Thursday, February 19, 2009

The Prime Minister lays out a four-point plan to end the excesses of the bonus culture

We won't pay for bankers' one-way bets

Everywhere I go in Britain, I sense and share the anger and dismay of millions of hard-working people who have watched in disbelief during a year in which irresponsible practices in global banks have brought the world's financial system close to collapse.

Posted by gardeniadotnet @ 07:04 AM (1416 views)
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25 thoughts on “The Prime Minister lays out a four-point plan to end the excesses of the bonus culture

  • The bonus’s have been paid.The profits taken.The dividends paid out.
    All that is left is a lot of insolvent part nationalised banks and with the severity of this depression its unlikey that the banks will make any profits or bonus’s for the employee’s anyway.Empty words from an empty head.
    These policies should have been implimented in 2002/03 when the damage was being done, but the banks where NOT regulated where they?
    Brown and Nu labour are a disgrace and they need to be removed.

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  • Eternal Sceptic says:

    There were many of us fairly hacked off with the bonus culture many years ago. With the level of greed manifested by the bonus culture, a 2 year old with a frontal lobotomy could puzzle out that it would all end in tears. I am afraid Reagonomics and Thatcherism started the rot by loosening regulation, and when politicians glide from the public trough to bottomless directorship troughs, they are so busy guzzling the real world passes them by. I do not see a cat in hells chance of green shoots of recovery when they are trying to grow in a blighted wasteland still smothered in hot ash. Life is about to get nasty for many people.

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  • So last October the four top executives of RBS and HBOS were removed without compensation, ….

    Not quite.

    … the old RBS board have now lost their jobs and the HBOS board has been abolished.

    Erm, Trainset Hornby from HBOS is still hired as a consultant to HBOS on an eye-watering £60,000 a week.

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  • Why do GB’s plans always need 4 points?

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  • Recent bonuses have been based on fraudulent trades, or came from bailout money. Those bonuses were bad, but for lack of regulation & presence of unregulated bailouts. So, start enforcing laws & swap bailouts for tax cuts. Bonuses 4 legitimate gain r good

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  • Wage & price controls for the legitimate economy sever the link between your fund manager & their success in managing your portfolio. They now get money primarily from government bailout. So who do they work for now. Will you call 4 wage & price controls?

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  • Someone has to pay for this, we know that, so perhaps i’m being simplistic, but the general options are – taxpayers bail out the banks, those who profited from the whole scam of the last 10 years or so bail out the banks, or the banks are allowed to fail and those who gambled on things only getting better fail with them.
    There is only one option that punishes the prudent as well as the reckless, the innocent as well as the guilty, only one option that will restrict all wealth creation in the years to come, not just that of the reckless.
    You have to wonder why that option has been picked? Really there’s only one answer to that and it’s not the one we are hearing – the rich elite who were reckless are being protected by their political buddies.

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  • What is needed is a radical overhaul of the tax system (which, in short, is an attack on the greedy rich who exploit us all and hide it)… and we might have the means to bring it about. The people don’t rebel when they’re getting fat, but the rich have pumped credit into the system to stop us seeing through their lies. The day of reckoning is near… and it’ll be interesting in the YouTube age to see how easy it is to supress popular sentiment. I’m not really advocating Socialism, just a fair system that doesn’t allow certain forms of criminal behaviour to be seen as acceptable under the deciet of a ‘free market’.

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  • There certainly has been a very unbalanced economy in recent years – thanks to barely regulated globalisation. I too think that the tax system needs to move towards a more progressive one, with the removal of all the tax dodges and access to tax havens. I would very much like to see the culpable wealthy individuals brought to account and made to pay for their egregious errors. I don’t expect to, however. There does seem to be a tacit law that the very rich hang on to what they’ve got, even when it was acquired largely the result of wealth transfer than wealth creation.

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  • Brown is closing the stable door that he opened 12 years ago. The prime movers in creating this mess were the Wall Street investment banks. By 1997 they had wiped out the London ones and London became a satellite providing a huge shadow banking system servicing Wall Street’s requirement for excessive leverage. If the US system of financial regulation wasn’t lax enough the Wall Street mafia relied on Blair/Brown to provide them with a compliant and servile regulatory system in London, where Wall Street banks regulated themselves.

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  • ”I sense and share the anger and dismay of millions of hard-working people who have watched in disbelief during a year in which irresponsible practices in global banks have brought the world’s financial system close to collapse.”

    Gordon, not only did you stupidly fail to appreciate those irresponsible practices, you actually publicly applauded them :-

    ”your unique innovative skills, your courage and steadfastness”
    ”the outstanding invaluable contribution you make to the prosperity of Britain”
    ”Britain needs more of the vigour, ingenuity and aspiration that you already demonstrate.”
    ”In an era history will record as the beginning of a new golden age for the City of London”

    You also congratulated yourself for resisting pessure to toughen up regulation of these practices.

    So, are you incompetent or complicit?

    Either way, you are not fit for purpose and should resign.

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  • The attack on bonuses is political pandering… the politicians would prefer the bonuses to be big so they take the tax and furthermore the issue is tiny compared with the real one of the economy itself.

    Don’t misjudge me – I do not believe the bankers that participated in the game of musical chairs deserve anything, I just think the whole thing is a distraction.

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  • 51ck-6-51x I agree. It’s a deception. Brown is trying to make it look like the bankers fault. The bankers work for private individuals, they owe an apology to their shareholders but they are not our voted representatives. The buck stops at Brown. This ‘bonus’ thing is cheap popularism. The reason (in fact) that some bonuses are being paid is on performance. A great deal of banks bread and butter stuff is performing well, offset by massive massive gambles in Investment and Corporate divisions… at any rate it’s a tiny symbolic gesture at best.. fidding while rome burns. And when he’s burnt the straw men of banking, where else will his blame game run (it’s an international crisis but wasn’t an international boom apparently).

    I’m actually (or was) a fan of Brown.. i’m quite tolerant of him but this last 4 months have been a decent into farce. He needs to go, today.

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  • dohousescrashinthewoods says:

    51ck-6-51x, ketha, definitely. This is a Daily Wail sideshow-trial to take the heat off the government.

    After all, who was it that surrounded themselves with high-rolling financial friends and gave (and continues to give) them well paid perches in government and the treasury? None other than the prime-chancellor-minister himself.

    I just think it’s a farce. The “contrite bankers” don’t really care and Flash Gordon wants to reinstate his “friends” as “masters of the universe”. Sorry chaps, but the dream of a world ruled by financiers is, thank God, in ruins, defeated by its own flaws.

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  • 51ck-6-51x said…The attack on bonuses is political pandering… the politicians would prefer the bonuses to be big so they take the tax and furthermore the issue is tiny compared with the real one of the economy itself.

    Don’t misjudge me – I do not believe the bankers that participated in the game of musical chairs deserve anything, I just think the whole thing is a distraction.

    Completely agree – I said when RBS first mentioned bonuses that this was a set-up, so GB could come out and stop them and look like a hero.

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  • What can we do within our democratic society to stop this from happening? We continue to be controlled by those without a care for the country as a whole. This is not a Free Country, we are all slaves.

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  • Bonuses are a small issue in respect of their size to GDP, but I think they are a focus for the inequalities in society and the apparent impunity of many highly paid people involved in this mess, a kind of systemic corruption in some ways. In that sense they are an important issue, the tip of the iceberg if you like.

    GB is to blame inasmuch as he is PM, but I don’t think he is any more foolish than any other politician would have been in his place. The reasons behind this are cultural and have grown out of our economic and political system. I very much hope things will change for the better, but you can bet your bottom dollar (or foreign currency of your choice) that a change of PM or govt will not of itself do the job.

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  • The bonuses are a distraction because they are the symptom, not the cause of a system and society focused on short term profit at all costs. As we know, politicians and the media like to go after the symptoms and not the disease, because it is easy and good for soundbites.
    The first step is being governed by people who don’t rely on the current status quo, so fundamental reforms of our political system are needed. Zero private funding and zero private interests for politicians might be a start.

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  • I don’t really get this idea that politicians should be involved in the economy or creating jobs. The government are there to provide the framework, the law and the public services that we all need and are entitled to, such as education, health and so on – banking, even. This could be funded by a LVT that is stable and not dependant on the economic cycle, so we don’t have this ridiculous situation of suffering services due to economic woes. The reason why the government will fiddle with the money supply is if their votes depend on it – in other words, because we expect them to run the economy, because good public service is funded from it. If we do not expect them to run the economy, then we will not hold them responsible for it, we will hold business leaders responsible.
    Let the market work for what it is useful for – consumer products. This seems pretty clear to me, so why do the left and the right get it so wrong? (becuase it means less money and power in the hands of the few)

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  • shipbuilder –
    “I don’t really get this idea that politicians should be involved in the economy or creating jobs…”

    I go further, there a very few (if any*) things that centralised decision making can provide better solutions for than market driven ones**. I would like to see us move to a real free-market system, not what is now going to be referred to as the failed trial of free-markets which was no such thing.

    * The only things I am dubious about in an anarcho-capitalist system are the legal system, water supply (& possibly energy supply) and fixed transport (trains / trams / tubes / roads) – but there are others that are sure that even what are seen today as essential services or monopolies will still function better under a true free-market system. Even law courts and charities have been private in the past (in Iceland of all places, but long before the recent past!).

    ** after all democracy is just a kind of market – everyone gets one vote, after which a party (funded of course! what a skew…) gets to steer the decision making (after listening to the funded lobbies). Why not go the whole hog… in a true free-market private companies would probably spring up to take on the roles we think of as roles for the state, and since only consumption can drive them they would truly reflect the wants and needs of the people (apart from some things that are not catered for under the present system either, like love).

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  • It depends what you mean by free market. If you mean a plc, then I don’t agree about services. Essential services are completely different from consumer goods and in my opinion cannot benefit from the same approach. In addition to that, i’ve pointed out on here many times that private companies are not inherently more efficient, only companies run a certain way are, whether or not they are private. For example, ‘lean’ principles (as pioneered by Toyota) have nothing to do with shareholder profit – they are primarily customer-driven. I actually think that a lot of economists who talk about free market principles and supply and demand seem to have little experience of real business outside finance. The irony is that while private enterprise and the centralised state are seen as polar opposites, most large companies are still run rather like a totalitarian state with a planned economy. ‘Lean’ principles are actually the only the supply and demand model for a large business, yet very few are run this way. I suppose what i’m saying generally here is that private = efficient is just as simplistic and wrong-headed as left-wing = centralized.

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  • 51ck-6-51x – none of my comments were directed at you personally, by the way, I just used your post as a jumping-off point for mine. Actually, my post may need clarification – when trade is involved, I see supply and demand as the most efficient method – to me that’s common sense. I say supply and demand because private/profit-driven is neither inherently efficient nor supply and demand based. So – private, supply and demand based ‘lean’ companies to supply consumer goods and services and non-profit, public-owned (but not public-run) , ‘lean’ companies for ‘essential’ services, is my view.
    In addition, I would see a citizen’s wage as the most efficient way to distribute the funds from any Land Value Tax.

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  • shipbuilder –

    I agree, companies are often inefficient, but markets tend to efficiency – they usually end up separating the wheat from the chaff (especially without interventions and protections).

    The problems I see with certain services (not all, but unfortunately some of which are essential) and social provisions (e.g. Law courts & policing) are those of a lack of competition. I feel free markets can provide the best solutions (much as in nature) but when a monopoly arises there may need to be a secondary mechanism (although this could be an incorrect conclusion from exposure to the current state of a regulated system).

    I didn’t think there was any personal direction and value your comments, they are exactly the kind of view I am interested in hearing.

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  • I’ve thought about this a wee bit more and probably need to clarify my reasoning further. Where goods and services are optional, a free market system of private businesses in competition and making profits, I believe is fine.
    The search for profit will lead those companies to seek efficiency, although as I said the reality is that WITHIN most companies, the prevailing system is still one of central planning, so profit does not necessarily lead to efficiency.
    However for essential public services, I believe that private profit and money spent on competing – marketing etc. is inefficient and morally wrong. To me there is no reason that a non-profit company, run according to customer demand, cannot be as efficient as a private one. There are two reasons for this – firstly, unlike many economists, I believe that duty to others can be as strong a motivating factor as profit (I don’t believe that humans are naturally exclusively self-interested). Secondly, the ‘lean’ business model, which is the most efficient, is based on customer demand – profit is not the motivator that makes the system work. ‘Lean’ manufacturing for example takes a customer order as the signal to produce a product and pulls in only enough supplies to produce that unit of demand. In other words it is the system that is inherently efficient and the culture that drives efficiency, so in a public service environment the price could be set at zero-margin level.
    The problem with public services as I see it is government interference for political ends. In the model I am talking about, LVT would fund a citizen’s wage. This wage would then be used to pay for the services that the citizen required at point of use – the most efficient distribution of funds. As the public services would be public-owned but then independent of the government for allocated funding, they would then be free of political interference. Efficiency of services would also become more important than ‘job creation’ as the need to work for basic services would be removed.

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  • shipbuilder –

    Note that during Icelands period of anarcho-capitalism non-profit organisations existed – even including charities. There may be hope for the model, even for essential services, although I am still nowhere near 100% – greed seems to be an unshakeable trait of human society, but the optimist in me feels that , as you said, duty to others can be as strong a motivating factor as profit (this has been exhibited in nature too).

    The supply of water is hardest for me to fathom in this respect.

    “The problem with public services as I see it is government interference for political ends” – totally agree. How little a role should the state really play in our lives? Is policing a state army, or a service to society? What about bin men or street sweepers?

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