to think that bankers who sue take legal action to protect their bonuses should ...

[MmeReindor]

be made to live in a grotty mouldy B&B for a month, so they can see the consequences of their actions. There are people who have lost their jobs because of the recession, who have lost their home, lost everything.

And the bankers still insist on a bonus. On top of their already well paid job?

I am speechless.

The Guardian reports today that this may happen.

Already in Germany, the Commerzbank is facing a legal challenge from its subsiduary, DresdenKleinwort

The bankers claim that Commerzbank, which bought Dresdner Kleinwort, should have honoured an agreement to provide a ?400m bonus pool for 2008. Dresdner Kleinwort reported a ?6.3bn loss for 2008, which Commerzbank believes changed its commitment to the bankers

What really gets my goat is the comment about taxes, from a think tank.

City bonuses are expected to total £4.2bn in 2011, down 38% on the £6.7bn paid out last year, ... will generate about £2.5bn for the Treasury, ... this is still some distance ...from the £6.8bn collected in the peak of 2007-08, clearly illustrating how the taxpayer also misses out when the City pays lower bonuses,"

How in the name of all that is holy, does that even make a bit of sense?

We bail the banks out with taxpayers' money, but should be grateful that we are getting £2.5bn back - if we even get it back, as no doubt some of it will vanish in an off-shore bank account, or via shady tax avoidance.

FFS pomme the only greedy ones are the bankers and politicians and people who resent paying out almost (or actually) half their income before NI etc... and NOONE in the public sector is greedy (aside said politicos).

SORT IT OUT.

I think this weird urge to justify the rich taking money off the not-rich is what keeps us in the pickle we're in. Some of you will doubtless be blaming the disadvantaged for littering the streets as you step over their ravaged bodies in a few years' time. (Let's hope it doesn't go that far, but it's headint that way.)

Assuming your patronising remark was aimed at me, pasta - a CMO is a financial vehicle. It doesn't alter the reality of what sub-prime lending is and does, just makes it look viable on paper.

I had one of those mortgages while I was still trying to liquidise my assets, believing I was going to get better and recover stability. The guy came over and offered me a 125% mortgage at a lower interest rate than my existing 'normal' loan, actively encouraging me to sign a fraudulent self-certification. He told me it was legal ... which it was, at the time, on paper. Of course I checked how long the low rate would last and how much it would increase. I was given a stepped rate 'forecast' which I accepted. After the initial rate expired, the interest rate tripled. This was before the shit hit the fan over sub-primes; my (cheap) solicitor advised me there was nothing I could do. I lost the flat.

I honestly don't think I'm to blame for asking the right questions and not knowing the lender was blowing smoke in my eyes.

garlic - It sounds like you were in a horrible situation but ultimately, yes, if I'm honest I think alarm bells should have rung at 125% mortgage. I was astounded at the time by people taking out interest only mortgages when they had no savings/pension fund pot to offset it etc. It is illogical and grabbing at things that WERE too good to be true. They were exactly what they seemed - nonsense.

I was renovating the place to a very high standard, in a very upcoming part of London. The property was ample security against the capital.

You chose to take it.

Ultimately though Garlic, you chose to self certify and take a 125% mortgage.

Whilst I can understand given the at the time self cert mortgage's were all the rage why you did it, you cannot say you are not to blame. Well blame is the wrong word. Responsible. Noone could forsee interest rates tripling but when you stretch yourself too far then the risk of something bad happening increases. I

You took out a 125% mortgage and yet to do not feel in any way to blame for the fact that you failed to take into account that markets go up as well as down?

Wow.

Don't be daft. I took what looked like a not very nice, but rational, choice at the time and under the circumstances. They misled me over the rate increases. that's a fact. It's what happened to thousands of people.

If you're that interested in my personal affairs, you can read me here. The 25% was to fund my ongoing renovations. The year after I defaulted, the flat was valued at 3 times what it cost me, including the cost of works. I'd had it for 3 years.

I was hardly gambling on a poor market - gambling on my health, yes, but I didn't know that then. The tripled rate was what killed me off; it was about £400 a month more than their projection suggested when I signed the loan.

when you stretch yourself too far then the risk of something bad happening increases - did you mean that to sound heartless and smug?

I'm confused as to how the property could have been ample security if it was a 125% mortgage. That's the whole point of the percentage - it is a loan to value ratio.

In my opinion, responsibility (agree blame isn't the right word Niceguy2) should be shared by the person taking out the loan as well as the shyster / financial institution selling it and the irresponsible regulators. Garlic, I am not commenting on your situation as I have no idea what you have been through and what the circumstances were.

Garlic, wasn't aiming at being patronising, but was trying to understand your comment on CMOs, I don't get why you think the banks didn't lose out. Banks retroceded the CMOs to other banks, and when people began to default on high risk mortgages nobody won. The borrower lost their home, the lender only made back 50-80% of their loan issued and the bank owning the CMO made zilch as the cashflows from the loans had stopped.

......and I should have better things to do on Christmas Eve than debate banking, I know :)

Merry Christmas all.

Merry Christmas from me, too! It's is utterly silent here (just been outside.) I love the thought of all the families being early to bed so as to get the best of the day Somebody sent Chinese lanterns up earlier - despite risks to animals, etc, they are magical to watch!

I was turning an uninhabitable wreck into a des res in a rapidly-inflating part of London. Had I not even touched it, it would have gained 10%-15% every three months. Since I had to live in it, and obviously aimed to remortgage it more normally once the work was complete and I was better (haha), I spent a lot of money. The extra 25% was for that and made perfect sense with the information I had at the time.

That's just basic investment - borrowing to fund future gains, which looked pretty likely in that market. Do you think a lender would have offered that much if they weren't confident of making a profit?

I can understand people who think very simply about money: never borrow, never spend more than your disposable income - and there is great sense in that. It's a bit strange for someone who defends the banking industry to criticise me for borrowing to invest, though!

As an aside, I probably would have lost my home in the end anyway, as my health didn't recover, but am utterly confident the lender conned me. Unless you're extremely young, you'll remember all the hoo-hah when the self-certification scandal broke; I was reading stories just like mine in the paper every day. Self-certification mortgages were much more tightly regulated in consequence. However, I do get letters 'offering' me the same kind of deal every few weeks now. I have the world's worst credit rating and am a tenant on benefits. So I guess things ain't changed that much ...

garlic you are entirely to blame. Life happens. You chose to take a mortgage you couldn't afford and clearly have an engrained (sp) sense of entitlement. You now want bankers to suffer because you made a stupid decision. Get over it and put your intensely self-righteous attitude to work and buy another house you cant afford

alternatively, go enjoy Christmas and get over it.

Wow. Talking. That is an incredibly rude post.

At that time many people were taking out 125% mortgages.

I have no idea of garlic's circumstances but the whole business of lending was very different then and people were encouraged to take risks that in hindsight were not sensible.

How nice it must be to be so smug intelligent and knowledgable that you could not make a mistake like that.

Thanks, MmeR. I see the spirit of goodwill is alive and well in some quarters.

Talking, your post is bonkers! You say "Life happens" but seem to have zero comprehension of what that means. I even bothered to give a link to my story but, hey, why let real life get in the way of your misplaced sense of superiority.

Well I don't have a problem with banker (and I include lots of venture capitalists, private equity types, hedge funders etc) bashing , even though I agree that people who lied on self-cert mortgages are part of the group to be blamed. It's vital really to make people wake up and understand what has been going on. People have started to get their heads around subprime, CDOs, CDSs but there is still much more that needs to be understood by the general public.

My role as an interpreter/translator has taken me all over, from NHS appointments to investment banks. Sure bankers work long hours but they don't have the monopoly on hard work, I see just as much hard work on 12 hour nursing shifts, and arguably work that creates more economic value if you think how getting someone better = getting them back to work if they are of working age. Beyond that though, so so much of what I've been involved in translating is pointless moving around of money and it is so sad to me that the cleverest of brains are often wasted on this. Really, there is just so much pointless work in financial services with people pretending that it is all so important. There is a dreadful macho culture where people don't seem to be able to speak up and say when they don't understand transactions/vehicles and so others get away with things in true emperor has no clothes on fashion.

Banks are useful of course but it has all got so out of hand. Not so long ago I translated some research about how M&A activity destroyed value in the majority of cases and how, the more frenetic activity got in the 2000s, the more value was detroyed.

The scandal of the loans that RBS gave out to certain totally non viable companies for instance and how these companies continue to this day to hold their massive credit lines because if they were called in, they would mean more massive balance sheet asset mark downs has never really been reported.

Good post, Eurostar.

Have you thought of writing on toomanycuts.blogspot.com?

I've just realised why takingbackmonday's post has been bothering me, and it's nothing to do with financial planning. It's about her accusation of "entitlement". This is so close to what Frothers are all about, I'm surprised I didn't see it.

I do have a sense of entitlement. I believe everyone in this country is entitled to support when they need it, and I am angry that it's too hard for them to get it.

Most of the people who complain about "their" tax & NI being used to support people like me, and others who are not like me but need support, conveniently forget that "my" tax & NI provided their education, their childhood medical and dental treatment, the police who brought them home when they got lost, the medical assistance they and their parents have received, their ante- and post-natal care, and so on and so on. That's how societies work. You pay into the pot when you can afford to and the pot pays out when you need it.

I need it now and I am entitled to it.

What this has to do with banking, business and economics is what Frothers are about. Even Warren Buffett says the rich should pay more tax. For once, I agree with him.

Eurostar - yes I agree very much with your post. M&A did destroy a great deal of value and mergers often happened for no other reason than the ego of the CEO running the acquiring company plus running a bigger company means a bigger pay packet.

It is also true that many senior managers in large City banks do not understand what is going on down on the trading desks. Some 15 - 20 years ago I was both a trader and then a consultant to investment banks telling them how to manage risks and it is clear the mistakes that were happening back then happened again in recent years. Nothing has been learned. The entire financial crisis was down to very poor management, ego and greed and nothing else.

Me and DW still trade financial markets for a living with our own money and we are aghast at what hapened and is still happening. We are a long long way from getting through this mess. Most of it has just been kicked down the road to be dealt with later. Many banks are still insolvent and many will blow up like Lehman. People need to understand better just how big this crisis is and why it happened - but finance is boring and the X-factor society we have will ensure that people and newpapers will lose interest in following the scandalous cost to tax payers of sorting the mess out.

You are right. Most of the dud loans have still not been written off properly. If they were, many banks would go under overnight. Instead the bad loans and trading losses are being shuffled around in off balance sheet vehicles and politicians and regulators and central bankers are still participating in that conceit.

Incidentally, if the big investestment banks had been allowed to go bust then no one would have been paid their bonuses either guaranteed or discretionary.

Saving the banks saved the bonuses of many bankers that did not deserve them and I agree when people object to that. It is the lack of consequences for terrible risks taken and poor management and I am sure in some cases outright law breaking that bothers me more than anything - not the fact that bankers get big bonuses per se.

Yes, MB, exactly what you said in your last paragraph.

How? How can this be exposed, in terms we all understand? It's really important.

garlic - problem is that as soon as the reality is exposed then the system will fail as confidence in it will totally will evaporate. The system will cataostrophicaly fail one day when it can no longer be patched up - but then it will all be too late and politicians will ring their hands and say 'lessons must be learned'.

Hmm. How would you feel about a team of super-clever auditors, with heavy powers, going right through everything? My imaginary team would have two primary objectives:

1] Exact payment of all taxes and penalties which are due in principle, never mind the loopholes;

2] Create a much stricter and simpler legal structure for financial institutions, with defined permitted activities rather than "not forbidden" ones?

I wouldn't have liked Keynes if I'd met him, but I tend to agree that capitalism is the best economic model for democracy. Keynes himself stressed that, in order to function long-term, capitalism must be benevolent. Up until recently it has been, more or less, benevolent. Now money has invented its own rules, which bear no relation to real life and take no responsibility for its consequences.

I'm still clinging to the hope that someone will pull it back from the edge.
While the majority of people (and politicians?) remain ignorant about what banks do, we're still hurtling towards destruction. No-one will get a bloody bonus then.

MoreBeta
that is interesting. My DH said that a private company would have gone bust, and it would have been a shame for the people who were employed by that company, but c'est la vie.

Why were the banks treated differently?

And, yes, Garlic. The "sense of entitlement" bothered me most about the posts earlier.

People who are entitled to benefits would generally rather be able to earn their income by doing a job for which they were paid enough to pay their bills.