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How The Bankers' Minds Work

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Andrew Clark's Business Comment in the Observer today.

The bit of dialogue is, as Mr Clark says, particularly enlightening.

http://www.guardian.co.uk/business/2011/jan/16/andrew-clark-bank-bonuses-diamond

"MPs fail to land a knockout punch on Diamond BobBarclays' boss parries Treasury select committee, but what do you expect when you question a banker's pursuit of riches?

With a glossy grin, a dry wit and bags of affable Irish-American charm, Barclays' chief executive, Bob Diamond, is a difficult man to discombobulate. His stratospheric career is built on a mastery of canny negotiation – and the man from Massachusetts was never going to be outwitted by a bunch of backbench MPs in a fusty Westminster committee room.

During a rancorous session last week on bankers' bonuses, the Treasury select committee failed to guilt-trip Diamond into a commitment to waive his personal pay cheque, which could top £8m for 2010. And the Barclays boss, who has already taken home £75m over five years, cheerfully dodged an invitation from a Labour MP to opine on whether it was easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven.

There was, however, an enlightening exchange that is worth reproducing in full, because it goes to the heart of the gap in attitudes between bankers and the public. It began when David Ruffley, a Conservative MP, cited estimates from the Bank of England that the entire banking industry has benefited to the tune of £100bn from a bailout of its weaker players.

"Are you grateful to the British taxpayer for subsidising you in this way?" Ruffley asked.

Diamond: "There are a couple of answers to this question..." Ruffley: "No, are you grateful to the British taxpayer?"

Diamond: "We are very grateful to..." Ruffley: "To the British taxpayer?" Diamond: "May I answer? We are very grateful to the central banks around the world, to the governments around the world, for the actions they took."

Ruffley: "No, I'm talking about the British government, who stand in the shoes of the British public. They say, and this is accepted, that you're too big to fail. That makes you more credit-worthy; it means you can borrow much more cheaply than if you're a standalone organisation. Now are you grateful to the British public?" Diamond: "Can I ask you one question?'

Ruffley: "I ask the questions, you give the answers. Are you grateful to the British public?" Diamond: "We're very grateful to the central banks; we're very grateful to everybody that's helped the financial system get back..." Ruffley: "The British taxpayer?" Diamond: "We're thankful to everyone. But if I can just point out, last week we raised money at about 50 to 100 basis points lower yield than the government guaranteed banks in the UK."

Evidently, Diamond (who is known internally as RED after his initials) doesn't do humble and isn't going to toady to ordinary folk on the street. His view is that Barclays wasn't in trouble in the financial crisis, isn't a villain and has nothing to be ashamed of. Other banks, including RBS and HBOS, may have written rotten mortgages and handed out reckless loans. But not Barclays. So why on earth shouldn't his bank distribute £2.5bn in bonuses to its staff? And as for an implied government backstop, Barclays can raise money on the private markets at a lower rate than its state-owned rivals – so, Diamond feels, it isn't in thrall to taxpayers at all.

The public disagrees. In the view of many, it wasn't mere individual banks that failed. It was the broader system of casino-like trading – of ever more opaque derivatives, of credit default swaps and of securitisation that big-brained analysts thought would minimise risk from toxic assets instead of broadening it to infect an ever widening circle of institutions. And, from the perspective of the industry's critics, a glaring question still hasn't been answered: why do bankers need such stratospheric pay cheques to motivate them, while surgeons, soldiers, teachers, airline pilots, even industrialists will do a decent day's work for so much less? Diamond's answer was that Barclays must pay top dollar because it competes for staff in a global market, aiming to wrestle talent away from the likes of Goldman Sachs, Deutsche Bank and JP Morgan. But that's just a way of saying "we're doing it because everybody else is doing it".

The real answer lies in Diamond's skilful, wilful evasiveness. Investment bankers' core skill is negotiation. They are paid to milk a tiny bit of extra margin, a sliver of yield, a little extra profit from a deal. They're encouraged to guard their cards fiercely, to spot the most fleeting of opportunities for arbitrage, to go an extra mile to make a few quid for every corporate client. Money is their working life and bargaining is their business.

Surgeons are motivated by at least a passing interest in medicine alongside their pay cheques. Soldiers may enlist because they relish action. The chief executive of Facebook has a passing interest in technology. But investment bankers are only interested in money – and if they didn't fight for the maximum conceivable bonus at all costs, they'd be as incongruous as a chain-smoking surgeon or a pacifist private. Calls for voluntary "restraint" are never, ever going to work."

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But guns and the fist of the people will.

Indeed. Not advocating we shoot them, but words mean nothing to them. I just hope one day they get their comeuppance.

Nice Tomodachi avatar by the way!

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Indeed. Not advocating we shoot them, but words mean nothing to them. I just hope one day they get their comeuppance.

Nice Tomodachi avatar by the way!

welcome.

I would have asked Bob Diamond what the difference is between a CDS and an Insurance policy.

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But guns and the fist of the people will.

We have some of the toughest gun controls in the World. Just where would you get yours?

The fist of the people. Don't make me laugh. People in this Country are so placid they do as they're told on everything. They are so controlled they wouldn't know where to begin. They are in debt up to their necks and wouldn't dare do anything which might make them homeless.

You're living in a dream world.

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Andrew Clark's Business Comment in the Observer today.

The bit of dialogue is, as Mr Clark says, particularly enlightening.

http://www.guardian.co.uk/business/2011/jan/16/andrew-clark-bank-bonuses-diamond

"MPs fail to land a knockout punch on Diamond BobBarclays' boss parries Treasury select committee, but what do you expect when you question a banker's pursuit of riches?

With a glossy grin, a dry wit and bags of affable Irish-American charm, Barclays' chief executive, Bob Diamond, is a difficult man to discombobulate. His stratospheric career is built on a mastery of canny negotiation – and the man from Massachusetts was never going to be outwitted by a bunch of backbench MPs in a fusty Westminster committee room.

During a rancorous session last week on bankers' bonuses, the Treasury select committee failed to guilt-trip Diamond into a commitment to waive his personal pay cheque, which could top £8m for 2010. And the Barclays boss, who has already taken home £75m over five years, cheerfully dodged an invitation from a Labour MP to opine on whether it was easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven.

There was, however, an enlightening exchange that is worth reproducing in full, because it goes to the heart of the gap in attitudes between bankers and the public. It began when David Ruffley, a Conservative MP, cited estimates from the Bank of England that the entire banking industry has benefited to the tune of £100bn from a bailout of its weaker players.

"Are you grateful to the British taxpayer for subsidising you in this way?" Ruffley asked.

Diamond: "There are a couple of answers to this question..." Ruffley: "No, are you grateful to the British taxpayer?"

Diamond: "We are very grateful to..." Ruffley: "To the British taxpayer?" Diamond: "May I answer? We are very grateful to the central banks around the world, to the governments around the world, for the actions they took."

Ruffley: "No, I'm talking about the British government, who stand in the shoes of the British public. They say, and this is accepted, that you're too big to fail. That makes you more credit-worthy; it means you can borrow much more cheaply than if you're a standalone organisation. Now are you grateful to the British public?" Diamond: "Can I ask you one question?'

Ruffley: "I ask the questions, you give the answers. Are you grateful to the British public?" Diamond: "We're very grateful to the central banks; we're very grateful to everybody that's helped the financial system get back..." Ruffley: "The British taxpayer?" Diamond: "We're thankful to everyone. But if I can just point out, last week we raised money at about 50 to 100 basis points lower yield than the government guaranteed banks in the UK."

Evidently, Diamond (who is known internally as RED after his initials) doesn't do humble and isn't going to toady to ordinary folk on the street. His view is that Barclays wasn't in trouble in the financial crisis, isn't a villain and has nothing to be ashamed of. Other banks, including RBS and HBOS, may have written rotten mortgages and handed out reckless loans. But not Barclays. So why on earth shouldn't his bank distribute £2.5bn in bonuses to its staff? And as for an implied government backstop, Barclays can raise money on the private markets at a lower rate than its state-owned rivals – so, Diamond feels, it isn't in thrall to taxpayers at all.

The public disagrees. In the view of many, it wasn't mere individual banks that failed. It was the broader system of casino-like trading – of ever more opaque derivatives, of credit default swaps and of securitisation that big-brained analysts thought would minimise risk from toxic assets instead of broadening it to infect an ever widening circle of institutions. And, from the perspective of the industry's critics, a glaring question still hasn't been answered: why do bankers need such stratospheric pay cheques to motivate them, while surgeons, soldiers, teachers, airline pilots, even industrialists will do a decent day's work for so much less? Diamond's answer was that Barclays must pay top dollar because it competes for staff in a global market, aiming to wrestle talent away from the likes of Goldman Sachs, Deutsche Bank and JP Morgan. But that's just a way of saying "we're doing it because everybody else is doing it".

The real answer lies in Diamond's skilful, wilful evasiveness. Investment bankers' core skill is negotiation. They are paid to milk a tiny bit of extra margin, a sliver of yield, a little extra profit from a deal. They're encouraged to guard their cards fiercely, to spot the most fleeting of opportunities for arbitrage, to go an extra mile to make a few quid for every corporate client. Money is their working life and bargaining is their business.

Surgeons are motivated by at least a passing interest in medicine alongside their pay cheques. Soldiers may enlist because they relish action. The chief executive of Facebook has a passing interest in technology. But investment bankers are only interested in money – and if they didn't fight for the maximum conceivable bonus at all costs, they'd be as incongruous as a chain-smoking surgeon or a pacifist private. Calls for voluntary "restraint" are never, ever going to work."

Like others I watched this live on SKY. Bob Diamond was good, very good.

We need the bob Diamond's of this world running this Country, not some pipsqueak self important MP's who have never done a day's work in their lives.

Diamond really showed how utterly sueless and hopeless our political leaders really are

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Like others I watched this live on SKY. Bob Diamond was good, very good.

We need the bob Diamond's of this world running this Country, not some pipsqueak self important MP's who have never done a day's work in their lives.

Diamond really showed how utterly sueless and hopeless our political leaders really are

evasion and obfuscation.

how about a little openess and truth.

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i have to admit, bankers seem to be made the scapegoat for every problem.

at the end of the day, its the public who borrowed too much money, and couldnt afford to pay it back.

the people borrowing the money have been made out to be victims when they are the ones who have caused all the problem.

its like accredting obesity problems to food manufacturers rather than individuals.

Edited by mfp123

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evasion and obfuscation.

how about a little openess and truth.

Up to the MP's to extract it. They failed because they are useless and hopeless. It doesn't help their cause the majority are poorly educated and have little if any world experience in anything other than their surgeries which deal with minor provincial issues.

The calibre of elected representatives is astoundingly low.

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i have to admit, bankers seem to be made the scapegoat for every problem.

at the end of the day, its the public who borrowed too much money, and couldnt afford to pay it back.

the people borrowing the money have been made out to be victims when they are the ones who have caused all the problem.

its like accredting obesity problems to food manufacturers rather than individuals.

Very true.

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i have to admit, bankers seem to be made the scapegoat for every problem.

at the end of the day, its the public who borrowed too much money, and couldnt afford to pay it back.

the people borrowing the money have been made out to be victims when they are the ones who have caused all the problem.

its like accredting obesity problems to food manufacturers rather than individuals.

I give my money to the bank for safekeeping.

Its their raison detre to pay me for it and return it to me.

To earn this trust they must be careful with it...they werent.

saying no is easy. they didnt. indeed, they provided cheap teaser loans and assured borrowers that they could find a cheaper deal at end of teaser deal.

Yes, borrowers are at fault, but bankers, being the professional in the deal were clearly negligent. deliberately so induced by the B word.

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i have to admit, bankers seem to be made the scapegoat for every problem.

at the end of the day, its the public who borrowed too much money, and couldnt afford to pay it back.

the people borrowing the money have been made out to be victims when they are the ones who have caused all the problem.

its like accredting obesity problems to food manufacturers rather than individuals.

I can't agree with that. It doesn't let the bankers off the hook for a second. If you leave your house unlocked and get burgled then you're a fool, and tough luck when the insurance doesn't pay out, but the burglar is still a thief who should be locked away.

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I give my money to the bank for safekeeping.

Its their raison detre to pay me for it and return it to me.

To earn this trust they must be careful with it...they werent.

saying no is easy. they didnt. indeed, they provided cheap teaser loans and assured borrowers that they could find a cheaper deal at end of teaser deal.

Yes, borrowers are at fault, but bankers, being the professional in the deal were clearly negligent. deliberately so induced by the B word.

Now reverse this argument into landlords/tenants?

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Now reverse this argument into landlords/tenants?

wut?

I dont give anything to a landlord for safekeeping...and neither the reverse

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I can't agree with that. It doesn't let the bankers off the hook for a second. If you leave your house unlocked and get burgled then you're a fool, and tough luck when the insurance doesn't pay out, but the burglar is still a thief who should be locked away.

There is no law which says you must leave your home locked.

Being a burglar is a criminal activity.

Your example is invalid.

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I give my money to the bank for safekeeping.

Its their raison detre to pay me for it and return it to me.

To earn this trust they must be careful with it...they werent.

saying no is easy. they didnt. indeed, they provided cheap teaser loans and assured borrowers that they could find a cheaper deal at end of teaser deal.

Yes, borrowers are at fault, but bankers, being the professional in the deal were clearly nwhole negligent. deliberately so induced by the B word.

they certainly had a part to play, but the the main blame lies with individuals.

the media makes out that lending out too much money was the problem but conveniently ignore the fact that it was the public who demanded the money and couldnt pay it back.

if you dont want to borrow money you dont have to. many people didnt and still dont.

if you borrow money and can afford to pay it back, theres no problem. if you borrow too much money, live beyond your means and cant pay it back its the indviduals fault primarily.

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Why were they even questioning Diamond anway? Incase the MPs on the committee have forgotten Barclays shunned gov't bailouts in favour of a private recapitalisation, I'm sure they took advantage of favourable BofE terms but they're not going to look a gifthorse of that proportion in the mouth.

Lets start grilling the heads of state owned banks, that's where the public interest lays. Starting with that fat twit Hester and his £7million pa remuneration package. And for God's sake, MPs; do your homework before you engage in these sessions.

Edited by Chef

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Why were they even questioning Diamond anway? Incase the MPs on the committee have forgotten Barclays shunned gov't bailouts in favour of a private recapitalisation, I'm sure they took advantage of favourable BofE terms but they're not going to look a gifthorse of that proportion in the mouth.

Lets start grilling the heads of state owned banks, that's where the public interest lays. Starting with that fat twit Hester and £7million pa remuneration package. And for God's sake, MPs; do your homework before you engage in these session.

All very true.

The MP's sitting there looking all self important and up to speed.

They showed themselves to be little people, idiots.

Ask why Lloyds was forced to merge. Where was Brown, that moron, who came up with such a marvellous suggestion/decision?

He ought to havbe been grilled.

Diamond for PM if you ask me. Canny bloke. We need someone like him to run our country.

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they certainly had a part to play, but the the main blame lies with individuals.

the media makes out that lending out too much money was the problem but conveniently ignore the fact that it was the public who demanded the money and couldnt pay it back.

if you dont want to borrow money you dont have to. many people didnt and still dont.

if you borrow money and can afford to pay it back, theres no problem. if you borrow too much money, live beyond your means and cant pay it back its the indviduals fault primarily.

What about these NINJA loans given out by US banks. Loans to people who had No Income, No Jobs and No assets. You still claiming that the main blame lies with the individual? Hmmm.

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What about these NINJA loans given out by US banks. Loans to people who had No Income, No Jobs and No assets. You still claiming that the main blame lies with the individual? Hmmm.

I don't hear too much whinging about Quick Quid.

APR 2,248%.

Still people borrow. Total madness.

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How long have you been here Chef?

Barclays were bust. They lent money to individuals to buy parts of their business to recapitalise themselves.

They have taken full advantage of the change to the rules to suspend mark to market accounting.

They availed themselves of the liquidity window at the central banks.

They have benefited from the near 0% rates, the money printing, the artificial maintaining of asset prices at bubble levels.

How on earth can you (or Bob) argue that Barclays are not alive today because of the tax payer. The mind boggles.

Even if you just include the banks who would have gone bust - they would have been a mere domino.

Barclays were one of the few high street banks to not fling themselves at the feet of Gordon Brown when the going got tough, politicians in general were quite miffed that they had the temerity to refuse public money when it was wafted under their nose. In fact IIRC they even salvaged some parts of the wreck that was Lehman Brothers during the depths of the crisis, that shows confidence in the face of adversity! Yes they have gained from the general low interest, banker friendly environment but the only people to blame for that are the Labour party.

It would make more sense for Diamond to grill the MPs, and he'd do a better job of it.

Edited by Chef

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I know we've been over this many times before, but bad lending on its own was not the problem - it was the securitisation mkt. By bundling up the mortgages, chucking them into an SPV, and flogging them as bonds with a phoney rating, they freed up the balance sheets. This allowed round after round of unchecked mortgage lending which boosted house prices and BTL empires across the land. The problem was the securitised mortgage bonds were founded on fraudulent (usually salary) information that bleating Joe Public is so swift to forget. Sure, banks made horrendous mistakes, but also borrowers who blatently lied on motgage application forms (usually aided and abetted by a nudge and a wink from an IFA) are just as culpable. Its symptomatic of society that if we can shift blame away from ourselves then we will. And now politicians, the clergy and MSM have endorsed banker bashing, to the point now where Nicky Campbell asks the question 'Will bankers go to heaven?' as a serious debate. I bet most bankers would swap their salary with Campbells.

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Barclays were one of the few high street banks to not fling themselves at the feet of Gordon Brown when the going got tough, politicians in general were quite miffed that they had the temerity to refuse public money when it was wafted under their nose. In fact IIRC they even salvaged some parts of the wreck that was Lehman Brothers during the depths of the crisis, that shows confidence in the face of adversity! Yes they have gained from the general low interest, banker friendly environment but the only people to blame for that are the Labour party.

It would make more sense for Diamond to grill the MPs, and he'd do a better job of it.

They were able to avoid the government bail out only due to their greed in trying to buy the best bits of Lehmans at a knock down price with Qatar Sovereign Wealth funding. They themselves needed liquidity but were able to borrow it cheaper when this deal feel through from the Qataris. History favoured them, however they'd have sunk with or without this funding if the other banks hadn't been rescued.

Banks and borrowers, well it's a bit like drugs dependency and dealers. The fact is that morally the whole banking sector raced to the bottom and once there the only thing that kept it going was fear of what would happen once the music stopped. Many many accounts of the crunch mention that many on the banks boards feared that greed would the banks to start feed off their own and even their own flesh. Cannibalism

Sorry I think that for the world to evolve we must totally reform the banking sector and force fiscal literacy on the public. No more head in the sand.

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Diamond for PM if you ask me. Canny bloke. We need someone like him to run our country.

As if you haven't noiticed, the PM doesn't run the country - the bankers do.

The PM is a guy that shows up on TV and talks about lots of things. Then he talks some more. And then some.

Yep, the PM does a lot of talking.

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  • 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% +
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      • Even
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      • up 5%



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