RBS board blackmail government into giving bonus

Jason

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On the contrary, the government needs to stand firm and create a bank of the sort we need rather than the kind the private sector wants to be. You seem to be saying that when a bank goes bust we should recapitalise it and give it back to private owners...so they can bankrupt it again and we can pay out and give it back again. Do you think we should make a limit on how many times we will do this?

ROFL :biglaugh:

What's this Marxist idea that governments can create a type of bank? The capitalist system is stronger than any government whatsoever, and any government that thinks it can create a certain type of bank would also believe boom and bust has been abolished, and no government could be that daft! Of course we should recapitalize banks that go bust - we have no choice. And of course we should get them back into private ownership ASAP - if possible breaking even or with a profit, but if this cannot be managed the priority is still to get them back into private ownership at any cost - for governments can't run commercial banks. I think the old boy system suggests that banks can only be bailed out once in a generation, and as long as we ensure that gentlemen run the banks this will be honoured.

I'm only partly joking. The verdict of the twentieth century is that Marxism - and Communism and Socialism - has failed. We are now seeing the slow failure of euro-socialism, in UK terms of new Labour. Instead we have to work with people and the markets. The Big Society is an idea ahead of it's time, but let's hope this is coming. Miliband's crusade against bonuses may well win him points in polls but is a policy born of profound ignorance. Its effect is to hurt the poorest in British society.
 

dandelion

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We live in a system called capitalism in which all private enterprises are regulated by myriad rules. Banks are no exception. Without the rules we get anarchy. Its an example of 'the prisoners dilema'. By cooperation we all benefit. if we cannot cooperate then we all lose. The rules are there to prevent anyone cheating so we know it is safe to cooperate. the rules about banks have been found to be wanting.

Im not sure that anyone has tried, marxism, socialism or communism. Russia had a go at dictatorship....really a continuation of czarist times. I have been to denmark. Nice place, theyre quite socialist and quite prosperous. Prisoners dilemma. if you know you must cooperate, then you do, and everyone benefits.

banks know damn well they can cheat. Not because of anything special about banks, but because they have managed to rig the rules.
 
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dandelion

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Stephen Hester was just interviewed live on BBC radio 4. I expect it will end up on their website.

Was asked why 1.2 million basic pay is not enough. Didnt answer, talked about something else. Was asked to come back to the question which was asked again. Said it was up to others to decide what he is paid but people deserve recognition for a good job.

Said in replying that banks had produced 'the biggest time bomb in history' and good people were needed to resolve this. Asked then why bankers are paid so much if this is what they did. Dont think we had an answer to that.

The question was phrased differently by asking whether he will work less hard because he will not get a bonus? Replied it is an important job defusing the time bomb. Asked why a banker need a bonus if surgeon doesnt? The surgeon is also expected to always do a perfect job. Said its not his job to enter the debate on bankers pay levels.

Asked again about the problem of the executive pay debate and whether it is out of control. Refused to say banking pay got out of control but said 'hubris set in'.

Was asked whether he had considered resigning. Replied yes, but before this row over pay blew up, not just over the pay issue. Decided he had been hired to do a certain job and it would be a cop out to now quit. Dont know what he was referring to, but obviously other bad things have been happening while he has been in charge.

He said banks mistakes were mirrored by the mistakes of many governments around the world. RBS was worst example of a time bomb, which they are fixing.

Brought back to question of pay and fair distribution of wealth. He replied it is more important to make money than worry about who gets it.

Said thinks it is important to get acceptance of all about pay but said it is more important to make money.

Well guess that says it all. making money is more important than social cohesion. We are all doomed. This is clearly the root of the whole problem, bankers believe the most important thing is to make money whatever the cost.
 
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dandelion

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Seems I am posting to myself again, but I take it that means everyone agrees.

Hester also wrote a letter to his employees to give them a boost in difficult times. BBC News - Stephen Hester's letter to staff in full

In this he lauds their achievement of making £33 billion in the last 3 years which has been set against their admitted losses of "£38 bn so far".I take it this is the time bomb he was referring to, that the company was clearly insolvent if you actually wrote down all the bad debts. So he is pleased to have made all this money to allow some of them to be written off.

The trouble is, in such bad economic times a bank has just 'made' £33bn. Or to put it another way, it has taken £33bn out of all our pockets in its charges for services and used this to pay some of its debts.
 

Jason

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Seems I am posting to myself again, but I take it that means everyone agrees.

Don't get too excited!

I can't get that interested in the bonus row. It is like how much a footballer gets paid - a silly figure, but not worth my energy getting bothered by it.

Imagine if the UK decided that no footballer could be paid more than say £40,000pa, an above average salary. Does anyone really think this wouldn't damage UK football? Good footballers would head for foreign teams.

And now we've entered into an anti-banker crusade, does anyone really believe that this won't impact on the quality of people we can get to run our banks? Of course the head of RBS has worked less hard through this media storm - I imagine that has taken all his time - and of course he will work less hard subsequently. He will also take decisions for the benefit of the media not the good of RBS.

We've even put at risk the ability of the UK to be the HQ for banks and big businesses. We the taxpayer have lost billions over RBS. We the taxpayer need the highest possible share value to recoup some of our loss. And the RBS story has lost us more billions (it is billions) to save a million in salary. It is amazingly stupid. Why can't Miliband et all shut up for the good of the UK economy and the prosperity of people in Britain?
 

dandelion

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Imagine if the UK decided that no footballer could be paid more than say £40,000pa, an above average salary. Does anyone really think this wouldn't damage UK football? Good footballers would head for foreign teams.
And maybe UK football would be a lot better off it ditched FIFA and international games altogether. The corruption in high places analogy is quite apt. Not to mention calls from others that high wages are destroying UK football, which they are. The clubs are going bankrupt....maybe the UK government should take on their debts?

And now we've entered into an anti-banker crusade, does anyone really believe that this won't impact on the quality of people we can get to run our banks?
Yes. Me. But apparently quite a few bankers too.

Of course the head of RBS has worked less hard through this media storm - I imagine that has taken all his time -
Given the number of people they employ it crossed my mind to wonder what exactly he does anyway? Someone was talking about a famous theater director the other day. Someone asked what he did in his afternoons after issuing his orders in the morning and terrorising everyone. The answer..he went to sit in the park.


We the taxpayer need the highest possible share value to recoup some of our loss.
No we absolutely do not. This is irrelevant. What we need is to prevent the same thing happening again. Short sighted profit taking is what caused this mess.
 

Jason

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The RBS bill is something like £83bn. This is beyond huge. We could bail out Greece with this, it's that big! It's a couple of thousand quid for everyone in work in the UK. What matters is to get back as much as possible from RBS. And for this we have to refloat it, and we desperately need the highest possible share value. The media frenzy over this has made us all a lot poorer. It is beyond stupid.
 

dandelion

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Banking is and always has been a sure fire way to make money. RBS made 11bn a year for the last 3 years, so if we continue owning it for 10 years, thats 100bn back. If people will only buy it off the government for less than it will earn then we are better off keeping it. Its all been paid for by issuing QE funny money anyway.

The reason it cannot now be sold for what it was formerly valued at is because the crisis is far from over. There is absolutely no point in hurrying a sale and giving it away. It could yet be exceedingly useful for the government to control a major bank if the next financial tsunami finally arrives. Even more useful if we reorganise it as a responsible organisation. wiki says it has assets of £77bn while hester said it makes £11bn a year. That sounds a very decent 15% return. Especially if it is typically paying depositors more like 1%. In short, it sounds like a ripoff of its customers.
 

Jason

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There is absolutely no point in hurrying a sale and giving it away.

There's not an economic point. But there is a political point. We now have micro-management by media, with the government in effect blamed for anything that the media don't like. And the very prospect of government interference will drive down the share price, as has happened over this bonus issue.

I think in this case the political pressure to get the bank back into private hands will be overwhelming, but it is actiually backed by a scondary economic point in that if the media and opposition is going to behave as they have then they will damage RBS. Privatisation cannot be just yet, but in a few months I think we will see a plan with an outline timetable. And I think the bank will be reprivatised a lot earlier than is good for the country.
 

dandelion

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Id think if Cameron decides on a giveaway sale that would be another coffin nail for him and his administration, which is starting to look a bit tarnished. Screw up on the NHS, screw up on the banks.


Im sure the other banks do not want rbs to remain under government control, and worse yet for the government to reform it to a good sustainable business model which they might then be forced to follow. All the time it continues in the public sector it is a sword against their necks.(which is of course good) The fuss over RBS pay has already put pressure on everyone else to pay themselves less.
 
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dandelion

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Barclays bank has announced its results. Its average bonus is £64,000, down 1/3 (on what?). This sum in itself is way above average wage, would be a top 10% wage maybe even a top 2% wage.

It was also noted most of their profits came from retail banking, rather than investment. hard to interpret that, but sounds like they took that money from us the public, rather than earning it from abroad. The excuse for allowing banks to continue fleecing people is that they are fleecing foreigners most.

The bank met its 'merlin' target of lending to small companies, but the BBC commented that all banks are cherrypicking in their loans to small companies, and the complaint continues that companies which really need loans cannot get them. As always, banks will only lend to guaranteed safe bets. UK government debt is guaranteed by every individual in the country, but the government is not willing to guarantee the loans of any individual.

Dividend to shareholders was increased despite the need to boost the banks capital. rats leaving a sinking ship?

The banking sector has shed 500,000 jobs since the crash. What the hell were these people doing before?

Someone just threw in a statistic that pre-crash banks were investing 16x more money in buying each others derivatives than they were investing in industry. Banks were trying to make money by buying and selling each others business?
 
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dandelion

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It cant go on Jason. You cant have one non-productive sector of society growing and growing and sucking money away from the rest of us.

It works for little places like hong kong or tax havens because they are sucking the money away from big countries. We cant live like that.
 

Jason

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Banks are productive. They create wealth. The primary sector and manufacturing sector can demonstrate their productivity through a physical outcome, be it potatoes or widgets. Bank produce wealth as the reward for entrepreneurship.

They don't do this alone - they need the entrepreneurs as well - and they don't do it as well as would be liked. But they are productive. The idea that they suck wealth out of an economy is political propaganda with zero truth.

Right now we have a negative outlook for the UK from one ratings agency. Their rubric shows that they believe the cuts must continue and intensify (a point Labour seems to have failed to read) but also that the UK economy needs to avoid recession. Our ONLY hope of getting this right is through the financial sector. The Labour and media anti-banks feeding frenzy is so dangerous. I can't prove that Miliband is personally responsible for the negative outlook, but it may be that he is. A reasonable person who wants the best for his country would have reigned in the criticism of the banks from Labour. It is doing damage beyond belief.

Go hug a banker.
 

dandelion

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Banks are productive. They create wealth.
They dont. Mostly they create inflation of asset prices.

Bank produce wealth as the reward for entrepreneurship...
They don't do this alone - they need the entrepreneurs as well - and they don't do it as well as would be liked. But they are productive.
This is what they ought to be doing. The problem is that it has become the monority of their actions. UK headlines are all about banks failing to meet their government targets for lending to small firms. And this is anyway a tiny proportion of their business.

The idea that they suck wealth out of an economy is political propaganda with zero truth.
Then please explain what tangible assets they make and sell which mean we have more goods and services....Ah...they give us loans! So we can buy things we cannot afford to pay for.....and then they give us another loan because our house price has been inflated and is notionally worth more. So we have a bigger debt....and we have no means to ever repay. Then...for one reason or another the lending has to stop....and everyone is bust.

All they do is create fake money. Its just the same as QE or good old fashioned printing of notes to pay debts instead of having an income. The mechanism of governments printing to finance their spending has been privatised!!!

Right now we have a negative outlook for the UK from one ratings agency. Their rubric shows that they believe the cuts must continue and intensify (a point Labour seems to have failed to read) but also that the UK economy needs to avoid recession. Our ONLY hope of getting this right is through the financial sector.
The one thing to be guaranteed if we return to the situation as pre 2008, is another crash. A bigger one. We had exponential growth of debt! It had long outstripped the ability of the Uk to finance its own debt and was reliant on borrowing from abroad. It was already in question how long this could continue because the lenders would run out of money. As soon as the debt stops climping you can no longer service it by borrowing more, and that was about to happen anyway. The Bof E was already making noises about a greek style crisis in the UK before everything went pear shaped.


The Labour and media anti-banks feeding frenzy is so dangerous. I can't prove that Miliband is personally responsible for the negative outlook, but it may be that he is.
The conservatives would like to make this a political disagreement but it is not. The entire country believes banks are out of control. It falls to the government to do something about it, and they are not.

A reasonable person who wants the best for his country would have reigned in the criticism of the banks from Labour.
If bankers werent hardened bastards interested singlemindedly in making money for themselves, they would not be in their jobs now. That IS the job definition. That IS the problem. sounds like we need to replace them.

I note the dual headlines. A suggestion banks should be referred to the competition commision...because they do not compete with each other and are too big. For years they have resisted demands they give people a better deal. Second, a demand the government use its shareholdings in two of our biggest banks, RBS and LLoyds, to require them to change their lending practices to force them to lend more to industry.
 

Jason

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dandelion

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Banks are the ONLY wealth creators.

Forget entrepreneurs, only banks can create wealth | Deborah Orr | Comment is free | The Guardian

Entrepreneurship is rewarded by profit - we often say that entrepreneurs create wealth, but it is woolly use of terms.
Some higlights from your reference,:

"Banks could sit in front of computer screens creating electronic money all day and all night if they liked (and they do like. They did exactly this during the last "boom"). But without a solid outlet into transactional reality (such as an invention, or the discovery of a natural asset, or even, for a time, an unsolid one, such as a housing bubble), their electronic money is worthless, figures on a flickering screen, no more meaningful than if you or I opened a text file, typed in some gargantuan number, shoved a pound-sign in front of it, and said: "This is mine.""

" even though the banks do compete with each other, they also are "all in this together", because their monopoly on money creation makes them an international cartel"

" the real money tends to end up with the banks, along with the abstract money."

"The abstract wealth of banks escaped into the real world, upsetting the balance of their game, and now these institutions are utterly uncertain about what's real and what's not."

" The banks are sick, mad despots, corrupted by the easy, unsound money of recent decades"

The author concludes by saying there is nothing we can do about this. I dont agree. All history is a successful rebellion against despotism. I agree where she says the banks weakness currently protects them, because we cannot allow the whole system simply to collapse. But we can use that weakness to force reform upon them. Someone on the radio just pinpointed the current disaster to the repeal of the US glass steagall act. put it back. The ability to creat virtual money on computer screens does not reside with commercial banks but currency issuing banks and governments, who licence banks to do this on their behalf. Obviously banks do not pay enough for their licences. Abolish income tax and tax banks instead?