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A Question About "action" On Banks

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In many debates on here about subjects such as welfare, tax and so on someone will come in and say that it's all wrong to address anything while bankers still get bonuses or fleece us, and so on. This is often in the context of attacking whatever the government is doing - such as reforming welfare, cutting spending or whatever - because they aren't "sorting the banksters".

I am no fan of banks. I have little or no respect for what they do, which seems incredibly easy compared to what I do for a living. However I wonder whether anyone can set out what they would do in respect of the banks bearing in mind their mobility of operation and the heavy reliance of the UK for the tax arising from financial sector earnings.

The complaints are well rehearsed, indeed repeated virtually 50% of the threads every day. What I'm interested in is a practical agenda of steps which could make useful change without shutting the country down.

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In many debates on here about subjects such as welfare, tax and so on someone will come in and say that it's all wrong to address anything while bankers still get bonuses or fleece us, and so on. This is often in the context of attacking whatever the government is doing - such as reforming welfare, cutting spending or whatever - because they aren't "sorting the banksters".

I am no fan of banks. I have little or no respect for what they do, which seems incredibly easy compared to what I do for a living. However I wonder whether anyone can set out what they would do in respect of the banks bearing in mind their mobility of operation and the heavy reliance of the UK for the tax arising from financial sector earnings.

The complaints are well rehearsed, indeed repeated virtually 50% of the threads every day. What I'm interested in is a practical agenda of steps which could make useful change without shutting the country down.

First of all, with the state owned banks, you can use your shareholder control to clamp down on excessive wages, and bonuses, That is the quid pro quo for the taxpayer putting in money into the equity of the bank. That is practical and doable, you just need the will.

With the other banks, you can tell them to cut the bonuses, cut top pay, and increase capital. If they dont like it, you can remove the guarantees on their loans, and those banks may go bust. So what if they do, a bit of political trouble for a short while, but the slack will be taken up by other businesses, who will learn their lessons and not lend recklessly.

Change the law, so that only the individual who is the beneficial owner of the share can vote on that share, to stop institutions gaining control of the capital of others.

Investigate and prosecute liar loan fraud all the way up the chain, and seize assets of wrongdoers in the banks.

The simple above measures will cause bank profits to return to normal low levels, and mean that there is no excess money to be stolen by bankers anyway. The crooks will be rotting in jail, and house prices will be lower, and only available to those that can back up a mortgage application with evidence of earnings.

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First of all, with the state owned banks, you can use your shareholder control to clamp down on excessive wages, and bonuses, That is the quid pro quo for the taxpayer putting in money into the equity of the bank. That is practical and doable, you just need the will.

OK, but won't that lead to the entity becoming denuded of anyone who can do better elsewhere, and so screw it up? After all, the people are a separate matter from the corporate entity.

With the other banks, you can tell them to cut the bonuses, cut top pay, and increase capital. If they dont like it, you can remove the guarantees on their loans, and those banks may go bust. So what if they do, a bit of political trouble for a short while, but the slack will be taken up by other businesses, who will learn their lessons and not lend recklessly..

Won't that make the UK uncompetitive as a place to attract financial institutions? Can the UK stand the consequences?

Change the law, so that only the individual who is the beneficial owner of the share can vote on that share, to stop institutions gaining control of the capital of others..

Not sure what you mean to achieve here.

Investigate and prosecute liar loan fraud all the way up the chain, and seize assets of wrongdoers in the banks..

Sure, I see that akin to busting the street corner drug dealer while Mr Big is unaffected.

The simple above measures will cause bank profits to return to normal low levels, and mean that there is no excess money to be stolen by bankers anyway. The crooks will be rotting in jail, and house prices will be lower, and only available to those that can back up a mortgage application with evidence of earnings.

What will the competition do to counter your tactics?

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OK, but won't that lead to the entity becoming denuded of anyone who can do better elsewhere, and so screw it up? After all, the people are a separate matter from the corporate entity.

No, most will stay with the bank. The threat to leave is a pretty holllow threat. There are plenty of people who will be willing to replace those who leave anyway.

Won't that make the UK uncompetitive as a place to attract financial institutions? Can the UK stand the consequences?

It will make it unattractive to bankers who want to steal from shareholders and taxpayers and anyone else they can get their teeth into. That would be a good thing for the nation. The consequences would be most benign.

Not sure what you mean to achieve here.

At the moment directors are able to award themselves bonuses, because the votes of the owners are stolen, and wielded by other insiders who incestuoulsy jack up each others remuneration. This law stops those votes being stolen, and places the power in the hands of those who care about the return to shareholders, namely themselves. Directors paying themselves too much will then be voted out.

Sure, I see that akin to busting the street corner drug dealer while Mr Big is unaffected.

Where there has been evidence that those at the top knew of or colluded in wrongdoing, Mr Big would not be unnaffected. For example, if HBOS was trading insolvently, the directors could be doing a nice bit of jail time. That would focus a few minds.

What will the competition do to counter your tactics?

Behave honestly and stick to the law.

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Won't that make the UK uncompetitive as a place to attract financial institutions? Can the UK stand the consequences?

Our financial sector includes vast numbers of funds of many kinds, not 'too big to fail' or underwritten by the taxpayer. How will they be affected by loss of privileges?

We need to call the city's bluff on buggering off to ... wherever.

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OK, but won't that lead to the entity becoming denuded of anyone who can do better elsewhere, and so screw it up? After all, the people are a separate matter from the corporate entity.

These would be the same people who shoved it over the cliff in the first place.. I'm sure a fair few would try to jump ship, and I'm equally sure that they are far more replaceable than they think.

Won't that make the UK uncompetitive as a place to attract financial institutions? Can the UK stand the consequences?.

Problem is, those institutions don't have anywhere else to go easily. Not every country in the world is happy to implicitly insure a few trillion dollars/pounds of balance sheet. Plus, those that are are not fun places to live, mostly.

Not sure what you mean to achieve here.

Generally, large public companies such as banks are owned by the public through pension funds. But it is the pension fund managers - who live and work in the same rarefied environment as the bankers - who vote on things like pay packages for the top executives. Hence the concept of share ownership is broken, and becomes a cabal where companies are run in the interests of management and not owners.

(I assume you run your own business.. imagine if you appointed a manager, and that selfsame manager decided to pay himself the entire profits of the company.. including assumed future profits. On a scale of 1 to apocalyptic, how would you feel? )

The one thing that the investment banking/speculation business really fears is a tobin/transaction tax. There are, I suspect, whole areas of finance which are basically useless for anything but taking deals with tiny margins and using huge amounts of leverage to make them profitable; none of which does anyone any good. A transaction tax would close a lot of this down, whilst having no discernible impact on longer term investment.

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No, most will stay with the bank. The threat to leave is a pretty holllow threat. There are plenty of people who will be willing to replace those who leave anyway.

Effectively that would be an experiment in running a lower paid bank. I like the idea, but it's an experiment. Just a thought, but has anyone done this before (like a Branson, or Stelios) and made a fortune? If not, why not?

It will make it unattractive to bankers who want to steal from shareholders and taxpayers and anyone else they can get their teeth into. That would be a good thing for the nation. The consequences would be most benign.

Would it really be good news if the financial institutions relocated to somewhere else. Their trade would still be plied, but the tax revenue would be gone. Are you certain that's good news?

At the moment directors are able to award themselves bonuses, because the votes of the owners are stolen, and wielded by other insiders who incestuoulsy jack up each others remuneration. This law stops those votes being stolen, and places the power in the hands of those who care about the return to shareholders, namely themselves. Directors paying themselves too much will then be voted out..

If the intitution is a pension fund who do you suggest wields the votes differently from now.

Where there has been evidence that those at the top knew of or colluded in wrongdoing, Mr Big would not be unnaffected. For example, if HBOS was trading insolvently, the directors could be doing a nice bit of jail time. That would focus a few minds..

I'm all for prosecution if it can be made to stick.

Behave honestly and stick to the law.

By "competition" I meant other countries trying to attract this industry.

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Our financial sector includes vast numbers of funds of many kinds, not 'too big to fail' or underwritten by the taxpayer. How will they be affected by loss of privileges?

We need to call the city's bluff on buggering off to ... wherever.

I was referring to the proposed edict to cut pay. I think they'd not like that for sure.

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Generally, large public companies such as banks are owned by the public through pension funds. But it is the pension fund managers - who live and work in the same rarefied environment as the bankers - who vote on things like pay packages for the top executives. Hence the concept of share ownership is broken, and becomes a cabal where companies are run in the interests of management and not owners.

(I assume you run your own business.. imagine if you appointed a manager, and that selfsame manager decided to pay himself the entire profits of the company.. including assumed future profits. On a scale of 1 to apocalyptic, how would you feel? )

This is one of my favourite hobby horses; the separation of ownership from control. What I'm just not clear about is how voting rights go beyond the collective institution.

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I think we need to stand back and take a look at what banks do.

They do not create wealth; they grease the wheels of industry with money (loans from High Street Banks; Investment from Investment Banks) and cream off profits, and fees for operating funds.

As they do not create wealth, the profits are at someone else's expense. If banks operated entirely within national borders, it would be a zero-sum game for the economy (and the exchequer).

However, by being an international banking hub. a lot of the profit is at the expense of parties who are not in the UK. This is how banks contribute to our balance of payments, and benefits the UK through taxation.

Two problems arise from this:

1 ) We are profiting from other nations (as all international trade attempts to do), but are we exploiting poorer nations?

2 ) The wealth is in the banker's hands, distorting the spread of wealth within the UK. The extra wealth means that the rich are richer, without the poor necessarily becoming better off pro rata.

Banker's bonuses are offensive and irritating, but the public focuses too much on the size of these bonuses, whereas I am more offended by what the bonuses are awarded for, which is essentially for screwing everyone else.

If international criminals paid their taxes, perhaps the government would turn a blind eye to them too. Perhaps this is what is happening with Russian oligarchs in the UK.

Edited by happy_renting

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I think we need to stand back and take a look at what banks do.

They do not create wealth; they grease the wheels of industry with money (loans from High Street Banks; Investment from Investment Banks) and cream off profits, and fees for operating funds.

As they do not create wealth, the profits are at someone else's expense. If banks operated entirely within national borders, it would be a zero-sum game for the economy (and the exchequer).

However, by being an international banking hub. a lot of the profit is at the expense of parties who are not in the UK. This si how banks contribute to our balance of payments, and benefits the UL through taxation.

Two problems arise from this:

1 ) We are profiting from other nations (as all international trade attempts to do), but are we exploiting poorer nations?

2 ) The wealth is in the banker's hands, distorting the spread of wealth within the UK. The extra wealth means that the rich are richer, without the poor necessarily becoming better off pro rata.

Banker's bonuses are offensive and irritating, but the public focuses too much on the size of these bonuses, whereas I am more offended by what the bonuses are awarded for, which is essentially for screwing everyone else.

If international criminals paid their taxes, perhaps the government would turn a blind eye to them too. Perhaps this is what is happening with Russian oligarchs in the UK.

Whilst there are many things wrong with banks, they do serve a very useful function indeed. What they do is allow those who have excess capital for which they have no use, to trade with those who have no capital but a need for it. The idea is that one gives the capital to the other, who then repays it, with interest at a later date. This can simply be for people who want to spend now, but wont have the capital until later on. There is greater utility for them to make that monetary trade through time, paying for it with the interest rate.

More crucially, it allows investors who have an idea to create something useful, like a factory, to put idle resources to work. Part of the profits of their activities finance the repayment to lenders.

This ability to move resources to those who use them is key to the success of the west. .

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I think we need to stand back and take a look at what banks do.

They do not create wealth; they grease the wheels of industry with money (loans from High Street Banks; Investment from Investment Banks) and cream off profits, and fees for operating funds.

As they do not create wealth, the profits are at someone else's expense. If banks operated entirely within national borders, it would be a zero-sum game for the economy (and the exchequer).

However, by being an international banking hub. a lot of the profit is at the expense of parties who are not in the UK. This is how banks contribute to our balance of payments, and benefits the UK through taxation.

Two problems arise from this:

1 ) We are profiting from other nations (as all international trade attempts to do), but are we exploiting poorer nations?

2 ) The wealth is in the banker's hands, distorting the spread of wealth within the UK. The extra wealth means that the rich are richer, without the poor necessarily becoming better off pro rata.

Banker's bonuses are offensive and irritating, but the public focuses too much on the size of these bonuses, whereas I am more offended by what the bonuses are awarded for, which is essentially for screwing everyone else.

If international criminals paid their taxes, perhaps the government would turn a blind eye to them too. Perhaps this is what is happening with Russian oligarchs in the UK.

* They're underwritten implicitly and in actuality by the taxpayer. Including their overseas liabilities/losses.

* They have a monopoly on money creation via their govt. licence

* They pay themselves out of 'profits' which are yet to materialise with no clawback when they don't.

* They're a legalised scam and without these govt. licences and implicit/explicit guarantees wouldn't exist.

They perform no useful social function, not even in financial intermediation, beyond perhaps the day to day clearing system, and should be shut down, their assets and land liquidiated and the criminals running them forced to pay back their illegal wages/bonuses and charged with theft.

We'd manage just fine without them.

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Whilst there are many things wrong with banks, they do serve a very useful function indeed. What they do is allow those who have excess capital for which they have no use, to trade with those who have no capital but a need for it. The idea is that one gives the capital to the other, who then repays it, with interest at a later date. This can simply be for people who want to spend now, but wont have the capital until later on. There is greater utility for them to make that monetary trade through time, paying for it with the interest rate.

More crucially, it allows investors who have an idea to create something useful, like a factory, to put idle resources to work. Part of the profits of their activities finance the repayment to lenders.

This ability to move resources to those who use them is key to the success of the west. .

That's how they used to work but they blew their supposed reserve cash capital (house keeping) buying up/trading toxic CDO's and when the first bank run hit they shat themselves and shut down all lending.

They were lending out cheap money at ratios of £50 for every £1 held in their coffers at the height of their madness and sheer bonus grabbing, short-termist greed of their executives.

The 'normal' safe rate is 5x-7x not 50x

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... and the heavy reliance of the UK for the tax arising from financial sector earnings.

Just on this specific point: the government should encourage smoking, as it is heavily taxed.

Of course, the costs of smoking (cancer...) far outweigh the tax take.

Some may suggest that it's exactly the same story with the banks ;)

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Split the banks into the retail peoples banks, and the casino betting investment banks...then you can let the gamblers fail without recourse to the innocent savers and investors.

I have no problem with paying for a service if savings are safe and can keep inline with inflation, knowing and trusting that savings are lent to the right people at a reasonable risk and price.....let the betting shops pay or not pay their own way, they then can take whatever risks they are prepared to play knowing that innocent others are not paying a price for their high risk high failure stance...not using the money of people that don't want to be part of their high risk game.....let the reckless fail without having to pull the rest down with them. ;)

Edited by winkie

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Just on this specific point: the government should encourage smoking, as it is heavily taxed.

Of course, the costs of smoking (cancer...) far outweigh the tax take.

Some may suggest that it's exactly the same story with the banks ;)

Actually, given the now extreme taxes on smoking, and the savings made on state pensions, I think that a lot of smokers are now net contributors.. and they pass on houses at a younger age, helping HPC. Frankly I'm surprised the government isn't encouraging it..

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Whilst there are many things wrong with banks, they do serve a very useful function indeed. What they do is allow those who have excess capital for which they have no use, to trade with those who have no capital but a need for it. The idea is that one gives the capital to the other, who then repays it, with interest at a later date. This can simply be for people who want to spend now, but wont have the capital until later on. There is greater utility for them to make that monetary trade through time, paying for it with the interest rate.

More crucially, it allows investors who have an idea to create something useful, like a factory, to put idle resources to work. Part of the profits of their activities finance the repayment to lenders.

This ability to move resources to those who use them is key to the success of the west. .

fine...if that was all they did and helped move money at my behest to where I want it to go, safely and cheaply.

they can do that from anywhere in the World....nice to have a branch, and why would an organisation see the UK as a place NOT to do business...G7 economy etc etc.

so, even if the big 4 left for foreign shores, others would step in and take their place to fill the void.

Banks are greedy by nature, and HAVE to be severely regulated....Regulation is the key, and it has to be tough and fair.

By the by, if ANY bank complains it has insufficient capital...12bn in bonuses would have been nice to keep in house as a nest egg.

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A separation between retail and investment banking, and smaller banks full stop, particularly if they're genuinely making obscene profits. There's nothing wrong getting a huge return by virtue of it being a small percentage on an even vaster amount, but it just isn't right at all when that return is concentrated in a very few. It's also probably also not the best outcome for the economy as a whole (which ideally would involve overheads such as banking, be it commercial or retail, only making enough to stay afloat, so that resources can be wholly directed towards productive areas). Smaller banks would mean more competition, and the ones that take the bad risks can go bust without dragging everything else around them - no more "too big to fail".

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fine...if that was all they did and helped move money at my behest to where I want it to go, safely and cheaply.

they can do that from anywhere in the World....nice to have a branch, and why would an organisation see the UK as a place NOT to do business...G7 economy etc etc.

so, even if the big 4 left for foreign shores, others would step in and take their place to fill the void.

Banks are greedy by nature, and HAVE to be severely regulated....Regulation is the key, and it has to be tough and fair.

By the by, if ANY bank complains it has insufficient capital...12bn in bonuses would have been nice to keep in house as a nest egg.

Bloo,

a wolf in sheeps clothing. It is only the honest and legitimate trade that banks do carry out, that has enabled the crooks to takeover and strip money from the shareholders and taxpayers in a troughing frenzy. The current crisis has as you say, underlined the need for strict and prompt regulation. And remember, it isnt the banks that are greedy by nature, it is the culture of greed that individuals possess which has grown within them, as personal gain is valued more than moral probity.

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Bloo,

a wolf in sheeps clothing. It is only the honest and legitimate trade that banks do carry out, that has enabled the crooks to takeover and strip money from the shareholders and taxpayers in a troughing frenzy. The current crisis has as you say, underlined the need for strict and prompt regulation. And remember, it isnt the banks that are greedy by nature, it is the culture of greed that individuals possess which has grown within them, as personal gain is valued more than moral probity.

I would add that compliant politicians also had a hand in the scam....and central bankers protecting failed institutions...moral hazard is built in to the central banking system.

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Split the banks into the retail peoples banks, and the casino betting investment banks...then you can let the gamblers fail without recourse to the innocent savers and investors.

Practically it's the only thing to do. And it's simple. Let them pay whatever bonuses they want, and when they fail let them fail.

Merv has something like this in mind, but apparently the gubmint is waiting to 2013 to introduce legislation that addresses the UK's suicidal relationship with the banks. Merv will be gone by then.

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In many debates on here about subjects such as welfare, tax and so on someone will come in and say that it's all wrong to address anything while bankers still get bonuses or fleece us, and so on. This is often in the context of attacking whatever the government is doing - such as reforming welfare, cutting spending or whatever - because they aren't "sorting the banksters".

I am no fan of banks. I have little or no respect for what they do, which seems incredibly easy compared to what I do for a living. However I wonder whether anyone can set out what they would do in respect of the banks bearing in mind their mobility of operation and the heavy reliance of the UK for the tax arising from financial sector earnings.

The complaints are well rehearsed, indeed repeated virtually 50% of the threads every day. What I'm interested in is a practical agenda of steps which could make useful change without shutting the country down.

There are two dimensions to this- one is the moral absurdity of a group of people who have destroyed millions of lives being allowed to profit from doing so, while the government and the law look on apparently helpless to intervene.

This moral issue would remain even if it could be claimed that the net impact of the bankers were a positive- which is not the case if the sum total of what their antics have cost us were honestly calculated.

It is simply morally unsustainable for the state to fail to deal with the bankers excesses while demanding austerity and moral commitments from the poor.

The second is a practical issue of value added;

Suppose you had an employee who consistently brought in over many years high profits for your company- then one day his entire strategy blows up, wiping out all the profit he made in the past and nearly bankrupting the company.

Do you keep him in the company in the hope that he will make those lost earning back again, or get rid of him because next time he blows up it might well be the end of the company?

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I don't think the analogy is suitable, and in any case we don't need one. We can just understand the situation and cope with it.

As for the moral thing, that is only useful if it helps us cope with the situation. Does taking that position help keep the UK from financial collapse if we risk losing a financial services industry?

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



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