in feeling that the bankers are REALLY taking the piss?

[glasjam]

It's almost as if we aren't expected to notice OR that we notice but that's it's so outrageous we can't really process it but - listen here, I just watched the guy from RBS on the news look very humble and self-satisfied because he has refused to take his 1.6 million ANNUAL bonus this year............for the sake of the economy, business etc....

Sorry for all the ellipses BUT really - are we to be grateful for that?? I think we all have to have a huge big economics lesson to have half a chance of understanding WHY it is a BAD thing that bankers do not get their ridiculous bonuses. And PURLEASE they are not the kind of bonuses that bring a basic wage up to something more liveable on - these bonuses ARE the wage if they would care to admit it.

Do we really have to support the million pound incomes of bankers in order to keep a roof over our heads? I loved the way Norman Lamont spoke of the Treasury as a fantastic Oxbridge club. He's right - but then why are we all holding the buckets under their leaks??

I'm wondering what sort of people they are who are prepared to work so hard for so much money. Obviously, the argument is that they wouldn't work that hard if their remuneration were less.

I wouldn't work like that for any amount of money. If I really enjoyed the job I would do it for considerably less. I know this, because I always chose work that I would enjoy doing over work that was paid well (which is why I have no dosh now!).

As a society, should we be encouraging people in valuing money so highly?

they don't really work as hard as they keep telling us.

The Glass-Steagall Act of 1933 was brought in in the States in 1933 after the Great Crash to curb the speculation that had been responsible for the crash. The Glass-Steagall Act prohibited an institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. They have known about the dangers of doing otherwise for years and years. Certain big players lobbied for financial deregulation which enabled banks to perform all of these operations. They got what they wanted and made a fortune gambling. The employees working for them, most of them clueless about what is really going on, are rewarded well for carrying out the activities. The big players knew all along that it was a house of cards that would one day collapse. However, they didn't care, they only live once, they were determined to amass as much booty as they could and make hay while the sun shined. They aimed to get out while still ahead and the devil take the hindmost.

Now the chickens have come home to roost, and millions of people worldwide are suffering. But the big players don't care, they got out while the going was good. They are slapping themselves on the back, watching the news while quaffing champagne on their yachts.

claig - I agree it all comes back to Glass-Steagall.

Before Glass-Steagall, investment banks took risks and retail banks didn't. The two were separate.

If an investment bank made lots of money, its employees were paid a lot. If it lost a lot of money, its employees lost their jobs (or at least got paid far far less). It was not bailed out because it didn't hold customer money. High rewards, but high risk too.

Retail banks didn't take much in the way of risks. They didn't make much money but their position was secure. If something went wrong (which was less likely due to less risk taking) they would be bailed out. Lower rewards but lower risk.

The problem comes when you have people who are able to take huge risks, which result in their employer making heavy losses, without there being any real effect on their own position.

It seems clear to me (and also I believe to Mervyn King and Nick Clegg) that they need to reinstate the division between low risk retail banking and high risk investment banking.

If that was done then the investment bankers could pay themselves all they like in the good years - and hang out to dry in the bad years.

minipie, exactly right.
It has just occurred to me why they probably wanted to allow the retail and investment sides to merge. On their own they haven't got enough money to play with. They probably wanted access to all our savings, pensions and insurance premiums. That way they could start placing some really big bets, and if it all went wrong, who cares?, they knew we would bail them out anyway.

I haven't read whole thread and apologies if this has already been posted but if you feel strongly that bankers should be paying their way, this is a great cause to support:

robinhoodtax.org.uk/

I completely agree with you OP, the whole thing is repulsive. I'm about to be made redundant (public sector) because of the cuts - all thanks to the banks and greed

moid - you make an excellent point about the old days when people in banking and elsewhere did not need bonuses to do a good job.

Indeed, you make the point more succinctly than George Akerlof (Nobel Prize Laureate) and Rachel Kranton did in the FT yesterday when talking about the concept of so called Identity Economics.

Its time to treat Wall Steet like Main Street

"Identity economics also tells us why the public, in America and elsewhere, are so angry about the bonuses on Wall Street. Most of us just get up in the morning and do our jobs Ã?Â? jobs that for the most part are neither glamorous nor well paid. We take pride in jobs well done, and we celebrate people such as Sully Sullenberger who, after ditching his plane in the Hudson River, checked the cabin twice for remaining passengers before being the last to evacuate. As he explained: Ã?Â?I was just doing my job.Ã?Â? (A month later, his pay was cut by 40 per cent and his pension was terminated.) The New York City firefighters on September 11 and the troops who stormed Omaha Beach just did their jobs. Most peopleÃ?Â?s work is not as dramatic and involves less risk, but these are role models we admire. Why then, we ask, do traders and bankers need outsize bonuses and performance pay to get them to do their jobs?"

CinnabarRed - yes you are right.I did not express myself quite right. However, I also echo the question that claig posed later on.

MtsRufallo- it's called equity. The taxpayer owns the bank; i.e. owns the shares. When the economy returns to normal, the shares will be worth many times what the government put in to bail these banks out. Don't worry- you, as a taxpayer, will get your money back.

The comment re Corus is bogus. Corus was acquired by Tata Steel, an Indian company,and delisted, in 2006. Tata Steel then decided to close Redcar as it could not find a customer for it's output(steel plants need long term guaranteed volume contracts to survive because you need to run the blast furnaces at high utilisation rates- ideally >85%, to be profitable. You cant just turn them on and off as demand requires). However, Tata steel as a company remains profitable- the Tata group is one of India's alrgest industrial conglomerates. Therefore, using the closure of Redcar as an example of the government's failure to act on failing companies in other sectors is wrong. Tata steel has not failed but Redcar is not viable.

Yanbu- The fact of the matter is that the banks were bankrupt, on their arses, finished, kapput whatever you want to call it. (The would have formally been declared bankrupt had the government not stepped in with 'our' money It therefore follows that it does not matter how much an individual made for the bank. The bank was technically out of business. The bankers are paying huge bonuses, meanwhile savers are getting nothing for the money they have deposited. Small business are being starved of finance.

Another dirty little secret of the global banking system right now is that there are quite a number of the largest global banks that are in reality barely solvent but being nursed along by the authorities. Not naming names but all this talk of 'restoring confidence' is nonsense. The authorities know if property prices fall further and banks repossess millions of homes, office buildings and other commercial property the game would be up. They are desperate somehow get house prices and commercial property back up again before teh repossessions have to be undertaken. If they repossessed now the write offs woul be so huge it would overwhelm what little capital is left in the global banking system.

In many cases, the banks are running what is known as 'extend and pretend' loan schems where they keep rescheduling debt on large property portfolios as long as interest is being paid even if the property is worth far less than the value of the mortgage secured on it. They would never have done that in boom years they would have repossessed and sold them - now the banks are too frightened to crystallise the losses. The losses are still on their books, yet to be crtystallised and written off, but yet they stil pay out bonuses in the meantime and refuse to lend to new borrowers who have excellent credit ratings.

The money you earn bears no relation to how hard you work - so the fact that some bankers work hard is completely irrelevant.

Agree with BelleDame. The media whips up a storm about a hand full of 'players' receiving mega bonuses. The public fall for it because it plays to our natural jealousy really. Those people are a tiny subset of those in the banking industry - and they are directly involved in handling huge financial positions. Remember bonuses are basically part of the remuneration for all the researchers and other support staff - people like us - who actually work very long hours in a rather volatile, unpleasant and extremely stressful environment that impacts on family and social life and is insecure in that it offers absolutely no job security even in the best of times (takeovers, mergers, changes in financial 'trends' etc etc mean hire and fire as a policy is the norm here). It's no surprise they only do it for the money!

Sorry haven't been back to look at this thread that I started (very rude I know ). Some interesting points and some stuff that I really do need to come back and read again. I wasn't joking when I said I needed an economics lesson but I am not THICK. It's a complicated subject undoubtedly but I was asking for genuine explanation as to why I should be SO grateful for this man not taking his huge bonus JUST THIS YEAR (the implication being that he has taken it year on year before this, and, if he is still in his job next year, will take it again).

And whenever I refer to "bankers" I assume that everyone knows that I am talking about the ones that get these bonuses - I'm astute enough to realise that Cashier Number 3 isn't creaming it in

Serenity's post made me the most. I was finding it quite informative until she flounced and inferred we were all a bunch of idiots. Perhaps it's this kind of polarising attitude that means banking stays as this mysterious, arcane, unfathomable institution that pats us on the head and says "oh you little people will NEVER understand".

I definitely think it should be a compulsory subject at school especially for those of us whose fathers/mothers are not investment bankers or hedge fund managers.

I came to the thread too late but the bottom line is it's a free market (apart from taxes, etc.). Most of the banks didn't take any government money. You can argue that they've benefitted from government stimulus, but they also lost an awful lot of money from the problems of others dragging down the entire sector.

It seems fair to think that RBS and Lloyds shouldn't get rewarded for failure when they are part-held by the government. Yet they, RBS in particular, must compete for employees with the banks that had a "good" crisis, so it's hard for them to call off bonuses and pay rises entirely.

Both banks had to pay most bonuses in shares, in any case.

If you want to solve the broader issue of a culture of outsized entitlement, you have to get shareholders to step up to the plate and stop rubberstamping banks' remuneration reports.

They are the ones losing out, when the banks pay far more in bonuses than in dividends. (Barclays being the prime example of this in 2009.)