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.

Its hard to know who is capable of running the banks probably not the government, or civil servants. However, the bankers haven't proven themselves to be very competent either. Do you think RBS downfall is entirely down to fred the shred? If not then maybe others in the 20% you mention in your last thread aren't that competent either.

chocolate dot..if Obama is capping the bonuses at £350k then I was wrong to use him as an example!! Whoops!

I agree with you both that a middle ground needs to be found for the banking sector.

happywomble, I am glad we agree.

Part of the problem, which has been pointed out variously on this thread, is that bankers that messed up only work in very specific parts of the bank, namely all the executives at the helm who presided over risky lending policies and did not rein in excesses in the securitisation, credit default swaps and other derivatives, structured and collateralised debt obligation (CDO) activities and those engaged in those areas. I am probably even missing out or unfairly tarring some because I don't know enough.

But there are lots of other parts of a bank that still turn a very healthy profit. Could be retail banking, foreign exchange, private client, fund management, ... again, others know more than me.

I always find it difficult when bankers are described as 'they' because that is blurring the lines between the different parts of a bank and the very different types of business they are involved in.

Sometimes, 'they' is used in a way that encompasses even more than bankers and extends to hedge fund managers, regulators and financial advisors. The more the merrier and the bigger the target.

Any company that is involved in different types of business have its bad and good (you would hope) parts. When you buy this business, you want to ensure that the good part continues to churn the profits as you rehabilitate or sell off the bad.

It makes no commercial sense whatsoever to punish the good part for sins of the bad.

happywomble, just noticed your question about Fred the Shred.

His hostile takeover of ABN AMRO at an inflated price at the top of the market was part of now much criticised larger expansionist policy when he was chairman. In hindsight, it was a gross error of judgment on his part which buggered its balance sheet and left it vulnerable in such a swift downturn.

I don't recall reading about whether RBS made risky loans to sub-prime borrowers or actively participated in the structured markets and derivatives which led to a large amounts of bought a lot of sub-prime liabilities getting on their books. They are likely to have some but possibly not significant enough in themselves to bring down the bank. Or maybe they did but the media reporting concentrated on the ABN AMRO debacle?

There is a possibility that the bad eggs at RBS could be a lot more limited than seems.

Definitely ABN was the main cause. RBS had a bit of sub-prime but nothing which would have threatened their viability. It wasn't just buying ABN at an incredibly bad time, it was paying cash for it that was the problem. The other bidder, Barclays, was offering stock and so would have been ok even if they had won.

At the time a huge number of commentators and employees thought it was a totally insane thing to do given the state of the markets. I find it astonishing that the regulator let them proceed with a cash offer.

So I'm afraid in the case of RBS, the blame is very much with Fred the Shred and his spineless board.

Thank you both. Its all quite interesting and sounds as though Fred the Shred (I do like his nickname) got a bit carried away to say the least. Feel sorry for those under him who could see the folly of what he was doing and were unable to stop him.

In response to Chocolate's job about the more stressful public sector jobs, there's a lot of altruism at play there which is more important to some people's self-respect than pay packets, although reasonable pay is desirable, of course. You don't go into education or whatever for the money, but it is dispiriting to watch your salary and benefits wither on the vine in real terms so that others can reap apparently unjustified rewards. All people are asking for is proportionate salaries rather than the extreme polarisation that has occurred.

Another factor is that finance is seen as a rather a arrogant and self-serving, testosterone-fuelled sector, and many bright women in particular would rather die than put up with some of the more extreme nonsense that goes on in the sector.

Right, lets see you defend this particular merchant banker then
www.timesonline.co.uk/tol/news/uk/crime/article5717596.ece
The first of many from what I've heard, I hope none of you get a knock at the door at 3am and your husbands who are the hard working exceptions taken in for questioning.

Sorrento, this was clearly criminal, but you can't con an honest man so what did his investors think was happening?

What a meaningless post. It is like asking all those MN posters who happen to be nurses to compare themselves to Beverly Allitt.

Yes, but Squiffy, banker-bashing is possibly the new anti-Semitism as we morph into a 1930s rerun.

Sorrento, why would anyone want to defend Madoff, Fred or now this latest case? They will have their day in court.

No one on this thread has doubted there has been unbridled excesses in certain banking areas and most definitely cases of outright fraud since time immemorial.

It is perplexing that you think anyone married to a 'banker' fears a 3 am knock. Well no more than you, I guess. Does fraud not exist in your partner's area of work?

Bonuses are more often than not in 2 parts (well they are for the lowly workers)

First part is a profit share so if the whole company makes a profit then bonuses get paid, obviously no bonuses there.

Second part is a performance bonus based on an end of year rating. If you have exceeded all your job requirements and all your targets for the year then this is paid. Now if you are a teller in a bank and have exceeded all your targets and worked hard all year I can understand why you would still be expecting a bonus.

It truly sucks if you are in a part of a business that made money that you are made to suffer for decisions the board made but I suppose thats life and be thankful you still have a job

lots of people do work for companies where they have done well but the company overall hasn't had a good year. In many companies people just resign themselves to no bonus.

For some reason the bankers are unable to just be grateful to have a job and expect to have a bonus whether or not the company as a whole has done well.

I have been thinking about the situation at RBS. I think they should give bonuses in a years time to people who have stayed on and sorted the bank out. Otherwise people will just pocket their bonus this year then move off to other banks where they think they will have an easier time. Any bonuses this year should be given in company shares.

banker-bashing akin to anti-semitism? Get some perspective - bankers are the powerful, not the powerless! They are hardly being discrimated against, herded into ghettos, forced to wear yellow stars and sent to the gas chambers, FGS.

oops! discriminated

Can you really not con an honest person?

Lots of old people have people con their way into their houses on the basis of something like reading the meter and then nick their purses.

Are the old people dishonest?

That saying I'm sure was made up by a criminal!

Edam, sorry, I wasn't all that clear, I mean the period before the holocaust where it was considered acceptable to hold up isolated examples of Jewish bankers and so on and accuse them of bleeding the country dry and engaging in sharp practice, scapegoating them if you like.

I'm currently reading The Pity of it All by Amos Elon and it's on my mind a bit at the moment.

in some cases, a bonus is part of the contract.

Sorrento I think you need to get back on track. Lots of honest people get conned. Are greedy people more easily con? I believe the answer is yes. White collar workers rarely get a knock on the door. Police are busy with street crime and terrorism.
Can city folk hide their crime? again yes. Some financial practices are unfair but sadly not all are illegal. Maybe we the public do not ask enough questions of them. We also don't listen very closely to the answers and neither do the politicians who represent us

I really do not care what religon they claim to be, white, black, yellow or green but I would suggest some have sailed very close to the wind and will hopefully be called to account.

OK boffin but I still don't think you can justify claiming bankers are some persecuted minority. The victims of this crisis aren't the clever dicks with the million pound bonuses!

Boffin, I think you need to drop the religious aspect of your argument as there are no comparisons. I agree that those who have acted illegally should be called to account but, I doubt it. The police will have to hire financial experts to find the evidence. As you can see from this thread few will work for the Home Office without bonuses. If they did hire the experts, will the evidence be easily hidden or/and destroyed?

Just to add the investigation will cost thousands if not a couple of million! AND take a few years I bet.

I didn't really mean there to be a religious component - I am probably not being very clear here - I just meant that we are possibly scapegoating just one group of people when there may be a wider malaise. I am not sure at this stage whether this is the case. Loath as I am to defend greedy bankers (see previous posts) I am interested to know whether people think the rot spreads further than just the financial services industry.

Am I making sense now??

I don't think anybody believes this started and ends with the financial services industry at all.