Bonuses for bankers

Easy Livin wrote: But imagine the situation if they had not been bailed out. If a bank such as RBS/NATWest or HBOS/Lloyds/TSB had been allowed to fail, everyone in the country would have suffered. Bear in mind what happens when a company goes bust. Those with deposits in the bank could potentially have lost their money, those borrowing money would have found their loans and mortgages being called up. Wages could not be paid as the payment system could not operate properly. And it would not have been just the bank going bust that would have suffered. The whole banking system nationally and potentially internationally would have been at threat. It's a real house of cards situation.  Like them or loathe them (and who actually likes them!?) banks are a cornerstone of our society. What is needed is tighter regulation of speculative activities (including commodities trading) globally.

But imagine the situation if they had not been bailed out. If a bank such as RBS/NATWest or HBOS/Lloyds/TSB had been allowed to fail, everyone in the country would have suffered. Bear in mind what happens when a company goes bust. Those with deposits in the bank could potentially have lost their money, those borrowing money would have found their loans and mortgages being called up. Wages could not be paid as the payment system could not operate properly. And it would not have been just the bank going bust that would have suffered. The whole banking system nationally and potentially internationally would have been at threat. It's a real house of cards situation. 

I challenge the premise of the question.

It's not for me to decide how much bankers should make just like it's not for me to decide how much hot dog vendors or florists or manicurists make. They should make whatever people are willing to pay them.

What I do object to is banks getting bailed out by the government because they are "too big to fail". I imagine bonuses would go down a bit if bankers knew that they would have to suffer the consequences of their business decisions.

Easy Livin wrote: Sorry, I still think there is a lot of misinformation here. I think it's convenient to jump on a bandwagon to criticise  the "system" without accepting responsibility for it. As I explained previously, bonuses are the "at risk" portion of a person's salary. If you simply paid them the higher salary without any incentive to earn it, would that really be better? A company may be making loses and still need to pay contractual bonuses (to current and former employees). The fact is that if they have met or exceeded the targets they were set to generate in terms of income for the company, they get the contractually agreed bonus. Those who failed and caused the loses don't. As I also explained, sometimes reducing losses is actually meeting an agreed target. That is the real world. Oh and as for blaming the government. Lets remember that the government is a reflection of the people. The party in power got the most votes and were democratically elected by you and me. The "I didn't vote for them" excuse doesn't wash as the problem emanate from all sides. If you didn't vote at all but could have, you are even more culpable. If you think you could do better, stand for election and persuade the electorate that your way is better. As I probably have already said too often, I don't seek to condone or justify the way things are, but I do get irritated by those who seek to blame others for the issues without accepting their own share of the responsibility.

Probably worth remembering that all the main parties on the ballot paper are supporters of the system, so the electorate has little choice. They could of course form their own political parties and challenge the status quo. How successful do you think that would be?

Well said, Bob

Sorry, I still think there is a lot of misinformation here. I think it's convenient to jump on a bandwagon to criticise  the "system" without accepting responsibility for it. As I explained previously, bonuses are the "at risk" portion of a person's salary. If you simply paid them the higher salary without any incentive to earn it, would that really be better? A company may be making loses and still need to pay contractual bonuses (to current and former employees). The fact is that if they have met or exceeded the targets they were set to generate in terms of income for the company, they get the contractually agreed bonus. Those who failed and caused the loses don't. As I also explained, sometimes reducing losses is actually meeting an agreed target. That is the real world.

I don't know about hung as I do not really believe in the death penalty, but they should be forced to work the rest of their lives digging ditches or flipping burgers for sub-minimum wage.  I think $2.00/hour sounds about right.  And obviously, they should be stripped of their wealth.

Easy Livin wrote: There's a great lack of understanding or heads in the sand here about how things actually work. As I've said before, I don't seek to justify the way things are, but let's live in the real world. I notice too that no one has refuted the notion that it is our own greed that is at the root of the issue.

Edited by rogerthat - March 05 2013 at 10:30

With the greatest of respect to EL, this situation is actually fairly clear cut, and it is you who appears not to understand how things work.

Bonuses are often paid to traders even when their respective banks are showing losses, and in some cases ahave been bailed out and even put at least in part, in public ownership. It wouldn't be acceptable in any other private sector areas ( andcertainly not the public sector) to pay out millions in bonuses when the business is going down the swannie. It is morally repugnant to raid the public public purse to bail out private corporations only for those corporations to be - in some cases - exempt from corporation tax and to be awarding their crooked staff vast amounts of money for gambling.

Re; "What is the point of bank trader who can't trade? Who says they can't trade? The issue is what they are trading and the level of risk ascociated to the investment, not to mention the moral arguments of trading food stocks, among other commodities, as derivatives; deliberately and irresponsibily inflating huge debt bubbles to make a fast buck, knowing full well that bubbles burst and it is then the rest of us who pay the price. The banks have been able to do this with impunity because there has always been the promise of government bail outs. If this promise was removed the trading would not be so reckless. It may be less profitable in the short term, but it would likely be more stable in the long term. I fail to hear any coherant arguments as to why the fabric of our civilization should be in the hands of five or six mega banks. No one seems bothered by this. they either invest their energies in berating the poor for drawing benefits, or the middle class for having the audacity to own a house. People need to wake the f*** up!

Re; our own greed. Is this the greed that has been agressively encouraged by successive governments? It's easy to say people have minds of their own and should be capable of making the decision to avoid debt without help, but the problem is most don't and consequently can't. If you take a single parent on benefits, who can't afford to buy new clothes for their child, and you give them a credit card, what do you think they're going to do? Cut it up and throw it away? No, they're going to do what every good parent tries to do, and privide for their child. Over the last 20 years the benefit class has been able to borrow through banks and credit card companies. Government has not intervened to discourage or even educate about rhe conseqeunces of debt, because they know that living on the never never creates an illusion of wealth which can score electoral points for them. The psychology of debt is well understood by lenders and politicians alike and is exploited fully.

Edited by Blacksword - March 05 2013 at 07:00

The assumption that people get bonuses for not performing is quite laughable. These organisations may be ethically challenged, but they do not just give their money away out of charity. Bonuses are usually based on meeting and exceeding pre-set targets. In the case of a company that is on the ropes, the bonus might be payable if the incoming staff appointed to turn it around can initially get the losses down to a manageable level. There's no magic wand for turning the company around, so you have to offer incentives to get the people in who can do the job.