The City takes a kicking (from the G20 leaders)

[pies]

Don said:

Cookie172 said:

WTH is that bonus one all about? Are they now saying that pulling high risk bets yields you a low bonus?

I'd have thought if, as an investor, you made low-risk investments and got a low return on your money you would get a lower "bonues" than someone making higher risk investments with a higher return!

What has been WRONG in the city is the lack of information about the level of risk.

.

Its not the level of risk thts the issue,its whose money is being risked.I dont hear of many traders risking their own money,maybe their employers and cutomers but not thir own
Who is in a no lose situation with high risk investments ?

[NDA]

Blame Carter for the Community Reinvestment Act (1977) and then Clinton for strengthening it. Every poor fellow from a minority group sitting on his porch in his string vest was 'due' his mortgage and every bank could gain credit by lending. The CDO's that resulted are what caused the problems. Whilst RBS made some mistakes with ABN, it's the CRA that's the heart of the problem.

Take a look at this BOR, you might learn something.

[elster]

pies said:

Don said:

Cookie172 said:

WTH is that bonus one all about? Are they now saying that pulling high risk bets yields you a low bonus?

I'd have thought if, as an investor, you made low-risk investments and got a low return on your money you would get a lower "bonues" than someone making higher risk investments with a higher return!

What has been WRONG in the city is the lack of information about the level of risk.

.

Its not the level of risk thts the issue,its whose money is being risked.I dont hear of many traders risking their own money,maybe their employers and cutomers but not thir own
Who is in a no lose situation with high risk investments ?

The reason why it is known as a high risk investment is you could gain a lot or you could gain bugger all. They conveniently inform you of this by referring to them as High Risk.

Much like dangerous activities carry a warning of danger.

[NDA]

elster said:

The reason why it is known as a high risk investment is you could gain a lot or you could gain bugger all. They conveniently inform you of this by referring to them as High Risk.

Much like dangerous activities carry a warning of danger.

[Randy Winkman]

smilerbaker said:

Take a little look as to who it was who made the banks lend to sub-prime customers in the first place.

"Made them" or "let them"?

Edited to sort out the hash I made of quoting - I'm still not sure I've got it right - I blame it on the drink.

Edited by Randy Winkman on Friday 3rd April 21:42

[Bodo]

Podie said:

BOR said:

Podie, let's not focus on the messenger, what's important is the message. There are millions of BORs out there.

Sorry, this is contextually relevant.

It'd be like me saying "bankers deserve their bonuses" and me being a banker.

The fact you are so determined to avoid answering the question merely puts further doubt on your reasons for banging this point home continually.

Sorry chap, but currently looks like you have a vested interest.

Knowing what BOR does for a living, I can say, he couldn't be farer away on having a vested interest on what bankers get or will not get. On top of that, it's totally irrelevant to this topic.

[NDA]

Randy Winkman said:

smilerbaker said:

Take a little look as to who it was who made the banks lend to sub-prime customers in the first place.

"Made them" or "let them"?

Edited to sort out the hash I made of quoting - I'm still not sure I've got it right - I blame it on the drink.

There is an element of 'made them'. The Community Reinvestment Act was designed in such a way that if you were poor and were of a certain demographic group and if your bank wouldn't lend you money, you could sue them. So it's quite arguable that the banks were forced, through legislation, to lend to high risk groups that wouldn't have normally be considered for loans.

This led to the bundling of this wobbly under leveraged debt, made and encouraged under the CRA, into CDO's that had a direct consequence for the banking industry.

[Randy Winkman]

NDA said:

Randy Winkman said:

smilerbaker said:

Take a little look as to who it was who made the banks lend to sub-prime customers in the first place.

"Made them" or "let them"?

Edited to sort out the hash I made of quoting - I'm still not sure I've got it right - I blame it on the drink.

There is an element of 'made them'. The Community Reinvestment Act was designed in such a way that if you were poor and were of a certain demographic group and if your bank wouldn't lend you money, you could sue them. So it's quite arguable that the banks were forced, through legislation, to lend to high risk groups that wouldn't have normally be considered for loans.

This led to the bundling of this wobbly under leveraged debt, made and encouraged under the CRA, into CDO's that had a direct consequence for the banking industry.

Why didn't Bush sort it out? And .....

Did this Act make Fred Goodwin lend all RBS's money to folk that couldn't pay it back?

[Marquis_Rex]

Bodo said:

Podie said:

BOR said:

Podie, let's not focus on the messenger, what's important is the message. There are millions of BORs out there.

Sorry, this is contextually relevant.

It'd be like me saying "bankers deserve their bonuses" and me being a banker.

The fact you are so determined to avoid answering the question merely puts further doubt on your reasons for banging this point home continually.

Sorry chap, but currently looks like you have a vested interest.

Knowing what BOR does for a living, I can say, he couldn't be farer away on having a vested interest on what bankers get or will not get. On top of that, it's totally irrelevant to this topic.

Agreed!
Lets just say BOR helps produce and contribute to the economy of the country he lives in, unlike the uber defensive tossers who have gotten us into this mess in the first place- shuffling money around and conning foreigner investors while patting themselves on the back for it.

[Soovy]

Oh dear oh dear, here he is again. Mr BOR.



You clearly understand NOTHING about banking, investments or the financial world.

You've simply swallowed the gutter press's envious rantings through osmosis via the newpapers your chips were wrapped in when you ate them in your council flat with your fat wife last Friday night.


There is a cuplrit here, and it's the one eyed scotch stroke victim. He ruined this country.

And for what it's worth, my spread betting company is making an absolute FORTUNE at the moment dealing options, which (and you can google for the potted details in nice simple short words) are effectively bets on volatility.

The fact is that no matter what the situation is, there will always be a group of people who make a mint out of it using their brains and some hard work. If you'd spent less time bunking off school, got yourself a decent education and applied yourself you could have been one of them. But no, you didn't, and you're not.


Thanks for superheating my bladder. Tosspot.

Edited by Soovy on Saturday 4th April 19:14

[ZondaMan]

900T-R said:

smilerbaker said:

Take a little look as to who it was who made the banks lend to sub-prime customers in the first place.

Which was the trigger for the downfall of the monetary system, not the cause.

No, it is the cause (along with monetary over-expansion). It's government policy which lies at the root, and nothing else.

[ZondaMan]

pies said:

Don said:

Cookie172 said:

WTH is that bonus one all about? Are they now saying that pulling high risk bets yields you a low bonus?

I'd have thought if, as an investor, you made low-risk investments and got a low return on your money you would get a lower "bonues" than someone making higher risk investments with a higher return!

What has been WRONG in the city is the lack of information about the level of risk.

.

Its not the level of risk thts the issue,its whose money is being risked.I dont hear of many traders risking their own money,maybe their employers and cutomers but not thir own
Who is in a no lose situation with high risk investments ?

Explain how an institution is going to make money without risking its own capital. They choose to employ traders to make money for them, and pay them well if they are profitable. They therefore take a risk in employing the traders, and since it is their capital they wish to risk, they absorb the losses. What's wrong with that?

[pies]

ZondaMan said:

pies said:

Don said:

Cookie172 said:

WTH is that bonus one all about? Are they now saying that pulling high risk bets yields you a low bonus?

I'd have thought if, as an investor, you made low-risk investments and got a low return on your money you would get a lower "bonues" than someone making higher risk investments with a higher return!

What has been WRONG in the city is the lack of information about the level of risk.

.

Its not the level of risk thts the issue,its whose money is being risked.I dont hear of many traders risking their own money,maybe their employers and cutomers but not thir own
Who is in a no lose situation with high risk investments ?

Explain how an institution is going to make money without risking its own capital. They choose to employ traders to make money for them, and pay them well if they are profitable. They therefore take a risk in employing the traders, and since it is their capital they wish to risk, they absorb the losses. What's wrong with that?

It encourages the trader to take higher risks.

Imagine a trader isn't making much profit on his trades but his mates are.He can increase his profit by taking ahigher risk investment, great for everyone if it works.If it doesn't everyone loses except the trader who might keep on taking higher risks as he lready has blown his 'bonus'

I have no problem with people/companies taking risks so long as its thir own money or they are fully aware of the risks involved

[ZondaMan]

pies said:

ZondaMan said:

pies said:

Don said:

Cookie172 said:

WTH is that bonus one all about? Are they now saying that pulling high risk bets yields you a low bonus?

I'd have thought if, as an investor, you made low-risk investments and got a low return on your money you would get a lower "bonues" than someone making higher risk investments with a higher return!

What has been WRONG in the city is the lack of information about the level of risk.

.

Its not the level of risk thts the issue,its whose money is being risked.I dont hear of many traders risking their own money,maybe their employers and cutomers but not thir own
Who is in a no lose situation with high risk investments ?

Explain how an institution is going to make money without risking its own capital. They choose to employ traders to make money for them, and pay them well if they are profitable. They therefore take a risk in employing the traders, and since it is their capital they wish to risk, they absorb the losses. What's wrong with that?

It encourages the trader to take higher risks.

Imagine a trader isn't making much profit on his trades but his mates are.He can increase his profit by taking ahigher risk investment, great for everyone if it works.If it doesn't everyone loses except the trader who might keep on taking higher risks as he lready has blown his 'bonus'

I have no problem with people/companies taking risks so long as its thir own money or they are fully aware of the risks involved

Well it's the institution's responsibility to monitor this sort of behaviour. Traders have limits on the maximum amount they can risk anyway. Anything up to that is entirely the institution's problem if it's lost, and they accept this and are willing to assume the risk. No one forces them to employ traders. If they don't fully understand the risks, again, it's their own problem, and deserve any mishaps which may ensue. In short, it's all THEIR CHOICE.

[elster]

Randy Winkman said:

Why didn't Bush sort it out? And .....

Did this Act make Fred Goodwin lend all RBS's money to folk that couldn't pay it back?

You do realise Fred Goodwin wasn't the only one who made these decisions?
He is just a media scapegoat, and it seems to be working.

[pies]

[quote=ZondaManWell it's the institution's responsibility to monitor this sort of behaviour. Traders have limits on the maximum amount they can risk anyway. Anything up to that is entirely the institution's problem if it's lost, and they accept this and are willing to assume the risk. No one forces them to employ traders. If they don't fully understand the risks, again, it's their own problem, and deserve any mishaps which may ensue. In short, it's all THEIR CHOICE.
[/quote]

Which brings me to securitisation, the institutions and traders were buying and selling mortgages where the level of risk was clearly not understood buy anybody dealing at the time.

But whose money was acually being risked? It certainly wasn't the board members or the traders,if thy actually stood to lose as well as gain then maybe we wouldn't be in the mess now

[ZondaMan]

pies said:

ZondaMan said:

Well it's the institution's responsibility to monitor this sort of behaviour. Traders have limits on the maximum amount they can risk anyway. Anything up to that is entirely the institution's problem if it's lost, and they accept this and are willing to assume the risk. No one forces them to employ traders. If they don't fully understand the risks, again, it's their own problem, and deserve any mishaps which may ensue. In short, it's all THEIR CHOICE.

Which brings me to securitisation, the institutions and traders were buying and selling mortgages where the level of risk was clearly not understood buy anybody dealing at the time.

But whose money was acually being risked? It certainly wasn't the board members or the traders,if thy actually stood to lose as well as gain then maybe we wouldn't be in the mess now

Yes, we would still be in the same mess. Many board members and traders will have stock (much of their remuneration consists of stock or options), and so do lose if it hits the fan. You make the same point again and again about it not being the traders' own money, but it's really not an issue, or the case. The institutions WANT the traders to trade for them, so it's completely reasonable for them to stand to lose. From a logistical point of view, it's often not possible to trade with your own money and your firm's anyway (aside from the fact that they pay you to make them money, not yourself), as time is of the essence, particularly for those holding positions for a matter of seconds.

It's analogous to many other situations, where you trust someone who's a specialist in their field to meet your objectives. You still bear the risk, and you know that, because it's your money, but chances are that you couldn't do a better job (obviously some exceptions, but it's your own fault for not keeping tabs on your staff).

It's also wrong to assume that noboday understood what they were doing. Many did, and are fine.

Edited by ZondaMan on Saturday 4th April 22:16

[pies]

ZondaMan said:

pies said:

ZondaMan said:

Well it's the institution's responsibility to monitor this sort of behaviour. Traders have limits on the maximum amount they can risk anyway. Anything up to that is entirely the institution's problem if it's lost, and they accept this and are willing to assume the risk. No one forces them to employ traders. If they don't fully understand the risks, again, it's their own problem, and deserve any mishaps which may ensue. In short, it's all THEIR CHOICE.

Which brings me to securitisation, the institutions and traders were buying and selling mortgages where the level of risk was clearly not understood buy anybody dealing at the time.

But whose money was acually being risked? It certainly wasn't the board members or the traders,if thy actually stood to lose as well as gain then maybe we wouldn't be in the mess now

Yes, we would still be in the same mess. Many board members and traders will have stock (much of their remuneration consists of stock or options

Edited by ZondaMan on Saturday 4th April 22:16

Everything to gain by opting for higher risk No or nominal downside as the basic (large) salery is untouchable.

Yes I make the point over as its a major flaw in the system

Edited by pies on Saturday 4th April 23:26

[Mikeyboy]

Soovy one thing to say, one of the great fictions of modern banking is that they are all smarter than the rest of us. They really aren't. I've met many across many sectors and to be honest some have been incredibly smart but most have been bright, no more nor less than any diligent A level students though. Most in fact work in positions where intelligence is not even a real requirement, they work to existing formula, methods and products. They rarely have to doinnovative thinking on products. The ones that do the innovation are very few in number.
In addition the example of options that you use is about the worst you could use. Most options traders, indeed I can think of two friends of mine for example are not even educated to degree level.
If someone has an opinion on bonuses that's different yours it's not 'cos they is thick, it's probably that they chose to do something different in their life.

[ukwill]

Mikeyboy said:

Soovy one thing to say, one of the great fictions of modern banking is that they are all smarter than the rest of us. They really aren't. I've met many across many sectors and to be honest some have been incredibly smart but most have been bright, no more nor less than any diligent A level students though. Most in fact work in positions where intelligence is not even a real requirement, they work to existing formula, methods and products. They rarely have to doinnovative thinking on products. The ones that do the innovation are very few in number.
In addition the example of options that you use is about the worst you could use. Most options traders, indeed I can think of two friends of mine for example are not even educated to degree level.
If someone has an opinion on bonuses that's different yours it's not 'cos they is thick, it's probably that they chose to do something different in their life.

Thats a bit of a broad brush to paint with though isn't it? There are several sectors in Banking where you will find the personnel to be mostly full of people with (at least) 1st Class Maths/Economics degrees (or specialities within these fields). I quite agree that this kind of skillset is not required in the typical Back/Middle offices, nor in desk-monkey prop-trading roles, where positions are largely pre-determined and risk-corridors provided. However, it's certainly not fiction to think that there aren't many very smart people in Banking. You just have to be specific about what area of Banking.