What's all this government posturing on "spivs"?

Dithering_Dad

Generali wrote: »

The 'fault' for the bubble IMO lies in greed. Many individuals thought they could get rich by buying a flat, developers could get rich by building them, banks by financing them. If people weren't greedy and thought they could get something for nothing we wouldn't have bubbles.

"Greed is good" - Gordon Gekko.

"Marge, my friend, I haven't learned a thing" - Homer Simpson.

jamescredmond

lynzpower wrote: »

easy hate figure.

Totally lazy politics. Same as the "easy figure" of the singfle mother in the 80s really.

Such basic lazy behaviour, Stereotype waiting to be exploited.- naturally a figure the working man would be able to despise fairly easily. Anger in the populace directed to the convenient figure. Figure turns into a total parody whom has absorbed and moulded into a weird typo-person, that exists only in the media and not that regurly in real life.

As if by magic, the people can laden all the blame on the step of hate figure, and nothing at the government who allowed and colluded with this group to flourish.

lazy politics is right.

broon is simply engaged in 'blame deflection'.

if spivs were at the epicentre yesterday, then it follows they were present last yr/10yrs ago.

so the obvious question to broon is: why didn't you take action against this drooling minority long before now?

broon is indulging in cheap politics much in the same way the cons did through the 90's, taking credit and none of the responsibility.

truly depressing.

Sir_Humphrey

The problem with the bonuses is that it is an asymetric incentive. If bankers take other people's money, put it in risky but potentially lucrative trading positions and win, they win a 6-7 figure bonus.

If they lose, they do not have to pay the bank a 6-7 figure sum.

Therefore, it makes it all too rational on an individual level to take stupid risks as they are not the ones who suffer.

That is why bonuses are going to be regulated by the FSA. Even the Torygraph seems to be in favour of it.

Generali

Sir_Humphrey wrote: »

The problem with the bonuses is that it is an asymetric incentive. If bankers take other people's money, put it in risky but potentially lucrative trading positions and win, they win a 6-7 figure bonus.

If they lose, they do not have to pay the bank a 6-7 figure sum.

Therefore, it makes it all too rational on an individual level to take stupid risks as they are not the ones who suffer.

That is why bonuses are going to be regulated by the FSA. Even the Torygraph seems to be in favour of it.

Maybe Lehmans had the right attitude to bonuses - pay it in stock. Many people working there have lost 50% or more of their wealth as a result of the firm collapsing.

Sir_Humphrey

Generali wrote: »

Maybe Lehmans had the right attitude to bonuses - pay it in stock. Many people working there have lost 50% or more of their wealth as a result of the firm collapsing.

Paying in stock is probably better, but the bankers would not play the system expecting the company to collapse. They got their comeuppance to an extent (along with other innocent Lehmans employees) but the argument is about changing behaviour, not punishing it as such.

chewmylegoff

Generali wrote: »

Maybe Lehmans had the right attitude to bonuses - pay it in stock. Many people working there have lost 50% or more of their wealth as a result of the firm collapsing.

don't most of the banks pay a hefty % of bonuses in stock? i know someone who was getting 75% in stock working for a different bank. i just assumed they all got somewhere between 25%-75% in stock already.

Generali

Sir_Humphrey wrote: »

Paying in stock is probably better, but the bankers would not play the system expecting the company to collapse. They got their comeuppance to an extent (along with other innocent Lehmans employees) but the argument is about changing behaviour, not punishing it as such.

Warren Buffet has his executives hold the majority of their wealth in Berkshire Hathaway stock to align their interests with that of the shareholders. I think it's a good idea.

The crux of the FSA intervention appears to be that if the FSA deems the bonus structure to be conducive to excessive risk taking then they'll force the banks to hold more in their reserves.

The FSA found that NRK was funding themselves in a risky way and did not force them to increase the level of their reserves.

This smacks to me of Something Must Be Done rather than actually doing something.

Frankly it is hard to see what can be done about all this. Governments supposedly regulate the financial services industry but get it wrong constantly, probably because the financial services industry is so massively complex it's almost impossible to regulate in any detailed way. I guess the choices are:

-Force the industry to simplify. Impossible unless every country in the world agrees to sign up as otherwise banks can just shift stuff to countries where they are more lightly regulated.
-Have a 2 tier banking system with an arrangement of simple retail banks and high risk investment banks. You chose to be one or the other. Retail banks get, for example, deposit protection for their customers and perhaps a sort of detailed but simple form of regulation. Investment bank clients get little protection and there is less regulation beyond a requirement to hold xx% in reserves (in cash or local currency Government bonds only) and to be honest in their dealings.
-Pass the 'Bolting the Stable Door Act 2009' whereby previous failings are addressed allowing the banking industry to find new and exciting ways to balls it all up in future.

Oh, and don't get me started on the ratings agencies.....

My guess is option 3 will be picked.

Sir_Humphrey

Generali wrote: »

-Pass the 'Bolting the Stable Door Act 2009' whereby previous failings are addressed allowing the banking industry to find new and exciting ways to balls it all up in future.

It was quite possible after the Wall St Crash. It is about minimising the recklessness. You also ignore the political lobbying that allowed the loopholes to be put in place (repealing Glass Steagal was not just some "bright" idea that Clinton and Rubin had one morning).

If banks always balls up and cannot be prevented from ballsing up, you are basically admitting that capitalism does not and cannot work properly. Are you sure that is what you want to be saying?

Generali

Sir_Humphrey wrote: »

It was quite possible after the Wall St Crash. It is about minimising the recklessness. You also ignore the political lobbying that allowed the loopholes to be put in place (repealing Glass Steagal was not just some "bright" idea that Clinton and Rubin had one morning).

If banks always balls up and cannot be prevented from ballsing up, you are basically admitting that capitalism does not and cannot work properly. Are you sure that is what you want to be saying?

The banking system isn't about free market capitalism, it is corporatism - banks and governments between them ensure that it is almost impossible to set up a competing organisation allowing a cartel to remain in place.

I'm not sure where that second paragraph comes from. Wishful thinking perhaps!

neverdespairgirl

Sir_Humphrey wrote: »

If banks always balls up and cannot be prevented from ballsing up, you are basically admitting that capitalism does not and cannot work properly. Are you sure that is what you want to be saying?

That's human nature - there is no such thing as perfection. Capitalism might balls up frequently, but still be the least-worst option. Like democracy.