Should bankers repay bonuses?

Cleaver

red_bertie wrote: »

I don't think any of us have an issue with those at the bottom end of the chain.

What's the difference between the bottom and the top? It's all just economies of scale, surely.

Sapphire

Cleaver wrote: »

That last line is so true, but it's also the complete backbone of most of the financial industry. Once we'd decided that we wanted to make money through financial services the whole ethos was to 'encourage individuals to take risks with other people's money for personal gain'. I may be simplifying things, but if we didn't have this aspect we may as way just have one national bank that loans money at 6% and pays 3% on savings and that's it.

I think you make your points very well Sapphire, but I don't agree with this. I'd say that the majority of private businesses pay some form of bonus to incentivise staff and as long as people have jobs, and we have money paying people, you'll have bonuses. If you banned bonuses in the financial services sector you'd just have successful companies giving share options, huge pensions or some other form of incentive to get the 'best' people.

I was certainly not part of the 'we' who decided that this country should make money solely through financial services (to the neglect of other sectors in which this country could have excelled). Neither is anyone I know.:cool:

I've worked in private business for a long time to senior managerial level. Yes, bonuses are sometimes paid in other sectors, but when this happens they are generally not more than a few thousand a year, so they don't encourage people to take stupid risks, and to be motivated solely by greed. I'm not against realistic bonuses of a few thousand pounds as a reward for exceptionally good performance that has helped a company's profitability. It's the obscene amounts that have been paid out to executives that have really angered me, as well as the vast amounts of money such executives have siphoned off from failed companies – to me these people are nothing more than crooks and should be jailed for many years.

Giving people the massive bonuses that seem to have become the norm in the financial sector for a great many people was also very bad for aspects of the economy such as house prices. Those who received high bonuses each year often spent them on property, as a consequence of which prices rose far too high, destabilizing the economy. This has had very negative consequences for us all (including people who have not succumbed to the general greed).

You state that if you banned bonuses 'in the financial services sector you'd just have successful companies giving share options, huge pensions or some other form of incentive to get the "best" people'. Well, perhaps incentives such as this (I mean if they are of the level common in the financial sector) should also be made illegal because they encourage corruption that is against the common good? After all, people in the financial sector never used to receive such high bonuses – and there certainly didn't seem to be a bonus 'culture' like there is now.

monkeyman1974

carolt wrote: »

Very interesting debate from Peston. Worth reading figures in first comment too, shocking:

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/02/should_bankers_repay_bonuses.html#commentsanchor

To save you reading the article, the gist of it is they should, and shouldn't get a penny more in bonuses.

maybe yes, probably yes for the more high profile chiefs who received payoffs

but in terms of perspective, and longer term damage to the future taxpayer, the public sector pension is much much more significant.

it is an investment as well as a bailout

i'm not sure what the outturn will be, but RBS and HBOS do look horrible, so I hope the select committee nail the individuals without killing the industry

baileysbattlebus

As long as I can remember there have been bonuses - well from the 1970's when American banks went from being partnerships to corporations and were floated on the market.

Until then a bank's partners were paid a percentage of pre tax profits - but they also had shared liability - if one screwed up they all suffered. That brake was removed once the majority of the bank's capital was owned by external share holders, and the deregulation of 1980's and 1990's helped things along further.

The "big bang" in London in 1986 saw the abolition of fixed commisions for trades. It also opened the doors to US brokerage houses who had a more aggressive attitude to risk and reward. When the Glass-Steagall act was repealed in the US in 1999 (commercial and investment banks could merge), suddenly investment bankers had huge balance sheets to play with. This coincided roughly with the "invention" of debt based derivatives.

And the rest as they say is history.

For quite a lot of senior people a good part of their bonus would have been paid in shares, because like house prices they almost always went up - most of the stock they hold will be pretty worthless now.

simon_templar_2

Should footballers who miss open goals pay their money back?