God stand up for bankers

James

Contrasted with Edwin Lane's much more measured reporting:

http://news.bbc.co.uk/1/hi/business/8528268.stm

Chuck Unsworth

The criminally insane Brown should have let RBS go to the wall - as many said at the time and continue to do so. And the same applies to Northern Crock.

Just one bank being allowed to collapse would have sharpened focus. Instead, we have that cretin Myners wandering around saying how wonderful it all is. We are in deepest ordure.

Arbitrageur

I am no longer in the City but have a vested interest (like all other taxpayers) in our investment in RBS doing well. Whilst it may seem inequitable and counter-intuitive to award bonuses when the bank is making losses there are sound commercial reasons for doing so. First, it does make sense to reward those who have performed well and generated profits so they continue to do so; second, the bonus structure, properly implemented, is the best structure for an Investment Bank, the idea being to have low salaries (cost base) to be topped up by a (performance) bonus. This latter point is subject to two caveats; first, the profits on which the bonus is based must be real and not subject to any contingent claim which could reduce them and second, more difficult point, is that there must be adequate risk controls both internally (otherwise it is a one-way bet for the banker) and externally, by appropriate regulation. Needless to say both of these went missing in the last crisis. The alternative is the George Soros approach, namely to require banks to hive-off the riskier activities (where the bank is taking principal/proprietary positions) to hedge funds where the employees and investors risk their own capital. This has much to recommend it but won't help the taxpayer make a profit on their investment.

Blofeld's Cat

5-6 years ago, a new framework for paying GPs was agreed; in part to address a recruitment problem and also to introduce a significant element of performance related pay. This has cost an estimated £700 million over 5 years for the nation's 30,000 GPs (who have since been subjected to an insidious and constant barrage of criticism from the media and the politicians that set the system up).

Is there a recruitment problem in the investment banks that requires £1.2 billion to address this year?

stephen

Why did we pay so much for what obviously[then and not with hindsight] was a bust bank; a single £1 was better value. NuLabour and Lord Myners are a load of goons

Fearless Frank

Shakespeare observed in The Merchant of Venice that the quality of mercy ‘blesseth him that gives and him that takes’

It was also in the Merchant of Venice that (if I remember rightly) Antonio, having lost all his money on a failed venture, seeks a loan to chuck in the same direction.
To get it he had to strike a deal with Shylock.
So where is our pound of flesh?

Bunnykins

Stephen........maybe Lord Myners' donation to Gordon Brown's leadership campaign was worth a little more?

Number7

Crooks Muppets Equals Equals Bankers Government,.

Arrange these words and punctuation into a suitable statemant!!!!!

Victor Southern

The natural laws of commerce seem to have changed during my lifetime. If RBS loses £3.6 billion and pays out £1.3 billion in bonuses where does the bonus money come from? It diminishes equity and that means the taxpayer is paying out those bonuses.

The bonuses will bear a penalty tax of £800-million at 50% and that too is notional money, diminishing our equity stake and transferring it to general Treasury funds.

This is some sort of insane party game designed to be played by guests who have consumed a little too much tipple.

Jimmy T

It's wrong (at best, it's misleading) to talk about 40% of our investment being wiped out. The £10bn loss comes off the whole equity base, not just the amount taxpayers put in.

In fact, since existing shareholders were so diluted by the taxpayer investment, you could say that we own 84% of the £80bn equity, or £67bn - a big gain on the £45bn we put in! Of course, the issue is that a pound of equity in this loss-making bank is currently worth far less.

AF

chuck,
If Northern Rock had been in leafy Woking and the like, this government would have let it go to the wall.

TomTom

RBS is a conglomerate. Why are we underwriting every business line in this disaster ? Retail deposits should have been insured for more than £2000 per account; but the trading desk should have been folded.

ABN-AMRO should have been spun out and Retail Banking and SME loans ring-fenced in NatWest which should have been spun out.

The fact is the country cannot afford RBS and Lloyds Shareholders cannot afford HBOS. The taxpayer simply cannot afford the NHS and RBS

London Calling

Jesus said that the money changers and those who exploited money were likened to a rich ruler, they find it hard to repent of their greed...

Hence no regulation for Banks and business as usual and astronomical high interest rates on borrowing ...Why should God stand up for the Bankers when the people are on their knee's?

Meanwhile Greek citizens are rioting on the streets to the chants of “Burn the Bankers” whilst Theodoros Pangalos, deputy prime minister, said Germany had no right to reproach Greece for anything after it devastated the country under the Nazi occupation, which left 300,000 dead. "They took away the gold that was in the Bank of Greece, and they never gave it back.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7309861/Greek-rescue-in-danger-as-deputy-prime-minister-attacks-Nazi-Germany.html

PayDirt

Why doesn't RBS make a lot more loans (NOT subprime though)? This will automatically "create" more "money" for itself.

Moraymint

Arbitrageur argues cogently for bonuses but, by and large, the argument applies to virtually any profit-making business.

The fundamental problem, however, is that banks don't create wealth; they churn it. The economic genius, Gordon Brown, fell for this one and confused wealth-churning with wealth-creation. His infantile understanding of economics led him to think that this state of affairs could go on forever. It was a wonderful way making society "fair"; anyone could be wealthy, largely without effort or risk. Marxism in action.

It turned out, not surprisingly, that you can only grow an economy on rampant private and public sector debt for a limited period before it implodes.

All the while, smart people like Arbitrageur take citizens and politicians for the mother of all rides, pocketing billions, before leaving the wreckage to us wealth-creating idiots.

People like me are now being milked dry - my business and my family really are running out of money with a vengeance - whilst the bankers continue to trouser billions.

The little wealth that I am now creating is being transferred by government decree from my business and family straight through to some bank and its employees. It's barmy.

This is not a sound way for running an economy.

It's a pity our political class continues to fail dismally to comprehend the separate but related concepts of wealth creation and banking regulation. I once thought that the Tories understood this stuff, but the sad fact is that Cameron doesn't do numbers.

Occasional Ostrich

Fearless Frank
February 25th, 2010 4:13pm

So where is our pound of flESH?

It's standing in the lounge in No. 10 . . . if your gorge doesn't rise too much at the thought of it.

Dennis Churchill

Much can be explained about this and other ridiculous decisions if you consider the background of our political class since the second half of the 20th century.
No senior experience outside politics or the law. Former Student Activists who in past ages would have ended up in a dull job somewhere with very limited authority-- but now able to introduce hair brained policies that cost us all dear.
So you put these over promoted fifth rate types against the City Slickers who have clawed their way up and the result? We are lucky ministers didn’t agree to £6 billion.
Remember these are the people who could not predict that if you pay young women to have children and live off the State they will...

lola

Moraymint - well said and me too. My wealth creating business is being strangled by this madness and my family's needs drain me. I have subsidised my children (on modest earnings) by almost exactly the amount they pay each in month in tax. I could, today, employ one trainee and one extra fee earner, but the capital I need to do that is being sucked out of me by the bloody state. I have also refused to pay my self assessment tax bill - so far. Clearly this is a battle I will lose, but really, what else can one do.

What about picketing every state employee? Go to every school, hospital, tax office, quango, loacl council or whatever and picket the swine. Posters like 'help a taxpayer'. What a dream.

eeyore

May I make a request: when reporting these billions that Mr Brown is flinging about on our behalf, would you Speccie johnnies (and your fellow hacks on lesser publications) spell out what we are in for PER HEAD? The crude maths aren't difficult: knock off six noughts and divide by 50. Thus if £10bn of our loot has been trashed already, as you say, that works out at £200 each, for every man, woman and child, p*****d up against the wall. That in turn is two full working days for an average bloke. That, I humbly submit, is the REAL cost, in comprehensible terms.

PayDirt

The reason RBS don't make more loans (create money) is probably because its managers are scared shitless of too many not being paid back. There is in other words a complee lack of confidence in the economy. They would rather pay their "investment bankers" to play the casino. The role of the next Govt must be to lead a return in confidence that the UK can pay its way in the world.

JohnAnt

I'm genuinely puzzled by Hester's complaint that RBS has lost 'thousands' of employees who have resigned over the past year in disgust at the reduction in their bonuses.
Such a mass wave of employment movement suggests that a)global banking is expanding (contrary to all rumours), and
b) RBS bankers are their preferred recruits, and
c) RBS must itself now need to recruit 'thousands' of staff.
This is not the picture I've been getting from the financial press, or its recruitment ads.

Perhaps Hester should explain what keeps him at RBS, as he is forgoing his own bonus, but apparently not aggrieved about it.