Jump to content
House Price Crash Forum
Sign in to follow this  
Realistbear

Bankers' Bumper Bonuses Are The 'mistake' Of Flawed Accounting Rules

Recommended Posts

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8255590/Bankers-bumper-bonuses-are-the-mistake-of-flawed-accounting-rules.html

Bankers' bumper bonuses are the 'mistake' of flawed accounting rules
Billions of pounds of banker bonuses may have been paid out "by mistake" as a result of miscalculations thrown up by Britain's flawed accounting rules, an influential Parliamentary Committee has been told....
The House of Lords Economic Affairs Committee, which is investigating the role of auditors in the financial crisis, was told that the controversial International Financial Accounting Standards (IFRS) had allowed banks
to hide risks so that profits and bonuses were inflated.

Good, perhaps the banksters will give the money back.....with interest. If the HL are right, fraud has been committed if the books were deliberately "cooked" to enhance bonuses.

Edited by Realistbear

Share this post


Link to post
Share on other sites
Bankers' bumper bonuses are the 'mistake' of flawed accounting rules
Billions of pounds of banker bonuses may have been paid out "by mistake" as a result of miscalculations thrown up by Britain's flawed accounting rules, an influential Parliamentary Committee has been told....
The House of Lords Economic Affairs Committee, which is investigating the role of auditors in the financial crisis, was told that the controversial International Financial Accounting Standards (IFRS) had allowed banks
to hide risks so that profits and bonuses were inflated.

Good, perhaps the banksters will give the money back.....with interest. If the HL are right, fraud has been committed if the books were deliberately "cooked" to enhance bonuses.

Posted yesterday an article about US bankers claiming profits from mortgages in default...ie, interest payments recorded as earnings, when in fact they werent being paid at all.

"profits yet to materialise" is something we have heard before from financial genii. It is clearly the intent to gloss over the actualitee.

Share this post


Link to post
Share on other sites

Good, perhaps the banksters will give the money back.....with interest. If the HL are right, fraud has been committed if the books were deliberately "cooked" to enhance bonuses.

Ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha.

Share this post


Link to post
Share on other sites

If a keen lawyer were to take this on as a class action suit and adduce evdience that accounts were intentionally "cooked" to give a false impression of the state of a bank's fininaces we are talking jail time here folks. Fraud, pure and simple.

Enronesque and many times bigger.

Mr. Lehrach where are you?

Share this post


Link to post
Share on other sites

http://market-ticker.org/akcs-www?post=177125

I shouldn't be surprised, but I am. The banks are doing exactly the same thing that blew them up in 2007 and 2008, and it will end the same way.

What am I talking about?

Booking non-existent income that will NEVER be realized.

The giant US banks have been bailed out again from huge potential write offs by loosey-goosey accounting accepted by the accounting profession and the regulators.

They are allowed to accrue interest on non-performing mortgages ” until the actual foreclosure takes place, which on average takes about 16 months.

All the phantom interest that is not actually collected is booked as income until the actual act of foreclosure. As a resullt, many bank financial statements actually look much better than they actually are. At foreclosure all the phantom income comes off the books of the banks.

Do you remember why I started writing The Ticker?

It was over this exact issue. Bogus and intentionally-misleading accounting by the banks that was "accepted practice" - specifically, I caught Washington Mutual (which has since failed) paying dividends with non-existent money - they were paying those dividends out of capitalized interest on Option ARM loans - money they had no reasonable expectation of ever collecting and which in fact they never did collect.

On 4/18/2007 I wrote one of many Tickers over the months to come that explained why this was destined to blow up in their face and destroy them. It did. It also destroyed Wachovia, Countrywide, Downey Savings and Loan and many other banks.

They're doing it again folks - we have in fact learned and changed nothing. The banks are counting as "income" money they have not actually received and never will as the loan that is "accruing interest" is in default and will eventually foreclose!

This has to be stopped and the phantom "income" must be forced out of their books or we will have another explosion exactly like we had in 2008.

We argue only over when, not what.

I'm warning you all right now - a mere four years after the first time they did it and I caught them at it, they're doing it again and it will lead to exactly the same outcome.

It has to, because the mathematics on it are exactly identical to what happened the last time.

Pure genius.

Still clearly US bank shares are a big buy, this sort of accounting should have been stopped by the regulators but that won't be allowed to happy as the banks might be shown to be actually insolvent and that can never be allowed to happy.

Posted this yesterday.

Share this post


Link to post
Share on other sites

Posted yesterday an article about US bankers claiming profits from mortgages in default...ie, interest payments recorded as earnings, when in fact they werent being paid at all.

"profits yet to materialise" is something we have heard before from financial genii. It is clearly the intent to gloss over the actualitee.

I'm starting a new business selling ice teapots for £100 a pop. I'm going to pay myself a bonus based on the sales projection for the next 3 years, in cash. If for some reason I don't ship the projected 10 million units in year 3, it'll be because of the global economy. Now, who is going to lend me the money..

Share this post


Link to post
Share on other sites

Yes, well done whoever produced this report.

Eric Pebble tells us that liar loans are the great fraud. As I see it, they are only part of the fraud. The means by which the profits from the fraud is conveyed to the perpetrators, is the bonus and the excessive banker salaries. This is why we laugh at the argument that the best bankers will leave to work at another bank. What they mean is the best fraudsters will leave.

On a separate note, there was a BBC 1 program that made me angry last night, about the Equitable Strife. They had a load of people on there who had lost a lot of their money thanks to incompetence by the Law Lords and Equitable Life management. Well, I call it incompetence, but I suspect it was far more serious in the case of the judges, but hey, they never break the law. Apparently a few spotty kids must have incorrectly written on government paper that investing with Equitable Strife was 'guaranteed', when everyone who knew a bit about anything, including those moaning on the BBC, knew that wasnt true.

After the Law Lords had produced their rancid verdict, where instead of paring back all claims on a bust institution equally, they gave preference to one group of claimants, presumably because they were mates with the Law Lords, ( I can think of no other logical reason) which meant the other group lost big time.

That other group have a lot of power as well, and despite all logic, they are on the verge of getting the taxpayer to pay them £1.5 billion in compensation. Well I know of no other private saving scheme, apart from bank deposits, that are insured in this way.

Tell me, why does an incorrect leaflet, make the taxpayer liable for this sort of loss? Why has that 18 year on Tesco who wasnt even at school at the time of the foul up, now on the hook to pay this back?

And why didnt the BBC put someone from the Taxpayers Alliance to make it clear that the losers in the Equitable Strife case have no legitimate claim over taxpayers money?

Note, when a Christmas savings scheme goes belly up, there are no payouts there.

Despite the dangerous precedent, of retrospectively making the taxpayer liable for something, something which appears to be in contradiction of the human rights of taxpayers, Cameron and Clegg are going to take your money anyway. The best way to rob people, and fleece that guy working hard in McDonalds some more, is to abuse political power.

Share this post


Link to post
Share on other sites

Yes, well done whoever produced this report.

Eric Pebble tells us that liar loans are the great fraud. As I see it, they are only part of the fraud. The means by which the profits from the fraud is conveyed to the perpetrators, is the bonus and the excessive banker salaries. This is why we laugh at the argument that the best bankers will leave to work at another bank. What they mean is the best fraudsters will leave.

On a separate note, there was a BBC 1 program that made me angry last night, about the Equitable Strife. They had a load of people on there who had lost a lot of their money thanks to incompetence by the Law Lords and Equitable Life management. Well, I call it incompetence, but I suspect it was far more serious in the case of the judges, but hey, they never break the law. Apparently a few spotty kids must have incorrectly written on government paper that investing with Equitable Strife was 'guaranteed', when everyone who knew a bit about anything, including those moaning on the BBC, knew that wasnt true.

After the Law Lords had produced their rancid verdict, where instead of paring back all claims on a bust institution equally, they gave preference to one group of claimants, presumably because they were mates with the Law Lords, ( I can think of no other logical reason) which meant the other group lost big time.

That other group have a lot of power as well, and despite all logic, they are on the verge of getting the taxpayer to pay them £1.5 billion in compensation. Well I know of no other private saving scheme, apart from bank deposits, that are insured in this way.

Tell me, why does an incorrect leaflet, make the taxpayer liable for this sort of loss? Why has that 18 year on Tesco who wasnt even at school at the time of the foul up, now on the hook to pay this back?

And why didnt the BBC put someone from the Taxpayers Alliance to make it clear that the losers in the Equitable Strife case have no legitimate claim over taxpayers money?

Note, when a Christmas savings scheme goes belly up, there are no payouts there.

Despite the dangerous precedent, of retrospectively making the taxpayer liable for something, something which appears to be in contradiction of the human rights of taxpayers, Cameron and Clegg are going to take your money anyway. The best way to rob people, and fleece that guy working hard in McDonalds some more, is to abuse political power.

I know you are angry, but the issue boils down to the FSA did not do their job at that time and that is beyond doubt and written in reports. That is why the compensation is due, pure and simple.

If it costs £1.5BN, which is only a fraction of what people lost by the way, and if that annoys you, then take it out on the Government and more specifically the FSA who lead to the problems being allowed to occur.

Share this post


Link to post
Share on other sites

I'm starting a new business selling ice teapots for £100 a pop. I'm going to pay myself a bonus based on the sales projection for the next 3 years, in cash. If for some reason I don't ship the projected 10 million units in year 3, it'll be because of the global economy. Now, who is going to lend me the money..

check out who invested in Enron, or Worldcom.

Share this post


Link to post
Share on other sites

Time some of the spotlight fell on the well paid (Chartered) professionals. Perhaps the Institute of Chartered Accountants and whoever creates Accounting Standards which now seem to be hopelessly compromised. These are the guys that are supposed to audit the books and sign off the accounts. They are just not doing the job. If you can no longer trust the rules of accountancy then its really pointless in investing in anything. Seems to be if a bank or firm can't get his auditors to "do the neccessary" they will get replaced and no Managing Partner (who is probably bonused up to the eyeballs) is going to want to loose billions in fee income. Its not only the ethics in banking that have gone down, but in accountancy and law too it seems.

Share this post


Link to post
Share on other sites

I know you are angry, but the issue boils down to the FSA did not do their job at that time and that is beyond doubt and written in reports. That is why the compensation is due, pure and simple.

If it costs £1.5BN, which is only a fraction of what people lost by the way, and if that annoys you, then take it out on the Government and more specifically the FSA who lead to the problems being allowed to occur.

No, this is a very important point of principle. If the FSA screws up, as it does from time to time, then the taxpayer must NEVER be on the hook for those losses. NEVER, NEVER, NEVER.

You invest, you take your chances. The FSA have to try and stop daft and crooked things happening to protect investors, like making cast iron promises when you have no capital.

But if it all goes wrong, there must be no taxpayer guarantee EVER!!!

This is incredibly important because

1 ) If the principle of a taxpayer guarantee is put in place through precedent, then everything that the FSA regulates gives the losing investor recourse to taxpayer money. Either that or you are treating people differently.

2 ) People in the FSA may have an interest in producing leaflets or whatever, that are deliberately false to put the taxpayer on the hook for any losses.

3 ) Moral Hazard. If the taxpayer is on the hook for your losses, you will invest in the riskiest, not the best option.

Now if the losers at Equitable Strife want to personally sue the FSA officers who didnt do their job properly, or the Equitable Board, fine, I dont see a problem with that.

But, no way should they be able to get a penny out of that kid stacking shelves at Tesco. If you can tell me why he is responsible, I would be glad to hear it. The Moral Hazard implications of this are as shocking as bailing out crooked bankers.

Powerful people using the organs of the state to make good their losses is repugnant.

Share this post


Link to post
Share on other sites

One thing I don't understand is why the IFRS (the reports produced by companies) don't require you to state the differences between predicted income and profit and a look back at actual income and profit. I understand why predictions come into play, so I am saying OK if you have to, OK if you even miss out loan loss provisioning (expected losses), BUT you must then state actual losses reflected back on what you estimated or didn't even include in those prior predictions.

This would show us the true state of a company. Which was the whole point of IFRS. It would also give us an indication of how good management actually are. If they can't accurately predict and report on the real state of affairs, and you would then see this in realtime rathern than waiting for an apocalypse, then you could summise that management and the company are cr@p before you invested.

Share this post


Link to post
Share on other sites

One thing I don't understand is why the IFRS (the reports produced by companies) don't require you to state the differences between predicted income and profit and a look back at actual income and profit. I understand why predictions come into play, so I am saying OK if you have to, OK if you even miss out loan loss provisioning (expected losses), BUT you must then state actual losses reflected back on what you estimated or didn't even include in those prior predictions.

This would show us the true state of a company. Which was the whole point of IFRS. It would also give us an indication of how good management actually are. If they can't accurately predict and report on the real state of affairs, and you would then see this in realtime rathern than waiting for an apocalypse, then you could summise that management and the company are cr@p before you invested.

the point about banks is that they could show the entire loan outcome as a profit.

for example, they could show a £100K loan as an asset worth £250K with all its repayments made in the future...clearly this is a "profit" of £150K.

the bonus could have been based on the £150K profit, but until every one of the repayments are made, its all a hope.

however, the bonus has been paid and the money gone.

Share this post


Link to post
Share on other sites

No, this is a very important point of principle. If the FSA screws up, as it does from time to time, then the taxpayer must NEVER be on the hook for those losses. NEVER, NEVER, NEVER.

I agree with that you say even though the consequences of Equit.Life were appalling. Watched the BBC and couldn't see why they kept hammering the government or why they didn't put a case for the taxpayers who hadn't invested in Equitable Life. Very sad for the people involved though. Still our financial services sector is very "talented" and they all deserve a bonus!

Share this post


Link to post
Share on other sites

I agree with that you say even though the consequences of Equit.Life were appalling. Watched the BBC and couldn't see why they kept hammering the government or why they didn't put a case for the taxpayers who hadn't invested in Equitable Life. Very sad for the people involved though. Still our financial services sector is very "talented" and they all deserve a bonus!

Thats right. I feel for those that lost money too.

But as a principle, any recourse must be against those that caused the injustice. This clearly was not the taxpayer.

Share this post


Link to post
Share on other sites

No, this is a very important point of principle. If the FSA screws up, as it does from time to time, then the taxpayer must NEVER be on the hook for those losses. NEVER, NEVER, NEVER.

You invest, you take your chances. The FSA have to try and stop daft and crooked things happening to protect investors, like making cast iron promises when you have no capital.

But if it all goes wrong, there must be no taxpayer guarantee EVER!!!

This is incredibly important because

1 ) If the principle of a taxpayer guarantee is put in place through precedent, then everything that the FSA regulates gives the losing investor recourse to taxpayer money. Either that or you are treating people differently.

2 ) People in the FSA may have an interest in producing leaflets or whatever, that are deliberately false to put the taxpayer on the hook for any losses.

3 ) Moral Hazard. If the taxpayer is on the hook for your losses, you will invest in the riskiest, not the best option.

Now if the losers at Equitable Strife want to personally sue the FSA officers who didnt do their job properly, or the Equitable Board, fine, I dont see a problem with that.

But, no way should they be able to get a penny out of that kid stacking shelves at Tesco. If you can tell me why he is responsible, I would be glad to hear it. The Moral Hazard implications of this are as shocking as bailing out crooked bankers.

Powerful people using the organs of the state to make good their losses is repugnant.

If the FSA, through negligence, lead to people losing money that they otherwise wouldn't, then they should be liable. The FSA stamp is to give confidence and assurance to all, that a company is being run within the rules. They have responsibility to ensure that companies are being run within the rules. Responsibility also comes with accountability. You can't have one without the other.

You can't sue the individuals. It's like a company. You go after the company, they can then go after the individuals if they want to. In this case it's the government because the FSA is part of government.

Share this post


Link to post
Share on other sites

If the FSA, through negligence, lead to people losing money that they otherwise wouldn't, then they should be liable. The FSA stamp is to give confidence and assurance to all, that a company is being run within the rules. They have responsibility to ensure that companies are being run within the rules. Responsibility also comes with accountability. You can't have one without the other.

You can't sue the individuals. It's like a company. You go after the company, they can then go after the individuals if they want to. In this case it's the government because the FSA is part of government.

No, I cant agree with that.

What you are saying is that all the investors who lost money in the banking meltdown should be compensated for the negligence and mistake of the FSA? After all, they had plenty of evidence regarding liar loans at banks, and are no doubt sitting on evidence of balance sheet fraud at HBOS. Indeed wasnt there a report today from the Lords that said balance sheet fraud was the problem.

As a principle, the FSA must be allowed to make mistakes, without leaving the taxpayer on the line for the lot if it all goes wrong.

As a taxpayer I would never want to pay for someone else's investment losses, and if having the FSA makes me liable, the only solution is to disband the FSA and leave the market unregulated.

Share this post


Link to post
Share on other sites

Risks were hidden to boost bonuses = even more fraud

Just thought it needed the extra two words.

It a shame that all those brightly lit financial centre office blocks in the photograph in the article seem to have been afforded off the back of so much financial fraud.

Edited by billybong

Share this post


Link to post
Share on other sites

So when the banksters talk about their gift for 'wealth creation' they are not being dishonest, they just forget to mention that the wealth they create is brought into being by cooking the books.

So on that basis the next time a crooked accountant is up before the beak his defence is not that he was engaged in fraud- but that he was involved in wealth creation!

Share this post


Link to post
Share on other sites

.....

As a taxpayer I would never want to pay for someone else's investment losses, ...

I totally agree with you but it's the UK entitlement culture. Everything that goes wrong is the government's fault and so everyone must have compo. The newspapers and telly all say this endlessly. Equitable made bad decisions and failed to get the returns it needed but it is ALL the fault of the government - everyone knows that. The big cheeses at EL were victims and they too should have a big handout.

A friend is an EL pensioner (projected 23k p.a. actual 8k p.a) and I would be very happy to see him get more money but why should the taxpayers of the UK be the fall guy? Sadly you have rich people like Ms Blackman squealing about compo and all the right wing press trying to make us feel sorry for her and somehow blame the previous government. Now the press has done its job and got the rich boys in power watch the same journos squeal about government "spending" on compo.

Someone more bitter and twisted than me might start talking about the boomers and how the 18 year old shelf filler at Tescos should think themselves lucky as we had it much worse in my day :D:D

Share this post


Link to post
Share on other sites

So when the banksters talk about their gift for 'wealth creation' they are not being dishonest, they just forget to mention that the wealth they create is brought into being by cooking the books.

So on that basis the next time a crooked accountant is up before the beak his defence is not that he was engaged in fraud- but that he was involved in wealth creation!

The bankers never will be in court, though. They'll claim "You can't hurt us, we're too big and important, you need us," the government will bow down to that, and they'll be on their merry way. Remember the Labour government and that Saudi / BAe thing? Where Blair essentially said that if enough money is involved the law is irrelevent (and in words not even vastly different from that IIRC)? Who thinks this bunch will allow anything different to happen to the banks?

Share this post


Link to post
Share on other sites

The bankers never will be in court, though. They'll claim "You can't hurt us, we're too big and important, you need us," the government will bow down to that, and they'll be on their merry way. Remember the Labour government and that Saudi / BAe thing? Where Blair essentially said that if enough money is involved the law is irrelevent (and in words not even vastly different from that IIRC)? Who thinks this bunch will allow anything different to happen to the banks?

Lerach would hurt them. Trouble is the poor sod got nailed himself and was disbarred. Lerach was the class-action king and brought Enron amongst others to their knees. Lerach defined the predator lawyer--hateful man but he struck terror into the hearts of the big corporations. My sister-in-law worked for him!

The banksters are riddled with fraud, so much so that people are blinded by the audacity of their theft.

http://www.reuters.com/article/idUSN2960024020071029

Lerach won more than $7 billion in legal settlements for Enron investors, amassing a large personal fortune along the way.
Last year, Coughlin Stoia Geller Rudman & Robbins LLP was the top U.S. class-action practice in terms of total value of settlements, according to shareholder advisory firm Institutional Shareholder Services.

I wonder if someone ought to prime these predators and suggest that there might be some rich pickins among the City bankster spivs. Seems to me that cooking the books is a prima facie case of fraud.

Edited by Realistbear

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 284 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.