the banks havent learned a lesson

ei.sdraob

and this is why not a cent should have been handed to any of the banks

they are at it again :mad:

they should have been left to own devices to learn a lesson



ECB member says banks are taking same risks as before

http://www.independent.ie/business/irish/ecb-member-says-banks-are-taking-same-risks-as-before-1924904.html

ifconfig

I know of a chap who worked with some subsidiary of Lehman's in their tech/research back office. Remarkably he didn't lose his job although there has been change within his organization due to the overall fallout of last year and the ensuing crisis. He is currently seeking a job move to another UK based investment bank which has a retail arm. He expects to be hired but he told me that they may hold off on making the contract until after the current bonus period. I think the point he was making was that bonuses are more or less paid unconditionally and so it would be easier for his hiring manager to get signoff on his employment if his bonus "entitlement" was deferred until he was a year in the job, etc.

I was alarmed. I challenged why that institution would be giving out bonuses given that it was massively bailed out by the UK government and was far off being back to anything resembling a sustainable non-intervention based growth business model. He explained that bonuses at most levels are being retained because of the fear of losing staff.

I think this is the moral hazard that is being played out at a micro organizational level within the banking system. Now that GS is giving out significant bonuses (again based on spurious claims of profits and success) they are pervading the culture of other institutions handing them out despite the fact that most of these institutions would have gone to the wall if public monies had not being sourced to bail them out!

Shocking indeed

ei.sdraob wrote: »

and this is why not a cent should have been handed to any of the banks

they are at it again :mad:

they should have been left to own devices to learn a lesson



ECB member says banks are taking same risks as before

http://www.independent.ie/business/irish/ecb-member-says-banks-are-taking-same-risks-as-before-1924904.html

dresden8

The banks have learned the lesson only too well.

Do what you want, make obscene profits, and when it all goes arse over tit go running to the government who will bail them out.

As Cowen says, he will write any cheque so that the banks won't fail.

It's you who hasn't learned your lesson.

RealityCheck

dresden8 wrote: »

The banks have learned the lesson only too well.

Do what you want, make obscene profits, and when it all goes arse over tit go running to the government who will bail them out.

As Cowen says, he will write any cheque so that the banks won't fail.

It's you who hasn't learned your lesson.

Exactly, They take the gain, we take the pain :mad:. Oh the benefits of quasi socialist capitalism!!

SLUSK

This is why we should let financial institutions crash. Some very huge financial institutions have gone into bankruptcy before and it did not bring about Armageddon.

the_syco

SLUSK wrote: »

This is why we should let financial institutions crash. Some very huge financial institutions have gone into bankruptcy before and it did not bring about Armageddon.

That's a fairly retarded opinion. Could you give an example of this happening in a small country that only has a few banks? Bearing in mind that should that happen, no external bank would want to touch Ireland for a long time, making any way out of a recession long and painful.

SLUSK

the_syco wrote: »

That's a fairly retarded opinion. Could you give an example of this happening in a small country that only has a few banks? Bearing in mind that should that happen, no external bank would want to touch Ireland for a long time, making any way out of a recession long and painful.

The competent would take over the assets of the incompetent and you would start over, like the system is supposed to work.

Instead you choose to use tax payers money to save the investments of the owners and management of these banks.

You could at least gone with the option of temporary nationalization and wiped out all the shareholders.

Explain to me why the shareholders of the banks should be saved? If you make an investment you take a risk and you should be prepared to lose all invested capital.

ei.sdraob

the_syco wrote: »

That's a fairly retarded opinion. Could you give an example of this happening in a small country that only has a few banks? Bearing in mind that should that happen, no external bank would want to touch Ireland for a long time, making any way out of a recession long and painful.

they seemed to be doing better in Iceland i hear...

Sand

@The Syco

Bearing in mind that should that [bank failure] happen, no external bank would want to touch Ireland for a long time, making any way out of a recession long and painful.

Why should healthy, well run and well managed banks be concerned if unhealthy, badly run and badly managed banks fail?

If anything, external banks would see a chain of branches ready for quick, cheap and easy purchase.

That's a fairly retarded opinion. Could you give an example of this happening in a small country that only has a few banks?

And privatising gain, whilst socialising loss is the MENSA plan?

What do you think happens when the banks collapse? Do the branches vanish? Do the staff dissapear? Do the business links and connections vanish?

No - what happens is the shareholders get wiped out (if the bank collapses their shares are near worthless anyhow), their junior bondholders get wiped out ( they risked, they lost) and their senior bondholders are forced (grudgingly but in their own self interest) to accept equit for debt deals where they become the new shareholders. A government guarantee on the deposits heads off depositor panick, the bank relauches under new ownership/management.

The old, failed management are wiped out of course.

This is why such rumours of doom and terror are spread if a bank should collapse - the old, failed management are wiped out. And Lenihan is nothing if not a creature of the bankers - lets face it, they have run circles around him.

These are badly run, badly managed banks that have risked it all and failed - they deserve to fail. They have to fail. Otherwise we will simply have to fix a bigger problem, later, when they fail again, and again we are forced to bail out a bank "too big to fail".

@ei.sdraob

ECB member says banks are taking same risks as before

Damn, I was certain they had really, really, really learned this time. From the investment banker/City newsletters Ive somehow got subscribed too I can assure you after a temporary judder last August - November, the crazed mindset is back in full flow. The attitude to those protesting over unjustified bonus schemes is "What the **** is the plebs problem? We're awesome. They're just ****ing jealous"

@ ifconfig

I think this is the moral hazard that is being played out at a micro organizational level within the banking system. Now that GS is giving out significant bonuses (again based on spurious claims of profits and success) they are pervading the culture of other institutions handing them out despite the fact that most of these institutions would have gone to the wall if public monies had not being sourced to bail them out!

GS tbh, are not taxpayer supported - they didnt want taxpayer support, took it on US govt insistence, and paid it back early as it became clear very stringent strings were attached. Hence, their bonus scheme is a matter for their shareholders.

Or at least it would be, if it hadnt already been proven GS risk is taxpayers risk. Also, most, if not all, large banks have been taken hostage by their senior employers. Nominally they are run in the interests of shareholders, but in reality they are run to achieve massive bonus pots for executives and higher ups.

The best article I have read on bankers bonuses was on the BBC website - Preston essentially makes the point that bankers have not delivered sustainable returns to shareholders over the past few decades that justify the massive acceleration in their own bonus payments.

Basically 1900 -1985, the financial sector offered an average annual return of 2%. Nothing special.

Taking 1900-2008 into account, the average annual return was 3%. Still nothing special.

Yet from 1985 onwards, bonus payments accelerated massively. Why? It might make sense to point out that the financial sector annual returns also acclerated massively from 1985 onwards ( though recent losses wiped out most gains over the period, hence only the modest return of 3% overall).

Preston examines the performance of the bankers and asks if they were actually all that much better than previous generations of bankers and thus reaped their own just rewards. Essentially, he points out that the increase on financial sector returns were not down to bankers being smarter, just that they leveraged their bets massively, winning huge when they won, and when they lost... well, we pick up the pieces.

His view is that bonuses need to be linked to the return on gross assets, with the return on leverage eliminated given it is massively risky and not in the long term interests of shareholders - whereas bankers dont give a **** about the long term, seeing as theyve already got their bonus and moved on.

Essentially, he pre-empts George Soros recent views in that he argues banks should be a safe, predictable utility, with a commensurate level of pay with risk taking maniacs chasing short term bonus driven risks moved out to private wealth management and hedge funds where the damage they can do is somewhat limited.

ifconfig

Great link, the Peston one, Sand.

As per usual I am getting some of the best material from my card carrying commie online friend

The part that confuses me a bit with the thought experiment of what-ifs and if the action taken was to nationalise the main banks instead of NAMA as-is ... is...

Wouldn't nationalisation option have been incredibly tricky since Brian Lenihan's "cheapest bailout in the world" guarantee covered most of the bonds including the majority of the sub bonds as well as the bank deposits.
Would there have been difficulty in keeping the ordinary depositor guarantee in place while unwinding the bondholder agreements and negotiating debt for equity swaps ?

Morally I would have thought that letting Anglo fail and simultaneously nationalizing the others (or pre-privatize them ... not sure if you'd like that term, Sand ... but it would have been Labour's stance) would have been the best option. However, I guess all the mark-to-market firesales that would have ensued had Anglo been allowed to fail would have had exposed the true proportion of garbage value loans in the other main banks.