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?

good post smallwhitecat

There are several questions really.

1. Should a shareholder owned corporation be able to renumerate as it sees fit.

I think, if you believe in capitalism at all, the answer to this is yes. If shareholders are stupid enough to allow the employees to take all the cash, then more fool them. That is, in effect, what has happened to the banks.

I think that there is a HUGE question as to the moral (and possibly legal) liability of fund managers during the banking crisis. After all, in the RBS takeover of ABN, 90%+ of individual shareholders voted against but it went through easily being pushed by the institutions. Why? Are the institutions (managing our money) really trying to maximise returns for investors or are they overly influenced by the banks/stock brokers who service them via soft incentives?

1. Are the banks shareholder owned corporations in the normal sense of the word.

I would have said before the global bail out, pretty much yes. Now, not so much. They have taken government money and there is a price for that. In addition, until they can fail like any normal company, the government can rightly take an interest in remuneration. All of which is an argument for "the talent" to move to hedge funds where they can be paid whatever in return for performance and the banks to get back to good old fashioned banking.

WE certainly can't have in the UK pay caps which are not agreed internationally or the UK will suffer.

I am old enough to remember when our top rate of tax was 99%. That was confiscatory. My father who only worked for teh NHS at one point was paying 66% income tax and another 15% on top of that for investment income on his modest savings. That just doesn't work, taking people's pay away. It simply damaged the UK.

People who want higher taxes and less difference between rich and poor can always emigrate to bits of Scandinavia if they'd like to up their tax rate.

The Government will get back more than it put in for the bail out so I'm not sure that that's been a bad deal for tax payers and some like Barclays went to sovereign wealth funds for the help instead.

"The Government will get back more than it put in for the bail out so I'm not sure that that's been a bad deal for tax payers and some like Barclays went to sovereign wealth funds for the help instead."

Seriously, Xenia, that is ignorant rubbish. ALL THE BANKS would have gone down without the bailout. There would have been a run on the banks. In addition, the banks had (and still have) so many liabilities with one another that they would all have gone down together. And you have not even considered the exceptional repo facilities offered by the BOE against distinctly dodgy assets, which was used extensively by Barclays.

The government may or may not get back more than they put in. At the moment, they are down on the RBS trade.

I don't think the government should legislate compensation but, as a shareholder, they should certainly control it in the nationalised banks, regardless of the potential "loss of talent". As to the other banks, making them take substantial reserves against risk will make them focus on traditional banking and that will never be profitable enough to maintain current compensation levels.

swc - they are papers that deal with the specific issue of bonus cultures and whether or not they are a required part of incentivising people to work. They are not. The banks don't need to pay out these bonuses despite the protestations about talent moving on etc etc if they don't. It is another factor in arguing about why the bonuses should not be paid out. On top of all the other reasons that have been cited on the thread, I haven't heard one good reason as to why they should be getting outrageous bonuses.

Nicholas Nassim Taleb's paper about What Caused the Crisis is brilliant, although I confess I don't actually quite understand it all. about half way down the first page called Technical Paper

smallwhitecat - ladyblablah has made some excellent points that seem to surprise you, so she has given you evidence - some of the published research so that you (and anyone else) can read up on it and become better informed.

And she backs up her points with research. It would be good if you (and all posters) could back up your claims, rather than spouting off the top of your head.

I'm on SWC's side of the argument but actually the EU's recently updated CRD that covers remuneration and which the FSA had to adopt for the UK does say that the pay restrictions are designed to curb excessive risk taking that contributed to the crisis ...

IMO, it's one small piece of a much larger puzzle but you could also argue that the actions of a small group of senior managers and execs at investment banks, insurers, etc. were incentivised to massively expand in lucrative and risky businesses that fueled subprime lending and the like - though most of them legitimately didn't see just how risky they were at the time.

I just find it distasteful and counterproductive to brand all bankers as the bad guys, when only 2 UK banks took state aid (ex. Northern Rock and Bradford & Bingley rump), and to introduce some sort of moral argument against high pay when plenty of other industries have it too.

"I'm on SWC's side of the argument but actually the EU's recently updated CRD that covers remuneration and which the FSA had to adopt for the UK does say that the pay restrictions are designed to curb excessive risk taking that contributed to the crisis ..."

That is interesting. They do know after all.

I have a problem with wealth distribution in this country fullstop, not just with the bankers, although they are a particularly easy example and more prolific because of the harm they cause due to their reckless behaviour. However, I also have a problem with a sales person earning over £1m for selling a bit of connectivity, a footballer earning £100,000 a week, a utilities boss earning £ 2m with bonuses to boot. I agree that there needs to be rewards for 'success', but there also needs to be some re-booting (Beta, 2011) and salaries need to be re-aligned with reality and spread more evenly.

Anyone who has ever watched Back to the Floor, Undercover Boss or Secret Millionaire can get a very basic picture of how horrific inequality is in reality.

LadyB, why do you have problems with it? Why does it matter to you what other people earn> It doesn't harm you. It doesn't stop you having enough food to eat.

To all those saying it's 'impossible' to cap bankers' wages without wide international agreement to do the same, I have only one word to say to you:

Ireland.

They did it and it can be done. We demand all the taxpayers' cash back NOW - they either pay up and pay whatever bonuses they like (but ooops...they can't pay any, as they're now bust), or they put up, pay whatever we tell them to pay, and shut the fuck up.

I know your question was addressed to LadyB but I want to tell you why it matters to me. I think the distribution of wealth in this country is a major problem for society and community. No, the fact that some earn millions doesn't stop me having enough to eat, but I don't see any justification for a tiny proportion of the working population getting millions while others who work at the other end of the income scale have to be assisted with tax credits. What would be wrong with spreading it about a bit more, giving a little more to the people at the bottom and a little less to the people at the top? And no, I'm not advocating some kind of system where everyone earns the same and we all live in communes.

It's nothing to do with jealousy (as some of your earlier posts have implied) just a wish for a more equitable society (perhaps of the type espoused by Wilkinson and Pickett in 'The Spirit Level').

Sorry that post was specifically in response to Xenia...

granted- The banks that we gave assistance to we took equity in return, demanding the money back from them would mean that money would be being transferred within Government as well putting the banks out of business and the Government would make an enormous loss. We could of course have used our influence as major shareholders in the nationalised banks to limit the bonuses they pay out further but neither the outgoing Labour Government or the Coalition thought it was a good idea to micro-manage the nationalised banks.

Woolyideas- I think the problem is the numbers at each end of the scale.

There are very very few "mega rich" people in the UK

Based on PAYE records* only 10% of people in the Uk earn more than £40k and less than 1% earn over £100k. I would guess that the % earning over £1million is less than 0.1%.

So even if we taxed income at (say) £1 million at a punitive rate (90%), the tax raised really wouldn't do much for the 90% earning less than £40k.

• this excludes self employed people, but there's no reason to think that the self employed have a significantly different income structure.

Thank you, wi. I think we need to get into why people don't want others to earn a lot more to work out the issues here. It doesn't bother me if people earn 10x or much more what I do. Now is that because I earn mroe than most anyway? But if that were so then someone on UK state benefits would feel fine because people in Africa starve and think a UK life on £60 a week is a life in clover?

There are definitely studies about comparative income and happiness. People are happier if their pay goes up to £20k if no one if others go up less. They woudl rather go up to £30k than £50k if others go up to £100k.

So really it's the sense of fairness thing that is your reason. Why should Mrs A get up at 4am to talk to the bus stop (tubes cost too much) to start her 2 cleaning jobs for £5.80 an hour when Mrs B does nothing on benefits or Mrs Xenia swans out of bed and earns x times the minimum wage? But it's as unjust that I might be reasonably pretty and some or not or that I was born with a higher IQ or into comfortable circumstances or a not disabled. In other words life is full of unfairnessness.

If the result of bankers and even me earning a lot is that the poor have more (our taxes pay etc) then in reality our pay benefits (depending on your view of the trickldown effect and even if you think nothing trickles down our taxes do help pay for the tax credits of mumsnet posters which I have never received because I earn too much and the like).

I don't agree with the need or desirability of harmonsining out through tax or wage restraints people's pay. I think we are a species which survived through survival of the fittest. I eat what I kill. If I don't hunt well we comparatively anyway starve and that is how mankind and womankind are made and thus inequalities don't cause me problems or angst as long as we feed and house the poor (as we mostly do).

I think saying only two banks took state aid underplays it rather. The entire banking system was bailed out by the taxpayer with the Bank of England printing money and the state effectively guaranteeing all bank deposits.

Banks are not operating as commercial enterprises that succeed if they do well and fail if they fuck up. Investors and shareholders are not risking their own money at all - they are risking ours.

An industry that brought the world economy to the brink of collapse - we came within an ace of the cash machines being empty and credit and debit cards being useless - is in need of drastic reform.

That reform hasn't happened - quite the reverse. It's back to normal business with fat cats getting fat and politicians colluding, only this time very obviously at everyone elses' expense. And bank chiefs telling our elected representatives 'we aren't even going to pretend to be sorry any more'.

The government needs to reform the economy and reverse the policies of the past three decades that skewed everything in favour of financial services while starving manufacturing. Our dear leaders allowed banking to become dominant. That's not good for the economy or for society. Especially as there has been scandal after scandal in financial services, with ordinary people ripped off over pensions, endowment mortgages, payment protection insurance and plenty of other scams too.

edam - agreed. They were all bailed out and still are being bailed out behind the scenes with buckets of taxpayer cash.

Totally disingenuous arguements are being put forward by bank Boards all aimed at one thing - allowing the gravy train of bonuses to start up again while the taxpayer is stil on the hook for the mess that has not yet been properly cleared up.

Xenia: "I eat what I kill"

I am now thinking of adopting this as my personal catchphrase to frighten people at work

Yes, I go out in a leopard skin bikini with a spear every day.

Most of these bonuses will see 60%+ coming back in tax (and these people are least likely to use state services with private healthcare, education coming out of their ears). If you limit the banks with significant state holdings to paying significantly less than market, the good people will go elsewhere, those banks will not be able to compete, and the state will not make its money back. I think these banks will turn out to be a decent investment when there is an upswing - and we will only really benefit from that upswing if London remains the competitive international financial centre that it is.

We will certainly get our money back and some on the banks we bailed out as long as we don't kill the goose which lays the golden eggs. It's a hard path for Cameron to walk thtough as there is a huge groundswell of public opinion against high pay at the moment. It seems to have been diverted pretty nicely on to footballers today in the Sunday Times though so that might help.

Yes. But will we move bank? I fear that direct action like this will only happen in meaningful numbers when more individuals begin to really feel the pain of the credit crunch and cuts. Give it time.

And, as to capping of salary issue. The point is that the bankers got us into this mess, but most have not actually felt any pain at all. Salaries were raised for many and then they got big bonuses on top.
Bankers threatneing to go abroad if they are penalised is hot air. They won't. Will Hutton said on BBC News that it is a lie that needs to be nailed. I agree. They don't want to go to Germany or France (Eurozone issues as well as penalty issues) , China doesn't want or need them,Japan similarly doesn't want to touch them with a baregepole. They could go to New York, but America has already taken actions that are more punitive than here. The issue is that the banks will need to be in a country that can afford to bail them out when they next go under. The idea being that they can take as many risks as they like, but they will always be bailed out. However, they may be to big to save next time. In fact, no country will be able to afford the next major bailout.

I must say that I totally disagree with the commentator who seems to think we can do nothing and why should we care? HYer facts are wrong. Re,e,ber - Northern Rock was also bailed out. The impact of the behaviour of the large banks, and their stupidity, has also spread to every bank in the UK. Low interest rates for savers is one outcome. Barclays said it received nothing but actually it received $7 billion from the bailout of AIG (who insured against derivative losses). The story is not over yet by any means because a lot of the derivatives that lie off balance sheet are not due to mature for a while. When they do and are found to be worth next to nothing, there will be another crisis. It is likely the crisis in the Eurozone will happen first. Hold onto your hats ladies.

Forgot to say : Another good book to read about the credit crunch causes is by John Lanchester and is called 'Whoops' (with a long subtitle) available in paperback from Amazon. I have read it twice and it is really a great book written by someone who understands the layperson's need to get a grip on complex issues. Warning- it could make you even more angry with bankers.

See comment about why banks have no capacity or willingness to move elsewhere -it is all hot air.