are the banks paying off their loans?
Discussion
coyft said:
You seem to put yourself forward as the resident guru,
Nothing of the sort, I've worked in financial services for almost 20 years includeing 4 years in investment banking (but not currently), so i do have some expertise.I think Tonker is the resident expert though:
coyft said:
so can you answer a simple question?
1. Who benefited most from the £200 Billion of quantitative easing?
I guess you want me to say the banks?1. Who benefited most from the £200 Billion of quantitative easing?
Has anyone denied that the banks have benefitted?
What is the point of the question?
Sidicks
coyft said:
Why don't you bogg off, you add nothing, haven't stated a single fact or tried to answer any question. At least Tonker is starting to enter into a factual based debate.
Apologies if I am a little impatient, but there so many threads on here about this and we still get people 'shouting':- All bankers are evil
- The economic issues facing the country were caused by the Bankers (all bankers)
- Many bankers committed fraud
- etc
anonymous said:
[redacted]
ok why.I understood the QE was effectively to change less accessible assets into more liquid assets thus putting more liquidity into the system and allowing the banks to lend more money.
After all the poor old BOE is just trying to increase the money supply because they think that is what makes the economy work. They are wrong though.
Increasing the money supply just makes the economy blow up.
coyft said:
Patronising t
t.
I'm sorry you feel like that, it wasn't meant to be patronising!t.The point I was trying to make is that your later posts follow on from information provided by other posters, and constructively challenge what has been said. This leads to a sensible discussion.
Recently there have been a spate of similar threads where no matter what information is provided, the response is a simple reiteration of 'bankers are evil', 'bankers caused the crisis' etc
:-)
Sidicks
sidicks said:
coyft said:
Patronising tt.
I'm sorry you feel like that, it wasn't meant to be patronising!t.The point I was trying to make is that your later posts follow on from information provided by other posters, and constructively challenge what has been said. This leads to a sensible discussion.
Recently there have been a spate of similar threads where no matter what information is provided, the response is a simple reiteration of 'bankers are evil', 'bankers caused the crisis' etc
:-)
Sidicks
As a developer I could see the writing on the wall many years ago due to understanding property boom and bust cycles and luckily despite the temptation of a fast buck didn't end with the toxic land deals that have hurt our market so much.
Any fool could see that housing could not sustain the continual increase in value above inflation for ever and that a fall has to occur, but of course we had banks falling over themselves to lend for second and third properties and such. We obviously had the greedy fools signing up in the first place but come on, from a bankers perspective this isn't the first time in history it's happened is it?
So it's a fair call to ask how exec's at the banks that were effectively insolvent think they've done so well.
I do agree it's not all the bankers' faults but they do have some egg on their face here.
MOTORVATOR said:
Fact is everything talked about here is hindsight and bankers amongst many other organisations are paid for foresight to protect and enhance my investment.
As much as it is the government's responsibility to determine macro-economic policy, which includes preventing asset bubbles through legislation (not very capitalist I know, but look how that's worked out).Generating national wealth through property appreciation is not a sustainable economic strategy. Yes, the individual banks should have been more sensible, but the buck has to stop at the door of number 11 Downing Street I'm afraid.
MOTORVATOR said:
Sidicks you are coming across as a smartarse. Fact is everything talked about here is hindsight and bankers amongst many other organisations are paid for foresight to protect and enhance my investment. They didn't do that very well did they?
So it's a fair call to ask how exec's at the banks that were effectively insolvent think they've done so well.
I do agree it's not all the bankers' faults but they do have some egg on their face here.
No they didn't, and hundreds of bankers were fired on the back of it.So it's a fair call to ask how exec's at the banks that were effectively insolvent think they've done so well.
I do agree it's not all the bankers' faults but they do have some egg on their face here.
Plenty of bankers in totally different roles did very well for their company, and those are the people who deserve bonuses. However the media will shout about 'rewards for failure' conveniently forgetting that 50% of these bonuses go straight back to the Treasury in tax, and some of the rest is likely to be spent supporting the wider economy.
No one is trying to dispute that some banks behaved recklessly in some areas. To tar all banks and all bankers with the same brush is unfair and misleading.
Further, the cost of the bank 'bailout' needs to be seen in the context of the wider UK economy. The bank bailout did NOT cause the current debt and deficit problems, this is primarily due to labour mis-management of the economy - spend now, pay later....
All the bank crisis did was expose the failings of labour policy, it is not the reason why we have these austerity measures now.
Sidicks
I don't dispute the government responsibility, but both of the above replies seem to be defending company performance on the basis of yeah but that bit of the business performed really well.
If I put that into terms of a major residential developer it is akin to saying that it was only the land buyer that fked up, everybody else done really well. Fact is if you look at someone like Taywood or Barratt the presssures of their businesses meant that land had to be bought to keep to keep the turnover going, and the land bought just before the drop was the their downfall.
Many of their sites were profitable as they were being built on holdings bought early on whilst the latter aquisitions became unbuildable on paper. The companies then had no option but to write their land banks down in some instances by 60% with the consequent damage to share price in order to make them buildable.
Now in that instance should we single out the individuals involved with the still profitable sites and say look how well they've done, or do we say the company overall has been mismanaged by allowing itself to be exposed to toxic land deals?
The answer is no, as a developer they had to cut costs across the board to survive, whether that came from the carpenter, forklift driver, commercial director or land manager. The vast majority having done a splendid job but implementing 4 day week money for 5 day work just to survive.
The point being that if a company is at the point of being non sustainable then the pain has to go across all divisions regardless of individual profitability. This principle applies even if you have a fairy godmother as the injection should be used to get the business back onto a field where it performs across the board.
If I put that into terms of a major residential developer it is akin to saying that it was only the land buyer that f
ked up, everybody else done really well. Fact is if you look at someone like Taywood or Barratt the presssures of their businesses meant that land had to be bought to keep to keep the turnover going, and the land bought just before the drop was the their downfall.Many of their sites were profitable as they were being built on holdings bought early on whilst the latter aquisitions became unbuildable on paper. The companies then had no option but to write their land banks down in some instances by 60% with the consequent damage to share price in order to make them buildable.
Now in that instance should we single out the individuals involved with the still profitable sites and say look how well they've done, or do we say the company overall has been mismanaged by allowing itself to be exposed to toxic land deals?
The answer is no, as a developer they had to cut costs across the board to survive, whether that came from the carpenter, forklift driver, commercial director or land manager. The vast majority having done a splendid job but implementing 4 day week money for 5 day work just to survive.
The point being that if a company is at the point of being non sustainable then the pain has to go across all divisions regardless of individual profitability. This principle applies even if you have a fairy godmother as the injection should be used to get the business back onto a field where it performs across the board.
Can't agree that the investment guys shouldn't get their performance related bonuses. That's akin to saying commission only salesmen in a firm shouldn't be paid if the firm does poorly.
But I also don't see why the directors who run failing businesses should receive huge payments whether wage or bonus. That's nonsense.
But I also don't see why the directors who run failing businesses should receive huge payments whether wage or bonus. That's nonsense.
youngsyr said:
Historically I believe the problem was that the bank bosses' "bonuses" were contractural, so there was no legal way for them to be cancelled even if the banks failed and were bailed out by the government.
Surely the contractual basis of bonus is performance related? Bad enough to pay an agreed and unconditional salary to the captain of a ship which runs aground on his watch, but surely no-one agrees to pay a win-lose-or-draw bonus on top?anonymous said:
[redacted]
Of course in that situation Professional Indeminities would have kicked in, with the key test being, had they done what a reasonable professional would have done in that circumstance.You of all people Tonks could see early on that this wasn't sustainable and it seems that the risk management within the banks was below par to say the least.
So the question for me is did the banks act in a way that was risk manageable and the answer to that obviously has to be no for them to end up insolvent. Or do we fall back on school ground terminology of he told me to do it?
Any other organisation ending up in this situation we would probably be questioning the cavalier attitude.
groak said:
youngsyr said:
Historically I believe the problem was that the bank bosses' "bonuses" were contractural, so there was no legal way for them to be cancelled even if the banks failed and were bailed out by the government.
Surely the contractual basis of bonus is performance related? Bad enough to pay an agreed and unconditional salary to the captain of a ship which runs aground on his watch, but surely no-one agrees to pay a win-lose-or-draw bonus on top?Whether the criteria for the bonuses that were met were historic profits, time served, or something else, I do not know.
youngsyr said:
groak said:
youngsyr said:
Historically I believe the problem was that the bank bosses' "bonuses" were contractural, so there was no legal way for them to be cancelled even if the banks failed and were bailed out by the government.
Surely the contractual basis of bonus is performance related? Bad enough to pay an agreed and unconditional salary to the captain of a ship which runs aground on his watch, but surely no-one agrees to pay a win-lose-or-draw bonus on top?Whether the criteria for the bonuses that were met were historic profits, time served, or something else, I do not know.
youngsyr said:
Historically I believe the problem was that the bank bosses' "bonuses" were contractural, so there was no legal way for them to be cancelled even if the banks failed and were bailed out by the government.
very very few (in number) were contractual. Contractual bonuses are a typically way of hiring someone soon before they are due to receive a bonus where they currently are, because when they leave their current firm, they don't get anything. So it only covers their first bonus, not forever after.Let's say it's November, and so far you've made $10m profit for your employer. It wouldn't be unreasonable to expect 10% of that as a bonus (as really it's commission) when they are paid in January. Now another firm approaches you and says come work for us. If you leave now, you won't get paid your $1m (plus 10% of whatever you make in Dec) so you say no thanks, I'll wait until mid-Jan. Maybe the other firm will wait and hire you then, but if it's rather an urgent vacancy to fill, they might offer to buy you out of your bonus, which as you're not daft, you're only likely to accept if it's legally binding as otherwise you might jump ship, get to the new firm only for them to say in January "sorry old chap, been bailed out by the taxpayer. Damned annoying and all that, but can't pay you a penny" (or some other excuse).
So yes, some were contractual but this wasn't really a big proportion. Of course, a rapidly expanding bank (as RBS was) might have a higher proportion of these, as they were hiring more rapidly.
MOTORVATOR said:
You of all people Tonks could see early on that this wasn't sustainable and it seems that the risk management within the banks was below par to say the least.
So the question for me is did the banks act in a way that was risk manageable and the answer to that obviously has to be no for them to end up insolvent. Or do we fall back on school ground terminology of he told me to do it?
Any other organisation ending up in this situation we would probably be questioning the cavalier attitude.
You're generalising a bit there. There were a number of banks that did spot all the risks, knew a crash was coming, and acted accordingly. It was really quite obvious to many of us - record highs on the Dow Jones and FTSE almost every day, record house prices, record levels of consumer debt, building booms - we used to literally "count the cranes" looking out of the office window and when HSBC announced it was selling its own office building for $1bn to rent it back, it was obvious top of the market stuff.So the question for me is did the banks act in a way that was risk manageable and the answer to that obviously has to be no for them to end up insolvent. Or do we fall back on school ground terminology of he told me to do it?
Any other organisation ending up in this situation we would probably be questioning the cavalier attitude.
However, it can be a case of damned if you do, damned if you don't. If you were over-exposed to property prices (as mortgage banks always are in a bubble*), lost a stack and needed a bailout, then you've been reckless. If like Goldman Sachs you knew you were exposed but sensibly hedged your risks by taking a bet in the opposite direction and avoided a bailout^ then you're villified because you "profited" from falling house prices i.e. from others' misery. So either way, you're damned.
- = to avoid being over-exposed to property, the mortgage banks would have had to stop doing any new business 5 to 10 years ago. That said, Northern Rock did act rather stupidly in its lending criteria.
Also many people and the media forget that the people getting bonuses are not the same people that caused these banks to lose money.
groak said:
Can't agree that the investment guys shouldn't get their performance related bonuses. That's akin to saying commission only salesmen in a firm shouldn't be paid if the firm does poorly.
But I also don't see why the directors who run failing businesses should receive huge payments whether wage or bonus. That's nonsense.
Agreed!But I also don't see why the directors who run failing businesses should receive huge payments whether wage or bonus. That's nonsense.
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