Bankers are bloody getting away with it.

[julesrose]

unlimited bonuses and this crappy government can't / won't do anything about it.

I think I'll move my bank account to the bank who pays the lowest bonuses. Anyone care to join?

I think a lot of City traders/bankers do genuinely enjoy the adrenaline of it and are driven and motivated to 'be the best', it's a lot like a big game really, so maybe not unlike the footballers situation. This is not necessarily a good thing though, as sometimes the drive to 'win' leads to risk-taking and takes precendence over making prudent decisions...

It is very, very much about the money though. I think it's reasonable to say that's the main reason most people go into banking, and why they put in such ridiculous hours day after day. It's also about prestige, not just the money for its own sake, but the big paycheque/bonus as an indicator of status compared to others. The psychology of it is more complicated than just simple greed (though there is that as well). If pay/bonuses came down so they were comparable with other sectors...well, it would be quite interesting to see what would happen

I don't agree with massive wage gaps - footballers, bankers, any of it. Wealth distribution is a serious problem.

That is not to say that women are not attracted to rich men....................but that is an entirely different argument to greedy being attractive.

'Women really are not attracted to greedy men' is as true a statement, as "young blonde ladies throwing themselves at footballers". I was/am young and blonde.......just checking and "no" I have never thrown myself at a footballer (and that is despite being invited to join Ryan Giggs for a drink one time - but then even if I had, 'Niceguy', it would have been me throwing myself at him )

..."but the big paycheque/bonus as an indicator of status compared to others"

There are many ways to indicate your status compared to others.........maybe they should introduce sticker charts

I agree though that the size of the bonus in comparison to others is the motivator not actually the money itself.........hence more argument for the change to the culture.

Several posters appear to have fallen hook, line and sinker for the government's / bankers' arguments on this.

1. "Ooh, these are private businesses, you can't tell them what to do". Bollocks. The UK parliament is supposed to be sovereign. We can pass whatever laws we damned well choose, more or less. We can certainly pass a law that says "any financial institution that calls on the Bank of England's special liquidity fund" [which includes such "successful" banks as Barclays, by the way] cannot pay its staff a bonus. There may be negative consequences of such a law, but there would also be positive consequences we avoid overpaid twats being even more overpaid and we can clearly do it. There are also more sophisticated methods, eg the one described by BeenBeta
2. "It wasn't the bankers that caused the deficit, it was overspending". Bollocks again. Total taxpayer support to banks has exceeded £500bn, according to the NAO. We taxpayers will get lots of that back, but we've had to pay it out, and the government is funding it by cutting services.
3. The bankers will go overseas and they contribute 20% of tax revenue. Bollocks a third time. Some of the revenue would undoubtedly go, but not all of it. Switzerland is a low-tax regime but lots of bankers find it boring, while London remains hugely attractive to them. The cost-benefits will shift but not enough that they're all going to disappear. Additionally, the revenue figure is a gross figure. It seems pretty likely that the net figure revenues minus real losses incurred by the taxpayer due to bailing out banks will be a strong negative. And that's ignoring the huge on- and social costs of the cuts that we've now got coming.

Finally, posters are too often failing to engage with the moral argument -- most people think it is disgusting and wrong that banks caused a crisis, then demanded large sums of taxpayers' money to avoid going-under, causing a recession that means the vast majority of people have seen at least a wage freeze if not a fall, and also forcing the government to cut services, and they are now going to pay their staff bonuses.

Stupid strikeout glitch, sorry

Several posters appear to have fallen hook, line and sinker for the government's / bankers' arguments on this.

1. "Ooh, these are private businesses, you can't tell them what to do". Bollocks. The UK parliament is supposed to be sovereign. We can pass whatever laws we damned well choose, more or less. We can certainly pass a law that says "any financial institution that calls on the Bank of England's special liquidity fund" [which includes such "successful" banks as Barclays, by the way] cannot pay its staff a bonus. There may be negative consequences of such a law, but there would also be positive consequences we avoid overpaid twats being even more overpaid and we can clearly do it. There are also more sophisticated methods, eg the one described by BeenBeta
2. "It wasn't the bankers that caused the deficit, it was overspending". Bollocks again. Total taxpayer support to banks has exceeded £500bn, according to the NAO. We taxpayers will get lots of that back, but we've had to pay it out, and the government is funding it by cutting services.
3. The bankers will go overseas and they contribute 20% of tax revenue. Bollocks a third time. Some of the revenue would undoubtedly go, but not all of it. Switzerland is a low-tax regime but lots of bankers find it boring, while London remains hugely attractive to them. The cost-benefits will shift but not enough that they're all going to disappear. Additionally, the revenue figure is a gross figure. It seems pretty likely that the net figure revenues minus real losses incurred by the taxpayer due to bailing out banks will be a strong negative. And that's ignoring the huge on- and social costs of the cuts that we've now got coming.

Finally, posters are too often failing to engage with the moral argument -- most people think it is disgusting and wrong that banks caused a crisis, then demanded large sums of taxpayers' money to avoid going-under, causing a recession that means the vast majority of people have seen at least a wage freeze if not a fall, and also forcing the government to cut services, and they are now going to pay their staff bonuses.

Personally i think Bob Diamond deserves 3m alot more than Wayne Rooney does. The Uk needs Barclays to be sucessful and generate jobs and income alot more than it needs to pay some useless lout to kick a ball around.

Sorry to have to say it, but overspending and overborrowing DID cause the crisis. At the top of one of the biggest booms in the last 50 years the government was still running a borrowing requirement. Its generally seen as normal to have a negative public sector borrowing reuirement at the top of the cycle - ie to save something. Labour blew billions on creating ppublic sector jobs many of which were totally unnecessary

remember that most people who work in banking dont get big bonuses (and the vast majority get none at all).....this is all such typical media spin and generalisation.

yawn

1. Yes, parliament can pass any laws we want. That is not in dispute. What is in dispute is whether its a good idea or not. It's not because a) we live in a free country where the govt should not control everything and b) economic reasons like ppl will move etc.

2. You are mistaking liabilities for actual money spent. The taxpayer is only liable if all the banks debts become bad. Practically impossible to happen and if it did, things would be so bad in the country, the last thing we'd be worried about are the banks.

3. Of course they won't ALL go overseas. But why drive highly paid (and therefore highly taxed) individuals abroad with a tax regime designed not to maximise revenues but to serve the populace who are too stupid to look beyond the headlines.

You accuse people of falling for the govt's/banker's arguments yet your own facts are at best on shaky ground and understanding is shallow.

Niceguy2:

1. if you look upthread, you'll see that several posters have said that it is impossible for the government to restrain bonuses of private businesses. So it is in dispute, although not by you. On a) this isn't about whether the government should control everything. It's about whether the government should control pay for these particular organisations, who have had taxpayer bailouts. Not just RBS and Lloyds - all those calling on the special liquidity fund. It seems like a perfectly reasonable quid pro quo to me. On b), the economics are disputed, as I mentioned.

2. I'm not mistaking liabilities for acutal money spent. Liabilities are real. We as a country have had to borrow to fund the liabilities. We have thus had to cut services to find the money to pay for the funding. The government is no more able to lend money costlessly than you or I.

3. "Why drive highly paid individuals abroad?" That's your question. My question is "Why allow ourselves to be held to ransom by a bunch of overpaid spivs in this way"? As for highly taxed, do me a favour. If they were truly highly taxed, their net pay would be not be two or more orders of magnitude higher than average net pay. And as you will know, bankers continuously innovate to reduce their tax liability so that the rate they pay is typically lower than the poor sods who clear their houses and wipe their babies' arses. And finally, the purpose of a tax regime is not simply to maximise revenues. It's also to shape behaviour: sin taxes are the classic example. This is one bit of behaviour that I think most people are happy to see shaped.

So: Which of my facts are on shaky ground, specifically? And in what way, specifically, is my understanding shallow? I think you've assumed that I don't know things such as the difference between a liability and money spent - you're mistaken. Frankly, at this point, it's your understanding that looks a bit shallow.

hoarsewhisperer:

• no-one thinks that all bankers get large bonuses.
• what material difference would it make to any of the argument if it were a tiny fraction or a large fraction, in any event?

The point is that a number of bankers, probably in the tens of thousands, are in line to receive large bonuses (say 100k+) - despite the fact that their banks have relied on so much state support to survive that the economy is down the swanny from funding the bailout.

slhilly, I've already linked to this report before but it might be worth doing it again
www.nao.org.uk/publications/1011/support_for_banks.aspx

I think you are misunderstanding the government's asset/liability position.

The government purchased a number of assets: bank shares (RBS/Lloyds), bank mortgage books (say Northern Rock) and provided loans to shore up bank balance sheets. These assets (shares, loans), and the Asset Protection, Special Liquidity and Credit Gurantee schemes that support them, generate interest and fees for the goverment (around £10bn thus far).

To fund the purchase of bank shares and loans, the government has issued Gilts. The interest on these Gilts is around £5bn/year.
So broadly speaking the cost has netted so far.

So the government has taken on significant risk yes but has not suffered any significant loss. More precisely "The current expectation is that there will not be an overall loss on the Asset Protection, Special Liquidity or Credit Guarantee Schemes. This is a central expectation, however, and further shocks could still lead to significant losses for the taxpayer".

"I'm not mistaking liabilities for acutal money spent. Liabilities are real. We as a country have had to borrow to fund the liabilities. We have thus had to cut services to find the money to pay for the funding. The government is no more able to lend money costlessly than you or I."

We were overspending before the bank bailout and if the bailout had never happened we would still be overspending. In 2007 before the bailout the crisis the deficit was £40 billion. This year will be much higher as tax revenues slump.

The Office for National Statistics gives some figures that exclude the cost of the financial interventions:

"Public sector net debt (excluding financial interventions) was £863.1 billion (equivalent to 58.0 per cent of GDP) at the end of November 2010. This compares to £708.6 billion (50.0 per cent of GDP) as at the end of November 2009."

So in one year we had a £150 billion deficit that had nothing to do with an financial interventions.

We are not cutting services to lend money.

We're cutting services because regardless of the financial interventions we're spending far in excess of what we're earning.

siasl, from the Exec Summ of the report:
"However, the amount of cash currently borrowed by the Government to support UK banks has risen by £7 billion since December 2009 to a total of £124 billion. The report also warns that the Treasury will probably be paying for the support it has provided to UK banks for years to come."

"The eventual cost or return to the taxpayer as a result of the Treasury?s support of the banks is dependent on the Treasury?s successfully disposing of its shares in RBS and Lloyd?s and recouping its loans to the banking sector. Meanwhile, the Government is paying £5 billion a year (£10 billion so far) in interest on the Government borrowing required to finance the purchase of shares and loans to banks. So far, this has been offset by the fees and interest received by the Treasury from the supported banks, but these are likely to fall in future."

BadgersPaws, the deficit was, as you say, £40bn before the crisis and is now £150bn. That has been caused by a precipitous drop in tax revenues and by the continued need to lend money to the banks. The drop in tax revenues was not caused by some dawning realisation that UK tax revenues were higher than spending -- it was caused by tax revenues tanking as the economy went into a recession that was sparked by bank failure.

slhilly, i think I love you...

You stated
"We have thus had to cut services to find the money to pay for the funding."

No we haven't. The interest on the loans has paid for the interest on the gilts.

The £124bn is funded by gilt issuance, the interest on which is £5bn/year. It doesn't cost the govt £124bn. Fees are £10bn. It has been 2 years. So this nets to zero.

Whether or not this costs the UK goverment in the future is not the point. You made a point about the cost so far.

"BadgersPaws, the deficit was, as you say, £40bn before the crisis and is now £150bn. That has been caused by a precipitous drop in tax revenues and by the continued need to lend money to the banks."

Yes the deficit is due to the drop in tax revenues but no it's not due to lending to banks, as the ONS says the figures are "public sector net debt (excluding financial interventions)"

"it was caused by tax revenues tanking as the economy went into a recession that was sparked by bank failure."

Yes.

But we were in a bad shape anyway during what should have been the good years.

But the point is that to say "we have thus had to cut services to find the money to pay for the funding" is untrue. That huge deficit isn't due to us borrowing money to bail out the banks, it's just due to us overspending. We started off overspending so hitting a time of trouble will then just make the monumentally worse, which is exactly what has happened.

Blaming the bankers for the recession is fair.

Blaming them for the size of the deficit is unfair as it was big already and Government spending was already outstripping it's income.

Even if the bank crash hadn't have happened we'd have had to have tackled that deficit eventually. Recessions do happen, it's part of the cycle, and the deficit was unsustainable before we went into this most recent one.

Some people are just ignorant on this issue. Bonuses are not a gift, they are part of the compensation package. Your base salary is usually the bare minimum and the rest is your bonus. Obviously, the aim is to make you work harder, so you get a proportion of the money you make for the bank.

When teachers make a hundred million for their employers, they can probably ask for half a million in bonus.

If all bonuses were outlawed tomorrow, base salaries would increase tenfold, and high earners would have less incentive to work hard. That is not a good thing.

Oh and I meant to say that a fiscally responsible Government would have made sure that we were living well within our means and getting reserves ready during the good years so that when the bad years hit you can sustain the level of public spending to which you have become accustomed.

I'm having financially tight times now, but when I was doing better I made plans and did what I could. If I'd lived right on the edge during the good years and only got by by hitting the credit cards to pay my bills each month then whose fault would it be if I couldn't cope now? Would it be those who have contributed towards my situation? Or would it be my fault for not planning and managing better?

Excellent posts slhilly, please run for government!

CoteDAzur. A very good point.

Clearly, banks could decide to change the base salary for the following year to incorporate the bonus from the prior year.

So rather than £1mm total comp package made up of £200k salary and £800k bonus for 2010, the individual would get £200k salary for 2010 and £1mm salary for 2011 (£200k+£800k). You're just amortizing the salary into twelve payments. No more "bonuses". Easy.

Banks are clearly moiving in that direction. That's why an ED salaries has moved from £100k to £200-500k.

Riven - that is stupid it would be the person who invented a cure for cancer that would be directly responsible and therefore should receive a huge bonus not the teacher who taught the student at some point in their life.

Event he banks that have received government money only have it way of an asset backed loan - they have not just given them a huge poit of money and when the financial sector improves they will get their money back ten fold and the best way for this to happen which the governemtn realises is to make sure they secure the best staff - the government also needs them and the other baks that have not received money to do a really good job as they raise a huge anmount of tax from them and their employees - we would be even worse off if they all left the country.

And the stupid - they look after their own excuse is really rather moote if you have ever met a group of bankers - I have worked for numerous banks and I would say 5% of the bankers who receive huge salaries and bonuses who I have met are private school educated and upper class - the rest are comp school boys/girls who have worked their arses off.

Stinbks of jealousy this whole arguement to me.

And remember trickle down, bet there are lots of mumsnetters who have husbands who get laods of work around bonus time - imagine how bad it would be for all those self employed builders/plumbers/electricians if the bonus money disappeared from the economy? Bankers dont; just buy yachts and porsches - although that does benefit the sunseeker salemen and their wives and builders etc.

Become a banker if you want a similar salary and bonus. Some people in this life has lots and others have nothing, that is life.
In the end we all leave with nothing apart from our souls and they can't spend money.

You have to be lacking morals to be a banker and accepting HUGE bonuses, it's just plain sick!

"When teachers make a hundred million for their employers, they can probably ask for half a million in bonus."

What if this teacher recklessly lost a hundred million £ of their employers money. Would they still get their half million bonus like the bankers do?

lifeincrimbo - do you know any bankers who lost that much and still got a bonus or do you read the daily mail?

Ripeberry - lacking morals is a pretty harsh judgement to level at a huge swathe of people just because they do a certain job?

The examples you see in the mail and on the telly are few and far between - most bankers are ordinary people who do not get millions or lose millions.