is not a sensible strategic or tactical form of remuneration. I would love my company car to be a Maserati Quattroporte but that does not mean my employer should provide me with one.

 

Looked at from a number of points of view large bonuses are not sensible for banks.

1. It has been shown that the 'bonus culture' encouraged undue risk taking and was a contributory factor to many of them collapsing.
   
2. Many banks are currently desperately short of capital so it makes little sense to use scarce capital to pay cash bonuses instead of using it to repair their balance sheets. If state funds and guarantees were not in place they would simply not be able to pay bonuses.
   
3. Nearly all banks have dropped significantly in value - in RBS's case as of today by 94% hardly a great performance - or an indicator of affordability to pay large bonuses.
   
4. The argument that people will leave does not seem to have been proven in reality - a few people have moved but then they always have irrespective of bonuses. People mostly move for other reasons.
   
5. If people move the banks should have a succession plan in place in any case - that is one of the key resposibilities of senior managers.
   

IMO there is no real proof that large bonuses improve shareholder value (in fact research in the USA indicated the reverse in the 90s). I do not advocate government regulation (though this has been done I believe in Germany) but I do advocate Boards and managers rethinking a system that has palpably failed and is wasting capital.

 

I am all for regulation, as much as possible. But not for bailing out companies - bail outs are absolutely disagraceful.

What Cambon describes as 'interference' was a natural consequence of the irresponsible behaviour of banks and their demonstrable incompetence in risk management. My point is that you cannot rescue banks with taxpayers money without there being consequences in the form of tighter regulation of their behaviour. To leave them with 'light touch regulation' whilst so much public money remains at risk is just not possible.

 

In principle, as a capitalist, I agree with you that bail-outs are disgraceful and contrary to capitalism. In the present circumstances I believe that to have let RBS and HBOS go to the wall would have sent out a strong and painful message about business competence and Board responsibility to shareholders and clients, but both Lloyds and Barclays were also extremely likely to collapse if the others went down. The failure of the UK capitalist system might have pleased you LDV but it would have had the consequence of destroying both private and public sector employment on an unprecedented scale. No government could conternance that.

 

I am not sure that the method of bail-out was the right one but that is a technical argument.

[bellyup]

B******ds the whole slimy crew of them

[jimbms]

I am all for regulation, as much as possible.

 

But you have already stated that as an anarchist you are against regulations. Or is it regulations when it suits you?

[manshimajin]

It seems harsh that the form of renumeration should be regulated - effectively cutting the person off from their bonus for years. Who's to say you expect to still be at the bank in a few years?

Alias, coudn't help thinking that bankers of all people should be able to handle changes in their financial circumstances - it is after all what they expect others to do. If a banker has planned his/her finances around year on year repitition of bonuses they should rapidly exit their banking career as they of all people should know that bonuses (like the investments they advise on) can vary from year to year - except for that weird thing called a 'guaranteed bonus' which is surely one of the best financial oxymorons ever.

[La_Dolce_Vita]

The failure of the UK capitalist system might have pleased you LDV but it would have had the consequence of destroying both private and public sector employment on an unprecedented scale. No government could conternance that.

Confused as to what you mean. The system did fail and then it was maintained through the use of the people's money.

 

I do wonder what the result would have been to let the banks fall, as they should in principle if we were to hold them to their own rules, and then have the government pick up the pieces.

 

But you have already stated that as an anarchist you are against regulations. Or is it regulations when it suits you?

I've never said that. The only thing that can rein in the irresponsibility that comes with capitalist practices is to have regulation imposed from outside. This can only be the government in our current society.

[manshimajin]

The failure of the UK capitalist system might have pleased you LDV but it would have had the consequence of destroying both private and public sector employment on an unprecedented scale. No government could conternance that.

Confused as to what you mean. The system did fail and then it was maintained through the use of the people's money.

 

I do wonder what the result would have been to let the banks fall, as they should in principle if we were to hold them to their own rules, and then have the government pick up the pieces.

LDV - if you are confused read carefully. We are saying the same thing in different ways. The system did fail but what I said is that no government coud counternance that because of the effects it would have (ie as you said it was maintained using people's money).

 

The banking system did not have to fail but the poor skills of bankers in managing financial risk when their remuneration was greed driven and the failure of 'light touch' regulation to control this situation were major contributory factors.

[La_Dolce_Vita]

Oh yes, I agree. And as I think you would agree, we can't hold any other expectations about the operation of the banks (but also the entire finance sector) because you can't take greed out of the capitalist processes when they result in increased wealth for those have control and ownership over the economy. Though as I have mentioned before, it goes further than this because the finance sectors of the world have maintained their adherence to free market practices and desire to be left unchecked. When operating under this illusion/myth of there being a free market the dangers in risk taking on the rest of society are not recognised, nevermind not being taken up when they are.

 

The problem with current mode of economics is that these big companies know that ultimately the public will bail them out when they are in trouble. Why should they expect otherwise when governments regularly bail them out?