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Pesto this morning

http://www.bbc.co.uk/blogs/thereporters/robertpeston/

The chart he mentions (Chart 4.22) is here http://www.bankofengland.co.uk/publications/fsr/2010/fsr27sec4.pdf

If you are looking for a capitalist conspiracy, you might notice that governments - especially European ones - seem keener to cut public-sector debt and public services than banking debt and leverage.

There is a choice here. Doing both at once in a very substantial way would probably guarantee a return to painful recession: the combination of lower state spending and a simultaneous reduction in bank lending would be vicious.

Some would say that banks and bankers should be grateful that governments - including our own - seem to have chosen to preserve bankers' way of life, at the cost of scaling back public services.

How are bankers choosing to repay the favour?

Well we'll see whether they manage to sustain the flow of credit necessary to keeping the recovery on track.

In that context, the Bank of England's new Financial Stability Report contains a chart that should probably be studied by all finance ministers and bank shareholders.

It is Chart 4.22 on page 54 (PDF). And it shows the proportion of banks' revenues that they have been paying out both in dividends to shareholders and in compensation to staff over the past few years.

What it demonstrates is that after the banking crisis of 2008, there has been a very sharp drop in dividend payments but a rise in the share of banks' income allocated to salaries and bonuses.

Which is striking, because it indicates that banks' owners have apparently been happy to make significant financial sacrifices while bankers preserved and possibly enhanced their own living standards. Or perhaps those investors just haven't noticed the uneven distribution of financial pain (which would be more worrying).

What the Bank of England helpfully points out is that if dividend payments as a share of revenues were kept at the levels of 2009, but compensation ratios reverted to pre-crisis levels, banks would retain an additional £10bn of earnings.

This would represent £10bn of new capital, which could support - says the Bank of England - some £50bn of additional lending in the UK.

If the banks simultaneously cut both pay and dividends (or paid those dividends in shares), the banks could provide even more useful credit to businesses and households.

Which is a formula for public gain from private belt-tightening that could well commend itself to the new Chancellor, George Osborne, as he frets about the economic affects of the unprecedented public-sector belt-tightening he has imposed.

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"..bankers preserved and possibly enhanced their own living standards"

It's a message that should be repeated - lots - just to remind people that we are not all in this together.

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The bank$ters are doing exactly what we expect them to do. Be greedy and look out for themselves. I dont blame them for that. I blame the politicians for continuing to allow it, pay them to do it, and in liebours case, encourage it.

Nothing irks me more than some braindead Liebour apparatchik mouthing off about the public sector bearing cuts because the banks TOOK hundreds of billions off taxpayers. No YOUR GORDON BROWN GAVE the banks hundreds of billions, no strings attached. GORDON BROWN had the option to do the right (free market thing) and allow the banks to fail, break them up, sell the good bits (ie enough of the best assets tied to savings) to building societies (most of which, non-dependant on interbank spending have not failed - indeed they have to pay more into FSCS to pay for BANKS insanities) and consign this CDS and CDO stuff to the history books.

The politicians regulate the damn things, they are the problem. You dont blame smith and wesson for every shooting in america, you blame the politicians who pass the laws and the individual shooters.

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Sorry, i mean its just insane.

*Thief is upset you're not leaving stuff out for him to steal anymore*

*Thief tells Gordon Brown he's upset, only wants to borrow stuff, will give back at some unspecified date, probably*

*Gordon Brown breaks into your house and steals for him*

*Turns out he doesnt want to borrow, but wants to steal*

*You blame thief, Gordon not responsible, couldnt have seen this coming*

And Gordon Brown innocent?

nah.

He's every bit as culpable as the Banksters, should be rotting in prison as they should.

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.....

The politicians regulate the damn things, ....

No they don't - that's the problem. They listened to halfwitted free-market tw@ts like you and deregulated the banks.

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No they don't - that's the problem. They listened to halfwitted free-market tw@ts like you and deregulated the banks.

the free market does not dictate politicians cosying up at cocktail parties to bankers I'm afraid. There's a bit of both here.

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No they don't - that's the problem. They listened to halfwitted free-market tw@ts like you and deregulated the banks.

A bit harsh, calling him a tw@t. (doesn't really make any sense either, surely it's tw@?)

If they'd continued the free market thinking when the bust happened and let them go to the wall, things would be much, much better now.

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No they don't - that's the problem. They listened to halfwitted free-market tw@ts like you and deregulated the banks.

There is no free market, there never has been nor ever will be.

Edited by Olebrum

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When they start talking about banksters cutting their salary/bonus levels to free up credit in the system you are talking about some huge banksters incomes. Huge enough to impact the economy.

When are they going to wake up to the fact that the banksters have pulled the heist of the dual-millenia? Levels of institutionalised corruption that would have curled the toes of even the most avaricious bankster operating the early forerunner of the FOREX/bank in the Jerusalem Temple racket of the late 1st Century BC- early 1st Century AD until the Romans moved the system to Rome and eventually formed the Bank of the Holy Roman Empire under Constantine. The banksters have a long history for ripping off the people--it may even be an older profession than prostitution.

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£50bn in additional lending isn't huge.

Banks are still struggling to understand whats going to come down the tracks at them... greater regulation, requirement for greater capital, taxes, enforced levies or everything you can think of.

Like it or not bansk operate competitively in the employment of staff... rialing against bank pay and bonuses is pointless unless you do something that takes that elemnet out of the free market eg A salary cap or a bonus cap or other regulation. Banks will operate on a level playing field and limit pay and rations if they all have to worldwide... otherwise theres simply no point in introducing this type of control country by country..... by the by this type of limitation won't happen for exactly the same reason you'd never find the premier league for instance limiting pay while their european counterparts don't have to or why Ufea won't limit pay in europe while elsewhere worldwide players can earn whatever anyone will pay them. Suspend disbelief for a moment but if you had some people in your business who were critical or who you felt were critical to delivering say 10% of the bottom line and you had an option... either let them go to a competitior ( with the profit) or retian them at double theri current pay and retain say an 8% contribution to the bottom line... what would you do.... most I think if honest would pay the rise and protect their profitability.

This is a much more complicated argument that Peston thinks it is ( or says it is)...... at it's heart is a question " what sort of financial services industry do we want"... by the by to expose Pestons articel as pointless... think on this... take LTSB, the retail and commercial opperations of RBS, Nationwide, Santanders UK operations, etc etc ( eg all the non merchant banking/pure trading/ fund management / hedging etc stuff) and these are the areas where the actual lending to get the economy moving happens. I can pretty much guarantee you that theri pay and rations have gone DOWN over the period Pestons talking about.... in other words the profits are being made and the bonuses being paid alongside the huge salaries in the parts of the banking world that to a degree are not relevant to the discussion over how much more banks can lend to small/medium sized businesses and individuals... Peston is slanting the facts to try and create news where there really is none.

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Banks are still struggling to understand whats going to come down the tracks at them... greater regulation, requirement for greater capital, taxes, enforced levies or everything you can think of.

Frankly, I won't be holding my breath for any of these things.

Have you read the front page of this very site?

From the FT

"Plans by global regulators to compel banks to set aside billions of dollars in extra capital to cope with future crises are to be pared back after intense lobbying by the industry. After wrangling over the details of a regulatory overhaul published six months ago, a consensus on the Basel committee is suggesting that its proposals be thinned down. A draft of the latest thinking of the committee, set up to oversee global financial regulation, is to be presented at this weekend’s G20 summit in Toronto. The most significant change to the proposed reforms concerns the committee’s recommendations on the volume of liquid funds that banks should hold to protect them against another financial crisis."

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Frankly, I won't be holding my breath for any of these things.

Have you read the front page of this very site?

From the FT

"Plans by global regulators to compel banks to set aside billions of dollars in extra capital to cope with future crises are to be pared back after intense lobbying by the industry. After wrangling over the details of a regulatory overhaul published six months ago, a consensus on the Basel committee is suggesting that its proposals be thinned down. A draft of the latest thinking of the committee, set up to oversee global financial regulation, is to be presented at this weekend’s G20 summit in Toronto. The most significant change to the proposed reforms concerns the committee’s recommendations on the volume of liquid funds that banks should hold to protect them against another financial crisis."

I'd agree with you.... in a way I was pleased there was no knee jerk reaction to the banking crisis when it hapened but not so pleased that the powers that be are not even bolting the stable door to ensure the horse doesn't bolt again ( which is effectively what doing little will mean)...... with new methods and techniques of trading emerging all the time its unlikely that regulators will be able to stay on top of the situation so I would prefer to see something which should be reasonably non-contenious such as a four part system whereby:

1/ Capital adequacy is raised, especially for the non-commercial/retail banking arms.

2/ Where there is seperation between standard loans and savings vs the more exotic ends of banking.

3/ Where there is a small transactional levy which goes into some form of ring fenced national fund year on year.

4/ Where there is a system of delayed bonus payments say over 2 years rathyer than the current end of year process for those sections of the bank where risk carries over ( eg day trading operations would not be included as an example as profits only result when positions are closed).

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...do you mean the gambling side where all the simpletons operate with no risk management ......? ... :rolleyes:

I probbaly wouldn't paint quite the same picture but yes thats the side I meant.

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...do you mean the gambling side where all the simpletons operate with no risk management ......? ... :rolleyes:

A new rule should be implemented for all banks that take deposits from UK customers, and who have a guarantee provided by the taxpayer (currently 50 grand per institution).

That rule is that if a bank runs into financial trouble, and needs any sort of government assistance whatsoever, then all directors who have been there more than 6 months, and have left within 5 years, get tapped first for any shortfall. If they dont have enough personal wealth, they get bankrupted as a matter of course.

That would certainly focus their minds regarding risk taking. You can guarantee that huge salaries would be a thing of the past.

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£50bn in additional lending isn't huge.

Banks are still struggling to understand whats going to come down the tracks at them... greater regulation, requirement for greater capital, taxes, enforced levies or everything you can think of.

Like it or not bansk operate competitively in the employment of staff... rialing against bank pay and bonuses is pointless unless you do something that takes that elemnet out of the free market eg A salary cap or a bonus cap or other regulation. Banks will operate on a level playing field and limit pay and rations if they all have to worldwide... otherwise theres simply no point in introducing this type of control country by country..... by the by this type of limitation won't happen for exactly the same reason you'd never find the premier league for instance limiting pay while their european counterparts don't have to or why Ufea won't limit pay in europe while elsewhere worldwide players can earn whatever anyone will pay them. Suspend disbelief for a moment but if you had some people in your business who were critical or who you felt were critical to delivering say 10% of the bottom line and you had an option... either let them go to a competitior ( with the profit) or retian them at double theri current pay and retain say an 8% contribution to the bottom line... what would you do.... most I think if honest would pay the rise and protect their profitability.

This is a much more complicated argument that Peston thinks it is ( or says it is)...... at it's heart is a question " what sort of financial services industry do we want"... by the by to expose Pestons articel as pointless... think on this... take LTSB, the retail and commercial opperations of RBS, Nationwide, Santanders UK operations, etc etc ( eg all the non merchant banking/pure trading/ fund management / hedging etc stuff) and these are the areas where the actual lending to get the economy moving happens. I can pretty much guarantee you that theri pay and rations have gone DOWN over the period Pestons talking about.... in other words the profits are being made and the bonuses being paid alongside the huge salaries in the parts of the banking world that to a degree are not relevant to the discussion over how much more banks can lend to small/medium sized businesses and individuals... Peston is slanting the facts to try and create news where there really is none.

After reading that line i stopped reading the rest of the drivel.

I presume the rest of your post talks about flying sheep, fairies at the bottom of your garden, and how the earth is being carried on the back of a giant tortoise, but since i have'nt read it i wouldnt know.

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A new rule should be implemented for all banks that take deposits from UK customers, and who have a guarantee provided by the taxpayer (currently 50 grand per institution).

That rule is that if a bank runs into financial trouble, and needs any sort of government assistance whatsoever, then all directors who have been there more than 6 months, and have left within 5 years, get tapped first for any shortfall. If they dont have enough personal wealth, they get bankrupted as a matter of course.

That would certainly focus their minds regarding risk taking. You can guarantee that huge salaries would be a thing of the past.

Yes indeed, it would immediately solve the vast majority of problems. Unfortunately the banksters would kill any such proposal miles before it had any chance to become law.

When the second leg down really gets going thou and we head into depression, the banksters will start to get strung up, literally. You can think of that as your consolation prize. I know it will be mine.

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When the second leg down really gets going thou and we head into depression, the banksters will start to get strung up, literally. You can think of that as your consolation prize. I know it will be mine.

They have allowed the meme of greedy bankers to flourish almost unchecked- though efforts are now under way to replace it with a new public sector scrounger construct which is currently working rather well.

But I have every faith in the bankers inability to reign in their greed, even to protect their own interests. Given time they will destroy themselves as the contrast between their excesses and the costs of their greed for the majority become ever more striking.

I would be disappointed if they were to now regain their common sense, before the rage has had time to mature into something truly potent. But risk assessment is not a skill they possess apparently, so this is unlikely to happen in time.

Edited by wonderpup

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This problem/ infestation could be fixed by addressing moral hazard head on. Start lynching banksters randomly until they reform, or go extinct through failure to adapt to their environment.

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£50bn in additional lending isn't huge.

Banks are still struggling to understand whats going to come down the tracks at them... greater regulation, requirement for greater capital, taxes, enforced levies or everything you can think of.

Like it or not bansk operate competitively in the employment of staff... rialing against bank pay and bonuses is pointless unless you do something that takes that elemnet out of the free market eg A salary cap or a bonus cap or other regulation. Banks will operate on a level playing field and limit pay and rations if they all have to worldwide... otherwise theres simply no point in introducing this type of control country by country..... by the by this type of limitation won't happen for exactly the same reason you'd never find the premier league for instance limiting pay while their european counterparts don't have to or why Ufea won't limit pay in europe while elsewhere worldwide players can earn whatever anyone will pay them. Suspend disbelief for a moment but if you had some people in your business who were critical or who you felt were critical to delivering say 10% of the bottom line and you had an option... either let them go to a competitior ( with the profit) or retian them at double theri current pay and retain say an 8% contribution to the bottom line... what would you do.... most I think if honest would pay the rise and protect their profitability.

This is a much more complicated argument that Peston thinks it is ( or says it is)...... at it's heart is a question " what sort of financial services industry do we want"... by the by to expose Pestons articel as pointless... think on this... take LTSB, the retail and commercial opperations of RBS, Nationwide, Santanders UK operations, etc etc ( eg all the non merchant banking/pure trading/ fund management / hedging etc stuff) and these are the areas where the actual lending to get the economy moving happens. I can pretty much guarantee you that theri pay and rations have gone DOWN over the period Pestons talking about.... in other words the profits are being made and the bonuses being paid alongside the huge salaries in the parts of the banking world that to a degree are not relevant to the discussion over how much more banks can lend to small/medium sized businesses and individuals... Peston is slanting the facts to try and create news where there really is none.

I disagree with the idea that banks can't be regulated "country by country." In the UK, the banking sector has been tremendously damaging to the country's economy. Bank tax payments (corporation tax and NI) since 2001 are less than the money banks have

received in taxpayer bail outs. I would say that hardly makes them an asset to the economy...I would sat tax them, regulate them and break them up, if they all want to b*gger off to Switzerland I find ut hard to see where the economic loss is...

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This problem/ infestation could be fixed by addressing moral hazard head on. Start lynching banksters randomly until they reform, or go extinct through failure to adapt to their environment.

I wouldn't lynch them (tempting though..), but I do think that the idea of imposing a retroactive 95% tax on the last 10 years of top banksters earnings has a lot of merit: if they can't or won't pay they should be bankrupted by HMRC and their assets sold to pay the bill: its what HMRC would do to a small business owver whos business had become insolvent...I don't see why wealthy parasites should be treated any differnetly.

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I wouldn't lynch them (tempting though..), but I do think that the idea of imposing a retroactive 95% tax on the last 10 years of top banksters earnings has a lot of merit: if they can't or won't pay they should be bankrupted by HMRC and their assets sold to pay the bill: its what HMRC would do to a small business owver whos business had become insolvent...I don't see why wealthy parasites should be treated any differnetly.

In principle I agree with clawbacks and also leicestersq's idea. The problem arises in practice. Banksters have captured the regulatory process. Not just politicians but also regulators, law enforcement and the judiciary (particularly the US where the SCOTUS seems more preoccupied with protecting the Federal Reserve than upholding the constitution). So only extra-judicial measures will work in these circumstances

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The bank$ters are doing exactly what we expect them to do. Be greedy and look out for themselves. I dont blame them for that. I blame the politicians for continuing to allow it, pay them to do it, and in liebours case, encourage it.

Do you blame burglars, rapists, and murderers for burgling, raping, and murdering? Or the police for not stopping them? Both may be at fault but it doesn't let the former off the hook for a second. The same is true for being greedy and looking out for yourself and not caring less about what effect your actions have on anyone else. It's probably human nature to be a greedy selfish ****. That doesn't excuse it, and I will happily blame anyone who exhibits it to excess.

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"Which is a formula for public gain from private belt-tightening that could well commend itself to the new Chancellor, George Osborne, as he frets about the economic affects of the unprecedented public-sector belt-tightening he has imposed."

Et tu Peston! :(:(:(

.

Edited by Tired of Waiting

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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