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So the board of RBS is dictating to a British Government and hence to the British people? Hmm, the last little corporal who tried that ended up in a bunker... and the one before that ended up on an island in the middle of the Atlantic... worrying about his wall-paper.

If the City had been in Paris I think the people of France would have long ago left the banking community in no doubt about their status within the country.

It is time that Darling got tough with these barrow-boys and sent round some of those nice men that we have in the intelligence community to have a word with the board of RBS and with any other banker who thinks that he or she can dictate to the country.

Let me guess, if we don't give them a big bag of cash they will go and live in Dubai!? LMAO!!!

there is no shortage of people to work in investment banking. put any ad up and you'll get hundreds of phds, mas and what not applying.

as long as merv does QE the bond market has been a one way bet. as has the interest rate market and usd and gbp devaluation. how many brains do you need for that. also 60% of the market is done by algos not humans.

if these people were SO smart why did the banking crash happen in the first place and when it did why are they not trillionaires.

basically they depend upon the public's or rather MP's ignorance for their the narrative of being 'indispensable' to work.

i'm sure you know the turtle experiment paul? where a guy took 20 people off the street gave them a strategy to trade the markets and proved any bozo could do it if they had the discipline.

for some reason it is still legal for anyone through a reckless system to bring the uk to its knees. the is no punishment if someone does this.
the bankers have destroyed factories and jobs and the living standard of the uk just as surely as any of mass bombing of cities by an enemy would have.

terrorists can only dream of giving the uk a near mortal blow as the bankers have done?

also the financial world in the uk is very much a club. everyone knows each other. they inter marry etc. if you were to make a list of all the names, the schools they went ot, the clubs they visit i think you would have a good idea of the inner empire that has brought this calamity upon ordinary people.

actually the bonuses are a symptom of the govt continuing failing to regulate.

Less of the barrow boys, thanks Tawse57, if you don't mind. Half my family were barrow boys and they were human beings, getting up before dawn, working hard and feeding the population. So - a somewhat irrelevant comparison with bankers.

Paul - lots of descriptions of what's happening here, there and everywhere, typical ³ÉÈËÂÛ̳ reporting, prepending its doing a serious, proper job when it isn't.

The key overview, absolutely key, is identifying and naming the government's unstinting privatisation/liberalisation agenda. Then people can see that it will let ANYTHING happen to this country and the people of this country, rather than deviate from that.

I bet you cannot show one example that deviates from this overview/analysis. Yet I have never even seen it named, once, in the media, including the pretentious media, that thinks it is, and is talking to, the intelligentsia.

Until it is named as such, people cannot start to assess it, address it, and to oppose it. Which is what we desperately need, in order to collectively formulate an alternative paradigm - for the economy, for the environment, for us, the people.

Sorry - equivalent of O-level only, this stuff. Can do better (maybe?)

Having had the misfortune to work in the City for 6 months with numerous bankers, who openly admitted they came from barrow boy backgrounds, I have no doubt that the country would have been better off if they had stayed flogging fruit & veg and dinner plate services than credit default swaps!

Dont underestimate the level credibility of the government riding on the bonus issue. If they fudge it they may have to kiss goodbye to even a hung parliament. The exceptional ease with which it appears that investment banking can generate profits suggests there is no effective competitive market operating. What other business can even contemplate paying £1M+ to 5000 employees? It does not seem to occur to Hasler et al to even attempt to justify in social terms these exorbitant payouts and what incentive is there for these pay millionaires to bother after just a few years of raking it in. Vince Cable says call their bluff - lets hear it for him!

So the bankers (who got us all in this mess) think they desrve a bonus because they made a profit. OK, let them have the bonus BUT use this formula: Profit Made - The money they got from the tax payer = What is left shared between every bank employee! A fair deal for all I say

This story gets more intriguing. The Treasury announced on 03 November that in consideration for the further recapitalisation and APS protection :-

"... executive members of both [ lloyds and RBS] boards have agreed to defer all bonuses payments due for 2009 until 2012, to ensure that their remuneration is better aligned with the long-term performance of their banks;"

Lord Myners didnt know what the fuss was about because the Board had signed up. You now say that there wasnt legal advice.....Bob Peston says Darling has taken power to authorise total amount and forms of bonuses.

Who's spinning who?

Paul

I cannot be alone in being confused by the contradictions in the arguments you put forward:

"Techncially, you need the investment bank whizz kids to be working inside the business even if its only to make sure the government does not end up sitting on this toxic debt pile"

versus

"RBS' GBM business does not make these high profits because of the skill of its investment bankers but because of QE and the Asset Protection Scheme."

If the second statement is true, any old fool (or at least someone willing to work for a huge, rather than obscene, salary) could make money.

This, I believe, is why there is so much panic about the bonus issue. If RBS GBM don't pay £million plus bonuses, and continue to make similar profits, then other banks might start doing the same thing.

Investment bankers, across the world, are running scared.

Hold your nerve Alastair Darling. Don't pay the bonuses.

Withold the bonuses and let the board resign, it is the only way to break the cycle of 'heads i win, tails you lose' the bankers have played with the government an taxpayers so cynically and so sucessfully

Sure there are risks with the above strategy but every civilised societies foundation is justice. Personally I think the return of the nations moral compass has far more value than RBS and its toxic debts.

We are a resourceful people we will work our way through any difficulties confronting the 'masters of the universe' brings and feel a lot better about ourselves for doing it too. A few billion in bonuses would buy a lot of sustainable energy schemes for the nation as a moral and tangible heritage for our children. what heritage for our childrens moral education and future energy needs will paying RBS bankers huge bonuses bring us exactly?

It will have to be manged well to avoid a financial meltdown but it should not be beyond us to break this negative cycle of providing huge reward for those who provide no realvalue to society.

1) pay all bonus in shares - with a condition that they cannot be sold for 5 years ( Hester has sold 5 tranches of RBS shares so far ! )

2) follow up with regular rights issues in order to replace the lost capital with bankers own wealth.

3) restructure, break-up and shrink balance sheet.

Heads we win tails you lose

Would it make a blind bit of difference if the top 2 layers of any large company was cut away and let the people who do virtually all the work run the show? A lot cheaper too!

Isn't it about time that everyone in the financial services sector was made to sign up to a social contract? We all know that those who go into banking/finance are inherently greedy. It goes with the territory. Therefore, why should it not also go with the territory that such individuals are forced to sign up to being socially responsible and, not making unrealistic, or antisocial demands with regard to their remuneration? After all, these guys aren't actually "The Masters of the Universe". They're the masters of misdirection, sleight of hand and gambling and, should be treated with a lack of reverance comensurate with that satanding. Should they not?
Meanwhile, those involved in setting up micro-finance and mutual initiatives should be getting government tax breaks.

If the governement decide to let the banks have these bonuses, hot on the heels of the scandal of stopping the OFT holding banks to account for unfair charges then Labour can kiss good bye to any chance of electibilty for at least two elections. Its as simple as that. This is wrong, everyone knows its wrong. We're all having to stump up £40,000 per family to pay for it all. The British Electorate will remember this for a long time to come. Eventually this scandal and its effects on ordinary, decent citizens will eclipse even the Iraq debacle.

Paul,

In your point 3 you say that much of these profits are being made due to the favourable position the bank is in due to taxpayer intervention.

Why is this 'extra' profit not removed from the posted profits and the bonuses paid from the residue of 'real' profits ?

EG. of the 5.6bn so far, if 5/8ths is due to taxpayer support then the actual contribution of the traders is 2.1bn, let them have a 1/4 of that as bonus.
0.525bn this year. As time goes by the taxpayer support will figure less and less into the equation and their bonus pot can rise.

There, not quite rocket science is it ?


3. But, you say, if the investment bank is so profitable, why don't they spin it off? Well the Treasury is not alone in believing that much of these profits are being made because, as a semi-nationalised bank, people can do business with RBS with very minimal risk to themselves; in addition the Bank of England's £200bn quantitative easing programme is flushing the banking system with cheap money. Basically, RBS' GBM business does not make these high profits because of the skill of its investment bankers but because of QE and the Asset Protection Scheme. Or to put it in footballing terms: they may have the skills of a Drogba or an Anderson but they are playing in the Sunday league.

U13375769 ? U13375769 ? what's going on - I'm not a number, I'm a free blogger ? Sorry this is too Orwellian for me - I'm off.........

Retail/commercial banks got mixed up with investment bank risk taking, funded by the wholesale money markets. Safe commercial banking in the UK got itself welded together with risky investment banking from 2001 onwards.

When the financial system broke, the government had to move in to save the commercial banks, which just happened to save the investment banks too, as the two are now inseparable.

Given the state of the equation: when the investment banking side of the mix is making money it should pass that cash back to the commercial side, to pay for the ongoing bad debts and writes downs being endured by the commercial banking side of the hybrid. However, instead of being sensible and balancing the equation, the investment risk takers pay the money out as bonuses to themselves. It's a kind of one way non-return valve.

Never mind. We've learned our lesson and we won't let retail/commercial banking get mixed up with investment banking again in the future will we.
Oh, I keep forgetting it's too late; we now can't separate the two.

What a mess.

Whizz kids, Drogbas. What all 5,000 of them. I think you need to get out of business and finance for a bit. Some of these people are likely the banking equivalent of Didier. Many of them are not but are specialists, working in an area that requires specialist knowledge, much like doctors, plumbers, lawyers, climate scientists etc. Like anyone else they see their own skills as being special, unique, valuable and expect to be paid for it.

The difference is that while the rest of us can only go on strike or change job (less likely now than say a year ago) these b** really can hold the country to ransom.

#15

I think they've got a failed investment banker who isn't called Drogba cutting code for the newsnight website. Is she/he on a bonus?

What bothers me about this all is:

1. If there was a legally binding arrangement in place between HM Treasury and RBS over bonus payments then the directrors of RBS would not be able to play this card as they would have to make sure that RBS complied with its legal obligations;

2. I'm fairly certain that the RBS board won't have received legal advice which is as black and white as "If the government doesn't let you pay the bonuses, you have to resign". These issues are never that black and white and you will not get a lawyer to provide such unequivocal advice. It is frankly pathetic that the RBS board is effectively trying to blame all this on the lawyers; they don't have the balls to argue properly for the payment of bonuses and are using the legal advice as an excuse.

3. What worries me is that the legal advice might not only be used by the RBS board as a stick to attampt to beat the government with to allow them to pay the bonuses. If the government call their bluff and the board of RBS resigns, will that advice be used as the basis of cliams for constructive/wrongfuil dismissal? Can you imagine the political ramifications if Hester et al go and make get large pay-offs?

Paul

I cannot accept the analogy between bankers and professional football players. Would Chelsea, Man Utd be paying the same wages if they were owned by the government? Out of interest, do you expect AIG and Northern Rock to renew their sponsorship deals with Newcastle and Man Utd?

What I really want you to answer are these questions:

1. Are these bankers doing anything exceptional here or are they able to make these profits because there is currently a plentiful supply of cheap money? If someone gave you a £1 billion pounds at o.5% interest per annum, could you have made a turn on it perhaps by investing it in gilts. Is there more to it and, if so, please explain. That is the job of journalists - not just to tell us something is so but why it is so.

2. Are these bankers taking excessive risks to generate these profits? My own take on it is that they probably are - this is based on some of the statistics I have seen in relation to the growth in the derivatives market this year. If indeed the answer is yes, should we be rewarding bankers at all or do we simply have to accept that despite all of the wailing and gnashing of teeth last year, the reality is the banks have got to carry on taking these risks to maintain profitability, rebuild balance sheets and repay the governments. Is the reality the bankers have us all by the short and curlies even more so than they did last year? Can we please get a straight and honest answer on this.

Very interesting account Paul, but to stretch the football analogy a bit further, until we exercise our 'fan power' all we are is interested spectators, howling from the terraces (i support a League 1 club and we've still got them!).

That's how this article makes me feel, and all the 'we should' .... comments here. A bit like arguing whether Capello should take Owen to South Africa - i think he should, but he's never going to listen to me is he?

We can all froth and spume from the terrace as much as we want, but if the Family Stand and the Centenary Stand don't give a krep then the manager keeps on picking the team full of players not fit to wear the shirt. The bad run of results is put down to 'a disruptive minority in the dressing room' and meanwhile the board steers us into administration.

The discussions in these comments equate to discussing whether to stay with 4-4-2 or switch to 5-4-1 when we're 5-1 down with 10 minutes to go.

Goodwin got away with it, Bob Dimond got away with it, Geoffrey Robinson got away with it, Blair got away with it, the RBS board will get away with it.

As you have said at the London Bookfair, in your book and other places, there's only one way to turn this season round - the board needs to have a healthy fear of the fans.

On the pitch! On the pitch! On the pitch! On the pitch! On the pitch! On the piiiiitch! :-)

What will be in Hesters 'secret Santa' this Xmas :

Perhaps if an explanation of what exactly these guys in Global Banking do from day to day, might help the man on the Clapham omnibus take a view on whether they are worth it. I suspect they are somewhat less of the calibre of Torres, Rooney, Fabregas or Drogba, than lucky minor squad members of the Premier League top-four, pampered and deluded.

Even I can figure out how to make a fat profit borrowing Mervyn's moolah at 0.5%, fractionally-reserving that 20-fold and investing it in Australia at 3.75% or better.

So what else do they do?

I suspect that anyone of real talent in RBS Global has already scarpered. Who wants to be associated with a zombie bank like RBS, when you can have the glamour of Goldman Sachs or the boutiques?

It is going to be a busy and exciting week for you Paul.

Predictions as follows:

1) There will be something punitive for the banks, too much 'background noise' created by political media manipulation to this effect for it not to happen. First you stoke up a bit of public anger at the injustice at the banks ( the RBS story). Then you follow it us with some punitive measures cos you know it will be a big vote winner. It will just be a co-incidence that it is the right thing to do on this occasion.

2)CUTS.. No.1 above will grab the headlines hopefully drowning out this one (they are so clever arnt they!!). There will be lots of cuts dressed as efficiency savings but nothing 'mainstream' you will have to examine the small print for that. It wont be obvious what they are doing or the extent so that they have lots of wriggle room for the rhetoric that will follow, designed not to inform but to confuse and obscure.

3) The borrowing requirements will be revised upwards but not by much rapidly followed by....

4) Green shoots will be on the agenda, revised figures will be quoted suggesting we are 'already out of recession' and the last figures were wrong, this will be aligned with some nonsence prediction of growth for the comming years which will take no account of item 2 above.

5) finally just to show how responsible they are and how confident they are of no.3 above they will increase VAT to 20% after christmas..because it is the responsible thing to do to help balance the books...it also happens to be more stealthy than a straight income tax rise which would lose them votes.

The above represents a good mix of popular moves designed to distract, mixed with disguised very bad news, over egged good news and a bit of apparent 'responsible behaviour' thrown in to prop up their credibility.

They will of course hope that this will be the launch pad for a recovery in the polls.


The really scary bit is....they may be right.


Lets see how close I am come Wednesday shall we....

no.24

Just for the record I wrote No.24 before RP's miraculous scoop was announced, so I am one up already :).

Somebody remind me who RP's dad is ?

Paul,

Good to hear you mention the "Tobin Tax" again on Newsnight yesterday. But please help us all to understand WHY it will help re-structure our economy - it may well be a means to reduce venal profiteering by bankers, but its importance in slapping high finance back into its place is the key message.

The voices of dissent are growing, now we can add Ex-Fed Chairman Volcker to the list:



"Mr Volcker told delegates who had been discussing how to rebuild the financial system to 'wake up'. He said credit default swaps and collateralised debt obligations had taken the economy 'right to the brink of disaster' and added that the economy had grown at 'greater rates of speed' during the 1960s without such products."

Yes, the economy grew for genuine productivity reasons in the 1960s: the pinnacle of turbines for energy extraction, plus Operations Research (OR) techniques for maximising Production efficiency.

Genuine Value Adding (Economic surplus) is created through Production, not Exchange. This is why China is wiping the floor with the rest of the world - it makes stuff!

this multi-£M headline has taken the really big news off the radar - that RBS is in up to its neck in this Dubai horror story. So whilst the papers and media are doing their dance with RBS about this, the secondary story, of the UK tax-payer now underwriting some £60Bn extra of bad investment in Dubai has seemingly dropped of the map.

this is their win/win card all right - if they resign, they can claim their full benefits before the hurricane heading in hits. If they stay, they can continue to suck in the wealth from ridiculous salaries and bonuses. If they leave, they "did it for the staff", if they stay, "to help the tax-payer".

we should have let those banks crumble like the rotten assets they were, and still are, and rebuilt with that £1.5Tn a solid, clean and trustable banking/mortgage sector.

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