Wednesday, December 9, 2009

De-gnoming

Exodus of the bankers

The president of Britain's second largest bank has issued a veiled threat that the country's elite financiers could join a mass exodus from the City of London if the Government pushes ahead with a bonus supertax today

Posted by devo @ 06:34 AM (4653 views)
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58 thoughts on “De-gnoming

  • krustyatemyhamster says:

    Parasites threaten to leave dead host.

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  • nice to see the grown ups wake up early! 🙂

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  • krustyatemyhamster says:

    Yes, I’m one of the 95% that lack maturity (please see all the comments at the end of the article) and don’t understand how special and talented are those that work in the City and have brought such wealth to this nation.

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  • Bye then. Thanks for all your help – its been great.

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  • They will all run off to queue for the IMF bonus of a lifetime. You boys need to do some ‘deep’ Copenhagen homework to even believe this is a possibility.

    Morning tech!

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  • kamh – how we got here was not because the bankers (being human) took advantage of the lax regulation – it was because of the regulators that allowed lax regulation. I dont say you are wrong – i just think the venom is directed toward the wrong place.

    Either you dont regulate at all and let the market decide or you regulate completely. i will give a quick general point – the fact that there is the FCSC is not a good thing – because the punters duty to assess the suitability of the deposit takers and therefore the deposit takers duty to ensure above all else they are safe – is effectively put in the hands of the depositors via the tax system! Once you go down that road you then have to regulate the deposit takers to ensure they dont have too much concentrated exposure in certain areas. If that is done and then positions are closed out that make profits then why shouldnt the people that create such profits be (handsomely) rewarded?

    They cant “bet the farm” where there are controls in place to stop em. There werent. So now the gov penalises the individuals because they (the gov) didnt do enough to stop the banks INEVITABLY one day (and nobody knew exactly when) producing the situation we are in?

    i dont blame any particular colour of government – since probably they would have all done the same, and you cant really blame our government in isolation. Its those damn yankees !! 🙂

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  • fscs even! – morning crunch!! :-),

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  • Oh dear I hear this daft argument a lot. The FSCS separates the *equity* holders from the *customers*. Without it, no-one would deposit money in banks and they’d cease to exist.

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  • At the end of the day you and I are now owners of these banks. So what is in our best interests? Seems we have at least 3 options.

    1. Pay for the best bankster talent and keep our banks as global players.
    2. Let the clever bankers leave and let less clever ones carry on.
    3. Let the clever bankers leave and stop new lending, hoping the loans made so far will be worth something if we hold onto them till maturity, our bank industry shrinks.

    Option 2 seems the worst, and so probably the one we will get unless someone intelligent gets voted in soon.

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  • Can’t legislate for human greed. Don’t remember many people protesting against low interest rates around 2001. It was more like more, more, more!!

    Governments will go with public consensus, and in this case that was ‘everyone should have the right to own a home…’. They are only guily of allowing the people to get what they wanted.

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  • Option 4; let the spolit overpaid proven incompetant bankers all leave and allow some of the hundreds of thousands of junior bankers have a go, they’ll probably work harder for a fraction the money and could hardly do worsse!

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  • techieman: “If that is done and then positions are closed out that make profits then why shouldnt the people that create such profits be (handsomely) rewarded?”

    Because of the economic rent idea, expressed well in yesterday’s FT – the market power that has enabled bankers to extract great wealth from the economy, to its overall detriment. It is not about profit-making, but wealth transfer.

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  • charlie brooker says:

    They should be barred for life for re-entering the country.

    These people are infinitely worse than illegal immgrants who kill innocents while driving uninsured.

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  • mountain goat

    Who are the “clever” bankers, and how do you assess their cleverness? Seems to me that these clever bankers bankrupted their employers. There will be plenty to fill their places. The notion that only a small number of individuals who are capable of performing these jobs is absurd.

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  • letthemfall – by “clever” I meant bankers skilled at making profitable investments and loans.

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  • Paul @ 8 – yes agreed but thats where we are NOW, if there was never an insurance scheme then the question wouldnt arise. There were banks before the deposit schemes and they seemed to be able to lend, but not without limit.

    The reason you hear it alot is because it isnt daft. The point is you EIther have no deposit scheme and rely completely on Mr. Market or you do have a scheme AND regulate PROPERLY. You cant unwind an insurance scheme so the only thing left is the regulation. Stables and horses bolting springs to mind.

    LTF – its the same point the market power is because of a combination of the insurance and lack of regulation. You can reward people for risk taking – but the risk taking and the rewards associated with it would both be limited by the regulatory requirements. In other words a “handsome” reward is relative.

    This has happened before moral hazard is quashed by deposit insurance – look at the S&P crises of the late 80s. That was a forerunner where nobody learnt. The dash for growth eclipsed sound management – if one country does that then that country eventually comes unstuck when a few do it, then capital flows (wrongly in my view) dictate that we should all compete.

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  • mountain goat
    There’s the rub. These investment and loans brought the banks down. If they’d been collectively a bit more skilled perhaps that wouldn’t have happened.

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  • techieman
    I certainly agree with you about proper regulation. In the meantime we should all look forward to bonus tax – a temporary form of regulation.

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  • Bogstandardbill says:

    Clever as in intelligent and smart or clever as in being able to cream off massive bonuses at the expense of the rest of us mere mortals whilst virtually bankrupting their employers?

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  • LTF – sadly those amounts wont be going to our pockets though – or i suppose they may by reducing the overall amount we have to pay back. But lets be honest at the end of the day this is a political stunt by the people who i think are pretty responsible in the first place – a smokescreen, and one that i find full of hypocrishy.

    The government let them play with the toys and never took them away to put them in the cupboard and surprise surprise… they broke ’em! So now we all have to buy new toys for the nursery!!

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  • 6. techieman said…. Its those damn yankees !! 🙂

    The damed yankees of Jekyll Island and the tamed yankees of congress.

    I think it’s called holiday shopping or is it a setting up of the inevitable clause (not as in the irony of Santa) that eventually would pay out

    on the double bubble (unregulated) derivative bets. Mr Summers your limo is here, Rubins is your driver! Poor Brooksley Born watches

    them speed off whilst engulfed in a puff of smoke. A true JFK fan indeed. Congress may win on the rematch, so have your wiener on hold.

    Yankees indeed!

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  • techieman
    Yes, it’s true that this Govt – and all govts since 1979 – have allowed the destructive behaviour of the banks to go uncontrolled. However, the bankers have shown great irresponsibility and selfishness, and deserve to be condemned. I personally do not accept the argument that it is solely the Govt’s fault – they are grown-ups who should know better than to break their own toys.

    Therefore taxing them heavily is not a stunt but a belated attempt to control their contemptible (and indeed contemptuous) behaviour as the tax payer keeps them afloat. A well functioning economy has to be a fair economy; taxing unearned wealth (and it really is unearned now) is an essential step towards this.

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  • 20. My daughter broke a toy once, so I replaced it. She seemed much happier with the new one. The throw away society that can never

    quiet keep pace with new technology. : (

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  • letthemfall – Chasing skilled people away is not in our best interests. Anyone can make investments and loans that lose money. I would rather pay a banker £1 million for making us involuntary bank owners £10 million than pay some inferior banker £50,000 to lose us another £billion. We can be angry about the past but why let this anger undermine us going forward?

    One solution I remember reading about (for example http://tutor2u.net/business/people/motivation_financial_sharesoptions.asp) is paying bonuses as future share options, the idea being that bankers have an incentive to act in the long term interest of the company.

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  • Techie “Either you dont regulate at all and let the market decide or you regulate completely.” I think this is what people have the problem with. Everyone was happy to let the market decide while times were good, but as soon as the wheels came off, the taxpayer was expected to come to the rescue. Personally I’d be in favour of the free market, but splitting the utility bit of banks from the casino. I’d be happy for bankers to earn their bonuses, but on the condition that if it all goes t1ts up then they suffer the consequences as any other industry would be expected to do. If that had been the case, these “talented” bankers would be having to expain how their talents bankrupted their previous employers whilst interviewing for new jobs and claiming benefits.

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  • charlie brooker says:

    I wonder if the Independent meant to make their headline sound so suitably biblical?

    I used to work as an actuary (nothing to do with banking whatsoever) – two of the applicatons I used to use were called Prophet and Moses!!

    A thousand plagues on Switzerland.

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  • Under “the coach’s” stewardship, that noddy bank has outsourced pretty much all non spiv jobs to “off shore providers” in whichever
    country is offering the latest cheapest labour. So, thanks to the coach, the HMRC has actually lost quite a considerable amout
    of NICs and PAYE. Think he should be more worried with marking his MBS and CDS books.

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  • the number cruncher says:

    Techieman

    The problem with your thesis is our politicians do not have the power to regulate the banks, because they would be edged out of Government if they ever tried. It is a chicken and egg problem about who is to blame. The failings of our political systems are that people with money have too much influence through the media and lobbying and at the moment the CIA/American corporate system controls British politics to a great extent.

    The rise of the Tory Euro-sceptic movement is being funded by American interests.

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  • We could make more bankers available for national banks by running on private banks. Anyone for terminating Barclays?

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  • mountain goat: “Chasing skilled people away is not in our best interests.”

    That is the crux of the matter? Are these people genuninely skilled. Given that they bankrupt themselves, I cannot see how they can be called skilled by any sensible definition. One also should question what value the “investments” add to society. Even before it all went bad I suspect the majority did little more than funnel cash the way of the bankers, a natural consequence of taking a percentage of huge cash flows.

    I don’t accept that financial services are generators of great wealth; that is largely an illusion. I would argue that teachers and scientists are more signficant in that respect. But their effects are long term and less easy to quantify, and cannot be manipulated. No one is suggesting paying them enormous bonuses in return for wealth-generation.

    Yes, society is angry about all this, but putting stop to iniquity is not about anger. The banks have wrecked the economy. Profound changes must therefore be made.

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  • Tory Euro-sceptic movement. Give me a break! Cameron loves the foundation of this deep pit.

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  • 26.

    It’s all happening at Copenhagen now. Wind and flapping springs to mind. This blog should be full of it, as the outcome could change

    everything. EVERYTHING. Don’t expect too many independent reports though. Not allowed mate!

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  • Trying to tax the result is no way to tackle such a problem; firstly it wont affect those taking huge bonuses and second it will only act to distort any causal link between actual skill and bonus received ( whilst making some lawyers and accountants richer ).

    If we are to regulate it should be down the road of deferred and retractable, not taxed.

    Personally I don’t think such a tax will actually get through the commons ( let alone the lords ) anyway.

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  • 51ck
    I’m not sure there is any causal link between skills and money, is there? Or if there is it is badly distorted. That may well be true in other areas too.

    Taxation is probably one of the better ways to regulate distribution of money – no arguments about who has really earned it. I see no reason why it should not get through Parliament: plenty of previous examples of windfall taxes.

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  • Letthemfall – surely you must recognize that for a business to expand it often needs to get a loan or rights issue (sell new shares). This can mean the difference between competing successfully or failing? This can only be meaningfully done through investments and loans part of our economy. So there is a need for a healthy banking system and skilled people to assess risk and profit relationships accurately.

    Moral hazard and possibly poor regulation have contributed to the problems we have now. This needs addressing. Personally I think failed banks should have been nationalised and dismantled by people skilled in bankruptcy to minimise collateral damage to the economy. This would have cleared the way for new banks because there is a clear need for them in the economy.

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  • mountain goat – have you got some really warped definition of talented? Do you need to borrow my dictionary?

    Yes we can realign bonuses to avoid speculation and encourage longer term thinking, or the other thing to do would be to line up all the bankers in public along with the war criminal blair, and put a bullet in the back of their heads. I think it would have quite an effect on other people wanting to show similar behaviour.

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  • The more I read about bankers, the more I believe in stricter birth control.

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  • Inbreda – I grew up in a country under marshal law, you should try it sometime. No thanks to your solution.

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  • Steve Townsend says:

    Have 2 types of banks.

    Type 1 – Simple, safe bank. They take customer and corporate deposits, make mortgage loans (no subprime, ensure affordable), company loans (capped loan / company capital ratio), relatively safe UK investments (i.e. no currency risk), UK gilts, top tier UK corporate bonds. Civil service renumeration structure. Stringent regulation. In return, the government guarentees 100% customer and corporate deposits.

    Type 2 – Investment banks, hedgefunds etc. Anything goes. Anybody can invest (except type 1 banks). Pay bankers what they want. Do so at your own risk. No regulation. No government guarentee for customer and corporate deposits. No bail outs. No whinging when it all goes tits up.

    Social function of bank preserved (type 1). London as financial services exporter preserved (i.e. type 2). Best of both words.

    Any problems.

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  • IMO Barclays have handled themselves very well so far. They can pay themselves bonuses from the profits that they have made.

    RBS, Northern Rock etc. are a F**K UP and they should be paying the general public a bonus.

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  • mountain goat
    Indeed I do recognise that, and of course I realise the importance of a functioning banking system – one reason we didn’t allow the lot of them to go to the wall. The problem, as I think we all know, is that investments were made in the wrong place – principally subprime mortgages – and the errors were compounded through the reckless use of derivatives of several kinds.

    Perhaps one reason I am highly dubious about the so-called skills of the people who got us into this mess – apart from the fact that they got us into this mess – is that most of my working life I’ve been surrounded by individuals with the same qualifications as the superclever (ie the quants), and have them myself. The kinds we like to call clever may be so in a fairly narrow sense, but can make howling mistakes as well as the next man, but may have too high an opinion of their own abilities to acknowledge this.

    I think I agree with you on nationalisation.

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  • I’d love them to leave.
    First, there is no industry where all employee are talent/stars, and the city is no different, so those bankers are just as replaceable as dull accountants and lawyers.
    Second, entry barriers are low, I’d love to see new entrants with the line, bring your account/business with us, as contrary to our competitors we have not left the country.
    Third, if cash-rich bankers leave property prices will finally fall also in London at affordable levels!!

    Let them go, let them go!!

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  • krustyatemyhamster says:

    Didn’t know what a quant was – just looked at a few adverts and I don’t think I’ve ever seen ads that fit my qualifications so closely. Something to fall back on if the real economy continues to implode I suppose.

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  • 37. letthemfall said…Perhaps one reason I am highly dubious about the so-called skills of the people who got us into this mess

    “apart from the fact that they got us into this mess”

    Oh how you missed the vital point. Who won and who lost? $50trillion worldwide so far and still counting. The incumbents who now sit

    within the power structure. Don’t believe me? Write to Paulson and cronies. It’s so painful!!!!!

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  • letthemfall Read my ditty on 22. Then have a little think.

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  • cat and canary says:

    Agree with LTF @ 28,

    Its not banker’s skill, nor lack of it, its simply there desire to make a quick buck at the expense of all our futures. The system has to change completely, but it wont 🙁

    LTF “I’m not sure there is any causal link between skills and money, is there? Or if there is it is badly distorted” – skills vs salary no, but there is some evidence (trying to find it)…that salary rises in accordance with IQ up to a point, then starts dropping!

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  • Anyone seen the movie trading places, the guy on the street is more in tune, goodbye

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  • 47. cat and canary

    There ‘is’ a difference between clever and immoral. However, a combination of the two is deadly, as you should know by now.

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  • C&C “salary rises in accordance with IQ up to a point, then starts dropping!”

    Yes the big money comes in being able to handle risk and stress. Arguably what banksters should be doing, before moral hazard made it a risk free job.

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  • @Earth, but Barclays are in competition with your tax money (RBS). Perversely we have to kill off the fittest for returns on our tax.

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  • Aristocrats, communists and religions all said that the world could not live without them. They all said they are fundamental to the society. Civilisation would be lost without them.

    Guess what, life waived fingers at those and pretty much just went on.

    The banking industry’s necessity to this country and the world is a complete myth. This country will survive.

    Once up on a time, witches, shamans and fortune-tellers were considered highly respectable professionals. How do we know that the bankers are not just some modern day clueless voodoo magicians cons who promise us some imaginary great wealth?

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  • Why don’t we all take all our money out of the better known banks and stick it all in the Co-op Bank? Isn’t their ethical investment policy akin to a voluntary Glass-Steagall act? I think a full-blown revolution is beyond us but we could vote with our feet…

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  • I’m with Timmy T. The rest of you talk too much. I want to see a public vs bank. Too big to fail?

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  • charlie brooker says:

    Exodus of the bankers : Kind of reminds of the ending of Team America World Police – where Kim Jung Il as his true cockroach-self makes his escape back to his home planet in spaceship.

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  • [email protected]: It will get through Parliament, because it will just be part of the overall Budget, which makes it a Supply Bill. A failure to pass a Supply Bill is called a ‘loss of supply’ and is usually taken as a vote of no confidence, leading to a dissolution. In practice, the Commons will always pass a supply bill.

    Further, the convention is that the Lords don’t debate supply bills, the Parliament Act 1911 says they may not delay one more than a month anyway, and that Act also supplies the rule where the Lords can only bounce a Bill twice. If it passes in the Commons on the Third Reading, it goes straight to Her Majesty who, on the advice of the PM (hah), grants Royal Assent making it law. The Lords normally let past manifesto pledges without serious debate, to avoid amendments to the Parliament Act that would remove more of their power.

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  • Dave Hpc Reader says:

    Shipman was probably a good GP, however he was pathologically floored, thats why the CPS took an interest in him!
    may be some bankers are very clever, however they are not always acting in the Banks best interest, may be some should look at them?

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  • Thanks kruador I was oblivious. Mind you I stand with my opinion that it wont help much and it probably wont raise much.

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