To feel depressed and angry about Bankers Bonuses

[SapatSea]

Most people in the country are facing a cost of living crisis. We have had austerity for over a decade due to bailing out the banks and the "we're all in it together" mantra (lies). Although our GDP doesn't look too bad as a bald figure the GDP per person is falling year on year and the multiples of difference in salary/wealth between those at the bottom and top is ever widening. We are becoming a more and more divided society in terms of the have's and have's not.Most people are deeply worried about fuel bills and the future and then we have this
www.theguardian.com/business/2022/feb/16/weve-had-a-run-on-champagne-biggest-uk-banker-bonuses-since-financial-crash
barely reported by the MSM. It's obscene.

(I do realise that just a few months after the crash and bail out that bankers got bonuses again but this just really hurt reading it this morning)

There is A LOT of luck in investment banking. If you make a few good bets as a trader, you can walk away with several hundred thousand pounds at the end of the year.

@TheReluctantPhoenix. Luck is definitely part of the equation, industry knowledge and strategy also play a major role, IMO. DH works in corporate finance and one of his colleagues made $100 million for the company last year. It was a consistent strategy based on his industry knowledge that got him there, not a few good bets. I can’t imagine generating that sort of profit, but some people can do it!

Financialisation of the economy that began in earnest in the 1970’s has driven inequality.

“Financialisation must be understood as a radical transformation within the financial sector that has altered entire economies – from the household and the firm to the functioning of monetary systems and commodity markets.

Research has shown that financialisation has increased inequality, slowed down investment in ‘real’ production, mounted pressures on indebted households and individuals, and led to a decline in democratic accountability.”

www.tni.org/en/publication/financialisation-a-primer#Q1

I think we all understand how capitalism works thanks very much.

Well the poster I responded to seems to think we can do without banks, so no, 'we' don't.

Some of us might be a bit more critical as to how beneficial it actually is though, in its current form.

Well you know what they say, the worst economic system, apart from all the others. I don't see anyone offering to do without the tax I raises for the treasury however.

It's economics 101 innit. Supply and demand.
Not everyone could be a trader, otherwise why aren't they doing it? The kind of relentless stress from trading, constant threat of redundancy etc is very real.
Not saying this isn't the case in many roles but let's not pretend that finance is a walk in the park.

Believe me they actively seek out women and people of colour. Just because it attracts white males for the most part doesn't mean they don't try to recruit outside that demographic.
For example my husband who also works in finance was made redundant a few years ago. Took him over a year to find a new job. One headhunter even used the term pale, stale male.
I on the other hand, who left trading years ago, still get calls and on a very regular basis from headhunters looking to recruit into Tier One Investment Banks.

I digress. What a nurse or teacher gets paid (public sector) has nothing to do with what a banker earns (private sector).
My brother is a nurse and earns about £30k a year. My husband earns about 7 times that salary excluding bonus. My brother knew what nurses salaries are when he started training. He also, having an undergraduate degree in economics, could have gone into finance and be earning £200k basic a year.
People conflating bankers bonuses with a nurses salary need a lesson in critical thinking.

@FourBookPiles

If you were making millions of pounds for your employer through your hard work and decision making, wouldn’t you want that to be acknowledged in your pay package?

It’s the same as footballers. If you’re signed by a club and the club makes multi-millions in additional shirt and ticket sales because people want to see you, why is it unreasonable to expect a cut of that?

I agree that some types of work are woefully underpaid for their contribution to society, caring roles particularly. It’s a joke they get paid so little. But it’s the system’s fault, not the individuals and it’s the role of the government to re-adjust things so there’s a fairer and more equitable distribution of wealth.

Exactly this. The issue isn't why bankers are paid loads - it is why other careers are not paid enough. And for what it's worth, doctors are also paid a very decent amount particularly if they do private work (I.e 6 figure salaries)

@BobbyeinArkansas,

I am not sure, based on the above rambling post, whether you are in a position to critique others’ thinking.

The point is that if you assume every banker is doing a role critical to the good functioning of the economy, what you say hold water.

I would strongly dispute the axiom, however. I would say the finance sector needs to be about 20% of the size it is now to actually support the economy. The other 80% is, effectively, very expensive (to everyone else) financial masturbation.

M&A of large companies, one of the biggest payers, has been generally shown to be value destructive.

amp.ft.com/content/4ed717f2-df96-11e9-b8e0-026e07cbe5b4

As for why shareholders vote to approve it, the large pension fund shareholders are run by ex and soon-to-be bankers in a very rewarding revolving door.

Let’s look at the genius traders now. Something like 70% of trading is now algo-driven, where computers are (very cleverly) programmed to extract tiny bits of value from short term moves in the market or discrepancies between the price of the same shares on different exchanges. ‘Flash Boys’ by Michael Lewis is a fascinating read on one form of alto trading and why it is a tax on other players in the market (I.e your and my pension).

To bring things bang up-to-date, another very lucrative practice is block trading, where large players are allowed to trade large blocks of shares without letting anyone else know until we’ll after the fact. Illegal sharing of this information is now being investigated.

amp.ft.com/content/da23c81e-b6cd-4026-9eef-ff9116dddd8e

I could go on, and on….,,and on.

The idea that bankers are some kind of financial alchemists creating money out of screens and genius has been well and truly debunked.

Banks know this, which is why they employ ex politicians on ludicrous salaries (Tony Blair inter alia), give massive political donations, and are major sponsors of sport. No company decides to hedge their interest rate risk with JP Morgan (for example) because they have seen them on a bill board at the Super Bowl.

Banks do all the above to make sure that it is in no one’s interest to upset the gravy train.

It is a bubble but, as anyone who has ever traded knows, you cannot bet against the bubble as they always go on longer and further than anyone imagines. Does not stop a bubble being a bubble.

Finance is necessary. We need bankers. However, we have reached the point where the finance tail is wagging the real economy dog.

DH works in M&A. For a boutique bank btw, certainly not one “bailed out” by the govt.

Yes, there have been record bonuses, because of the record money generated for the company. He pays essentially 50% of it in tax. That’s a lot of money contributed to society. He works extremely long hours and extremely hard - his bonus doesn’t in any way STOP nurses, teachers etc getting a bonus. He’s not stealing from another pot - it’s value created and actually then paid towards the pot.

[quote Blossomtoes]And yet, we're still talking about the government bailing out U.K. investment banks. They didn't.

I think you’ll find they did.

en.wikipedia.org/wiki/2008_United_Kingdom_bank_rescue_package[/quote]
Erm that article clearly states they didn't. Lloyds and RBS had bailouts. Both of which are retail, not investment, banks. There's a big difference.

@Giraffesandbottoms,

It generally isn’t value created, sorry, it is value taxed by the banks from the shareholders of the merging companies (see my post above).

Don’t be bamboozled by the hype. Ask yourself a simple question. Does a share price generally go up or down when it bids for another company.

As a shareholder, a company I own being involved in an equal merger or making a bid for another company is an event I dread.

It all makes me sick to my core.

I think singling out one group and being annoyed about it is just being envious for the big bonuses offered.the whole job is very stressful and tiring.its certainly not piss easy! Nurses and doctors should obv get more cash.however they don't make money for the country.job satisfaction makes it worthwhile for them.lots of people make money not just bankers .sir alan sugar had a 4 million pound bonus .many people who are in media jobs and so on

Interesting. I couldn't do it, the long hours, the stress.

@feb21,

RBS was retail in name, investment in nature. It had also just bought ABN Amro in one of the most scandalous mergers in history, where 90% of retail investors voted against the merger (but it went ahead, nodded on by the tame institutional shareholders).

There is no meaningful distinction between retail and investment banking in the uk. In addition, investment banks are financed by retail banks.

Of course investment banks were bailed out, both directly and indirectly.

@TheReluctantPhoenix

Of course they create value. They are selling company A. They need to do the work to value it correctly, but then they need to package and sell it attractively at a profit, usually involve bidding. If you sell a 90m company for 120m, you have created 30m. Just like selling a 1m house for 1.3m creates 3m. 25m or whatever goes to the company A, 5m goes to the bank. 5m has been made for the bank. Why wouldn’t the people involved in these deals personally get some of what is essentially sales commission?

@TheReluctantPhoenix

Btw I strongly
Agree many areas of finance create fuck all and move money around. This isn’t one of them.

"I wasn't even allowed to return to my desk to collect my handbag."

YABU

"Banking " encompasses a massive spectrum of jobs most of which are gruelling and stressful. Feel free to apply if its thar "piss easy"

The gravy train lawyers and quangos and bug accountantcy firms are the ones you should be focusing your attention on

@ButterMeTimbers

YANBU and that illustration photo is fucking depressing.

99% white men. What's with that?

How racist! The post has nothing to do with race and you decide to mention the colour of their skin! Shame on you, you racist.

@Giraffesandbottoms,

Ok, let’s look at your example. Someone buys the 90 mio company for 120mio. They have just lost 30mio. No value has been created. And this is before bankers and lawyers have take.man, say, 5 mio in fees, another loss to both companies.

M&A seeks to create efficiency savings and synergistic gains. Generally, these look far better on the Excel spreadsheet than they turn out in real life.

For real research, I linked to an FT article (above) and can show you far more if you are interested.

TheReluctantPhoenix

I agree with your comments. But many posts lump retail and investment banks together and they are quite different.

I made the distinction only in response to the "we paid for your bonuses" argument. No, tax payers didn't; my corporate finance firm was advisory only. Absolutely, clients may have used banks for debt raising. And a financial services crash would have affected all firms. But my colleagues getting big bonuses for bringing in even bigger advisory fees is not funded by taxpayers. The individual that received the highest bonus had branched out into restructuring, it wasn't even M&A.

Anyway, I digress. Some occupations may be underpaid. But we know that when we make our career choices. Nursing and teaching are very worthy professions, but not highly paid. I went into investment banking as it's very lucrative. It's not a secret. It's not "piss easy" either.

I think the phrase " job satisfaction makes it worthwhile " is the problem here. I work in health and whilst I do love my job and get job satisfaction, job satisfaction not going to pay for my mortgage, energy bills or much needed holiday is it?
I do not begrudge bankers a high wage as they work so hard. What i do begrudge is the government relying on " kind" people doing caring jobs and taking the piss as they are too kind to ask for more( or leave to become bankers). Many ARE leaving due to poor pay and conditions btw..the kindness of our hearts does not pay the bills.

Regulation on how the banks make money, pay bonuses and remuneration is very weak, so what they have in fact done is make a rewards environment where they set their own pay and bonuses.

so BOE interest rate is 0.5% try borrowing any money at anywhere near that amount.

But its not just bankers setting their own pay, its vice chancellors of uni's, nhs trust ceo's, council chief's, the ceo's of numerous public bodies.

Director pay of fairly ordinary companies has rocketed in recent years, remuneration committees are just back scratching each other, even when companies make a loss, the directors get a pay rise! and then there are the Golden handshakes when they fail......

the system has been designed to keep the rich richer and the workers poorer or as someone said to me recently "why am i working 40hrs a week to struggle?"

@malificent7

Please don't be so ungrateful, we all came out and clapped - what more do you want?

I do think it takes a certain personality type to become a banker. Correct me if i'm wrong, but it seems quite a testosterone fuelled culture with long hours which lends itself more to men than women with families. Age old problem. In the hospital where i work there are very few female surgeons compared to female. The women couldn't do those hours with small children.

@RedRoseRay Agree 100% with your post. The people who take the fallout from this are usually those on little more than minimum wage.