Bankers going to get their bonuses anyway

[jujumaman]

here

I don't know what to think about this.

We have a friend who works at another bank that has been bailed out by a foreign govt. He was telling us this weekend that he's planning to sue because he may not get his promised bonus of £2m or so, and will "only" end up with his salary which is prob around 250k

I know bonuses are intrinsic to banks' cultures but how - in these god awful times - can £2m bonuses be justified. My friend says his was the only division of his bank which made money last year, so why should he be penalised for others' faults? My feeling is every taxpayer is being penalised for others' faults and someone who is still earning an excellent salary should graciously accept it and be grateful he still has a well-paid job. But my dh tells me I'm being naive and that bankers will carry on getting these vast bonuses just as before. Not convinced by arguments in article I've linked to. Anyone with more knowledge of the city than me like to defend my friend's position (I v much like him personally.

Just ploughed through the first few pages of that article - are we really blaming the policy to help minimum-wage and welfare families in the poorest suburbs into home ownership for the credit crunch and not the mortgage-pushing crooks who sold them the lie that it was attainable? One commentator in an article I read about it said (and I paraphrase, I can't find the link) that the banks knew that there would be massive defaults but reckoned that as this could be offset by price rises. Obviously they got that calculation badly wrong...

I've got to come back to this as I haven't got the time to read it all now because I'm suppose to be doing house work! Very interesting.
Investment bankers and hedge funds are gamblers, with other peoples money.
What really, really shock me how many of the top people are not qualified in their profession The top brass at RBS (sorry, don't have time to find his name)admitted he is not a qualified banker
Now, I'm a cautious bird I'm 9 years away from retiring, I have endowment policies that I know will not pay the whole mortgage. I have a 4 year old DS that will need looking after.
I have savings but with no interest on them now!
Will the bankers have stolen my hard earned pension? Where do I go to collect the evidence?
Teenage muggers go to Feltham for doing far less!

Starbear, we are regularly told how intelligent as well as these gamblers are and if we don't pay them these generous salaries, then they will take their indispensable and unique talent elsewhere..

Lalalonglegs, the mortgage pushing crooks are talented individuals who walk on water and should be revered and rewarded accordingly.

Chris Martenson's "End of Money" - interesting site if you have time

Squiffy, I think your posts are very good, and very interesting - thanks.

It's not the banks that killed the economy - they just provided the rope for the country to hang itself on. IMO the fault lies with the generation of politicians who had self-interested motives for not controlling the housing bubble.

The bankers were guilty of getting on the bandwagon - joining in the feeding frenzy that launched a thousand channel 4 home improvement shows.

The big issue with the bonuses is how they are distributed within banks. They are hugely skewed toward those that 'generate revenue'. The guys whos job it was to 'generate revenue' did that just fine - but there were too few well paid influential people within banks whos job it was to look at the bigger picture, assess risks, manage the long term.

However, to have prevented the sharp economic contraction that we're experiencing, what it really needed was for someone to stand up and say 'STOP BUYING HOUSES - THEY ARE ALL OVERVALUED - THE EMPEROR HAS NO CLOTHES' . I think it would have looked mighty odd for the head of Lehman to be crusading on that message - and refusing to provide further credit or deal with credit-linked products would have been competitive suicide.

Squiffy, your posts are great - thankyou. My DH works at RBS (had nothing whatsoever to do with what went wrong and continues to generate a lot of money for the bank). If he gets no bonus then he's off. Why on earth would he do anything else? Base salaries are not sufficient to live on in London and are a fraction of what other people of his ability in other professions earn.

Taxpayers will never get their money back from RBS without talented people.

FWIW, I have gone through the two articles DaddyJ has linked to and - as uncomfortable as it is to admit it - I do think they are incredibly well written and knowledgeable, even if they do put the knife into my own industry.

The fact remains that - however it was we got here - the key question is how to go forward. And you can't even begin to map that out without some of the (wholly unconnected) good people still working in the industry. There is going to be a huge huge task pulling ourselves out of this. Last time it took the second world war to finally snap the world out of the effects of the depression, this time my guess is the whole world will have to actively encourage the almost uncontrollable deveil that is rampant inflation to correct what has gone wrong.

And - I stress again - I find the £10m bonuses pretty difficult to justify too, but there are a thousand 'normal salary level' people in the industry for each one of these multi-millionaires. And there are simply not many of those people around who will continue to work in this industry for less than they would get somewhere else (for less stress), and I certainly doubt that I personally will stay for long in an industry where my marginal income is £10 a day, which is what I get from my basic once I have paid my extended hour childcare and my commute costs (and before contributing to the family mortgage, household costs and so on). I can get around half of that on job seekers allowance. Would you do it for £10 a day after costs? Would anyone? No. That is why bonuses are integral to the compensation of staff in the industry. I would love for it to be otherwise (because it is not nice when you never know from one year to the next whether you will be rewarded for the work you have done), but unless the basic salary is lifted to the same as in industry and the professions, then you are going to need bonuses to make up the differential.

I don't buy the idea promulgated by the Spectator (and another couple of fairly right wing commentators) that the Clinton democrats were to blame. The central idea behind that argument is that the Clinton democrats forced banks to lend to people they would not otherwise have lent to.

The reality is that the banks were lending to anyone. Willingly and enthusiastically. The size of the problem is far greater than those people in social housing who got mortgages.

Totally agree Squiffy, the £10m bonuses (and £1m for that matter) are just an irrelevance to 99.9% of people in the industry.

lalalonglegs - re "rather than sit there sneering at those of us who never would have made it in the big, ballsy, super-intelligent world of finance"

If you actually read anything I wrote, you would know that I have been saying quite the opposite - that pretty much anyone could have "made it" in finance if only they passed the same exams and then worked as hard.

But no need to let reality come between you and a good rant, of course

DaddyJ - When I told you about deregulation of the credit derivatives in the US and its effect on the industry on another thread, that wasn't my "belief". It wasn't a made up story so there was nothing to "change", either.

Taxpayers will never get their money back from RBS

Is alot more accurate.

The fact is that the banks are contractually obliged to pay these people whatever we think of them but had they been allowed to go bust then there would be no contracts

Blaming the credit crisis on a requirement to help poor people to buy a house is akin to blaming the size of our tax bill on those who claim benefits.

It is always the poor person who is at a fault, never the rich.

I don't have an issue with counter staff getting a bonus. But today in the paper, it suggested that bonuses should be capped at 25k. Don't tell me counter staff earn that as a bonus - that's bollocks.

And it isn't true that all the people who have been instrumental in the banking crisis have gone. Not at all

Taxpayers certainly won't ever get their money back from RBS if they don't provide an incentive for staff to stay.

I don't understand all those saying that RBS employees shouldn't get bonuses because if they hadn't got bailed out, they wouldn't have a job. We are where we are and we need to rebuild the bank into a viable institution. The people responsible for the mess at RBS are long gone and existing staff need some incentive to stay. Why on earth would anyone continue to do a job for 30% of the going rate?

As it happens, Lehman was allowed to fail and almost all the Lehman European staff were then taken on by Nomura. As an incentive they were given 2 year guaranteed bonuses by Nomura in recognition that there were some very talented people who had the ability to generate profits. That way, the viable parts of the Lehman business will survive rather than disappear.

spokette Bravo! The arrogance of the wealthy gets me. Most of them are Robber Barons and actually beleive they are better morally than the poor! They just have the law written in their favour.

They shouldn't have a job, they failed, end of.
If I run a shop and electrical's are doing well but bedding isn't and the shop closes, nobody gets paid full stop, it doesn't matter if some parts are profitable, over all they aren't, therefore no bonus. It really isn't hard to understand. Very hard to justify.

Who are they who "failed"?

The entire banking industry, from the customer representative of a commercial bank to the assistant analyst of a private equity fund?

Do you realize how many people you are talking about?

Do you really think they all failed in some way?

Do you realise how many other staff there are in every industry who could claim the same thing, it wasn't are fault, the accountants made decisions, I did my job etc etc, who cares ????
Are we going to bail out the retail sector, the construction industry, the hospitality industry, after all Louise in customer service at M&S Harrogate didn't do anything wrong.

Sorrento, doesn't it depend on what taxpayers want to achieve? If they want to rebuild the bank into a viable, profitable institution then presumably they need staff to do that. Clearly staff are not going to work for 30% of their going rate as they are not a charity and have families to support.

Alternatively, if the taxpayers want to retain the bank in public ownership and have it never return to profit then I guess punishing staff is indeed a good strategy.

• our obviously

and who is expecting Louise in Harrogate to stay on and do her job for 30% of the pay?

They would work for 30% of their going rate if that was all that was on offer, that or the dole que.

But it isn't all that's on offer to anyone who is any good. That's the point. My DH works for RBS and has had 4 job offers in the last 3 months. I think I'm finally winning in my efforts to get him to move as I think his loyalty is entirely misguided.