Dave,

You need to show Mr Ricci actually was responsible for the situation in the first place – just bashing him for being a rich banker is easy but unconvincing (especially since Barclays Capital shouldn’t be benefiting from the schemes for helping the commercial arms stay viable, and I wouldn’t fancy trying to invest successfully with low interest rates and high inflation (happens with quantative easing you know…)).

If he dealt with derivitives, or was responsible for stupid decisions about mortgages, then fine, he should be denigrated.

Otherwise, go and take it up with Barclay’s shareholders. But they’re probably quite happy because, presumably, Barclay’s Capital made lots of money for them.

“The logic is specious. The reality is that without indirect taxpayer support in the form of cheap loans, BarCap would have been a goner. In the US, it took advantage of hundreds of millions of dollars of nearly free money dished out by the Federal Reserve, under the so-called Primary Dealer Credit Facility.”

Yes, but you can’t go reactively demanding money from someone just because you believe you created a nicer environment for their business.

If I caught a few muggers in my area, I’d probably be a bit of a local hero. However, if I then went to every house in the neighbourhood and demanded a tenner for making the area a safer place to live, I’d quite rightly be told to bugger off.

Pressure the banks that were bailed out, by all means, and increase corporation and higher-rate taxes if this seems reasonable. But I’ve no stomach for attacking individuals just because they’re annoyingly rich and qualify for the new public-enemy label of “banker”.

Try the relating editorial in the Financial Times: King [BoE governor] helps the case for banking reform
http://www.ft.com/cms/s/0/2e6ba9a6-49bd-11e0-acf0-00144feab49a.html#axzz1G6lMOVu9

The nub of the FT’s analysis is this:

“As the Bank’s own analysis has shown, what this means is that banks are still able to borrow at artificially low rates because creditors do not believe they will be allowed to fail. This in turn encourages risky behaviour and excessive remuneration.”

Try to the interview of Mervyn King in the Telegraph:

We prevented a Great Depression… but people have the right to be angry
http://www.telegraph.co.uk/finance/economics/8362959/Mervyn-King-interview-We-prevented-a-Great-Depression…-but-people-have-the-right-to-be-angry.html

Compare the view of the banks in the City:

“THE?banking community has reacted with ‘dismay’ to comments by Bank of England governor Mervyn King that the industry exploits gullible borrowers and has failed to learn the lessons of the credit crisis.”
http://www.cityam.com/news-and-analysis/industry-dismayed-mervyn-king-bank-eyes-new-powers

The banks have good reasons to worry::

Bank of England will use ‘all powers’ to stave off any future crisis. The deputy governor of the Bank of England signalled that the Bank would make aggressive use of new powers planned by the Government to head off any future financial crisis.
http://www.telegraph.co.uk/finance/financialcrisis/7969716/Bank-of-England-will-use-all-powers-to-stave-off-any-future-crisis.html

This is really a symptom. While we may rail at the injustice of the amounts these people are paid what we should really be focussing on is how the system needs to be changed to make earnings a more balanced reflection of a person’s worth and prevent our financial system from threatening the economy again.

@2 Excellent comment, particularly this bit: “Pressure the banks that were bailed out, by all means, and increase corporation and higher-rate taxes if this seems reasonable. But I’ve no stomach for attacking individuals just because they’re annoyingly rich and qualify for the new public-enemy label of “banker”.”

I genuinely think the public consensus is closer to this than to the banker-hatred of the left.

He really does have an unfortunate name. On Dave’s wider point the distinction between a bank receiving direct taxpayer intervention and those who did not is really spurious. States backstopped the whole system in 2008, so they effectively backstopped all the banks. In the midst of the panic everyone turned to the state because only they were big and powerful enough to prevent a total collapse. Without the state in a myriad of interventions Barclays and everyone else would have collapsed. Therefore, for that state guarantee the state should collect a levy as they are providing an insurance policy. I can’t argue that he was worth £44 million, but I do not see any good for the government to effectively having an incomes policy, which the would have if they were to try and ban high salaries.

@ 5 Roger

“I genuinely think the public consensus is closer to this than to the banker-hatred of the left.”

I’ve seen a couple of surveys showing public support for “a tax on bankers”, which I found depressing at the time – does that mean we’re supposed to penalise everyone who works in a bank, even if they’re sitting in a call center earning £12K a year? And even for banks that weren’t bailed out and maintained cautious lending policies?

But then again, the question was phrased in terms of dealing with the downturn, and I suspect if you put “downturn” and “bankers” in your survey question people will naturally be thinking of in terms of punishing the high earners who caused the whole mess when they answer. Not that I’d agree with that policy, mind you, but it’s an improvement on “I’m pissed off, so I want to see people who work for a bank get hurt”.

@7 In difficult times, those doing worse off (even if they’re still relatively better off than 99% of the people in the world, which they will be if they earn the median national average salary in the UK) will look for someone to blame. If it’s not immigrants, it’s bankers.

IMO the FT’s editorial @3 didn’t cover all the potential advantages which the directors and managers of the banks have:

“The Financial Services Authority has hit Barclays (BARC.L) with a record 7.7 million pound fine for mis-selling two income investment products to more than 12,000 clients who lost money during the financial crisis.” [January 2011]
http://uk.reuters.com/article/idUKLNE70H03B20110118

A City banker who amassed almost £600,000 through insider trading with his wife and a friend has been jailed for three years and four months.
http://www.bbc.co.uk/news/uk-england-london-12345373

Goldman Sachs’ ‘conflict of interest inflated Lloyds bail-out costs’
http://www.dailymail.co.uk/news/article-1268378/Goldman-Sachs-conflict-inflated-Lloyds-bail-costs.html

And the point Alan Greenspan made in testimony to the US House of Representatives Oversight Committee in October 2008:

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.”
http://online.wsj.com/article/SB122476545437862295.html

The fact is that in reality it’s often both difficult and costly to prove mis-selling and insider trading beyond reasonable doubt.

I’m beginning to think the government may come to have misgivings over handing so many new statutory powers to the Bank of England to regulate banks and wonder how long it will be before Mervyn King ceases to be the Governor.

Chaise and Watchman @ 1 and 2 are completely correct – banker bashing for bashing’s sake is pretty easy, especially considering that Barclay’s didn’t need a bailout and the deposit windows were accessed by all banks.

Regardless; shouldn’t you be applauding his 44m bonus?

After all, most of it will be paid in shares defferred for 3 years, thus aligning his interests with those of the shareholders and against excessive risk taking and better still he’ll be paying (at least) 50% tax on all of it.

@ 7. Chaise Guevara

Some of them deserve the demonising. However, it does show the power of the media to manipulate the public in providing highly distorted narratives and sometimes blatant untruths. Moreover, it just goes to show that when they are doing the same thing churning out anti-immigrant stories that they have the same effect on the public consciousness.

…..or I suppose we could keep on at banks the way Dave Osler is and have them move offshore, as HSBC is seriously contemplating.

He seems to think that bank profits come directly from public coffers. Which is of course ridiculous. Banks and their employees are massive net contributors to UK tax recietpts.

How much would it cost the exchequer if these banks moved offshore, taking their highly paid employees with them?

Isn’t it absolutely amazing just how many are engaged in this malicious, pervasive conspiracy against banks and bankers – including the governor and deputy governor of the Bank of England, the FSA as was, Alan Greenspan, the previous chairman of the US FED, and Reuters as well as the BBC and the Telegraph and the Mail for all those nasty news reports . . . Absolutely amazing.

“which the would have if they were to try and ban high salaries.”

Why would the govt ban high salaries when they get 50% of it (effectively)?

@ 13 Bob B

Remind me again when those people and institutions claimed that all bankers were bastards?

Everyone’s pissed off with irresponsible bankers. It’s when you conflate that with ALL bankers that it turns into scapegoating.

“The reality is that without indirect taxpayer support in the form of cheap loans, BarCap would have been a goner”

And so would the entirety of the UK economy. Without a banking system (because they’re all bankrupt) there is no economy above the level of a barter economy. We didn’t bail out the banks to bail out the banks, we bailed out the banks in order to bail out the entire economy. We did it for our own sakes, not theirs. Which is why us paying for it (or in fact, as it looks like will happen, us making a profit from having done so) is just fine.

“Therefore, for that state guarantee the state should collect a levy as they are providing an insurance policy.”

Which is what they are doing. They’ve even called it “the banking levy” in order to give people a clue as to what it’s all about.

“But what’s £44m between friends, I hear you ask? Well, it is equivalent to the budget cuts in a city the size of Newcastle this year, a move that will entail hundreds of job losses.

It’s more than the £40m by which the Royal Free Hampstead NHS Trust is set to slash spending, or which South Yorkshire Police is seeking to save by 2015, or which is disappearing from the higher education budget in Northern Ireland.”

Complete twattery.

If it’s not paid out as a bonus then it is a profit. Profits are taxed at 28%. If it is paid out as a bonus then (at this level certainly) then it pays 50% income tax and 13.8% employers’ NI and 1% employees’ surcharge.

So, by paying a bonus the government gets £16 million more in tax revenue than if a bonus wasn’t paid.

And Mr. Ricci is making a personal contribution of £26.5 million to reducing the cuts to boot.

as HSBC is seriously contemplating.

s/”is”/”isn’t”, and you might be on the money. You saw the data, right: the levy made nobody go offshore.

And Mr. Ricci is making a personal contribution of £26.5 million to reducing the cuts to boot.

AIUI, he’s based in New York, so he’s making a similar contribution to [universal healthcare/silly wars, as you prefer].

@ 14. Planeshift

Politicians being politicians tend to follow knee-jerk populism, Planeshift. Public choice theory tells us that politicians are self-interested agents so doing something that gains them popularity with some groups today but costs the country in the long-run would be unremarkable. If they have a range of policy options which one is best is rarely at the forefront of their mind. Which one is the least unpopular and to hell with the consequences because they will not be around will be their choice. Unfortunately it is one of the drawbacks of democracy.

“And Mr. Ricci is making a personal contribution of £26.5 million to reducing the cuts to boot.”

Cor. Can I too? It doesn’t look hard!

@15: “Everyone’s pissed off with irresponsible bankers. It’s when you conflate that with ALL bankers that it turns into scapegoating.”

You’ll need to convince George Osborne who has imposed a permanent levy on banks to pay for the implicit guarantee that none could be allowed to fail because taxpayers would always bail out failing banks to prevent the financial system from collapsing:

“George Osborne, the Chancellor, has increased the levy on bank profits to £2.5bn this year – raising an extra £800m – and made it permanent.”
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8310416/George-Osbornes-bank-levy-as-it-happened.html

Btw note also that the incoming chief executive of Lloyds Banking Group plc – Antonio Horta-Osorio, who came over to Lloyds from Santander’s UK operation – has almost finished the clearing out of the previous executive directors of Lloyds:
http://www.reuters.com/article/2011/03/09/lloyds-idUSLDE72808F20110309

I did tell my bank manager several years back that the then proposal for Lloyds Bank to takeover HBOS wasn’t a good idea but he didn’t agree.

By many reports in the press, the governor of the Bank of England, Mervyn King, appears very focused about applying the new statutory powers conferred on the Bank to impose a stricter disciplinary regime on the banks.

@12

“He seems to think that bank profits come directly from public coffers. Which is of course ridiculous.”

Where do profits come from?

@21 So basically all money belongs to the state/Labour party?

“So basically all money belongs to the state/Labour party?”

No – try the editorial in the Financial Times: King [BoE governor] helps the case for banking reform
http://www.ft.com/cms/s/0/2e6ba9a6-49bd-11e0-acf0-00144feab49a.html#axzz1G6lMOVu9

The nub of the FT’s analysis is this:

“As the Bank’s own analysis has shown, what this means is that banks are still able to borrow at artificially low rates because creditors do not believe they will be allowed to fail. This in turn encourages risky behaviour and excessive remuneration.”

Try too the citations @9 for insights into how some of the bumper profits of the banks originate.

“But what’s £44m between friends, I hear you ask? Well, it is equivalent to the budget cuts in a city the size of Newcastle this year, a move that will entail hundreds of job losses.”

It is a specious comparison because the alternative is not for the City of Newcastle to get that money. If we do not allow Mr Ricci to keep it, he won’t make it and so no one will get that dosh. As it is, he will pay out some in taxes and help keep the local government of the city of Newcastle or some other parasites going and he will spend the rest. Keeping the rest of us in work.

All a bit of a win-win really.

So Much For Subtlety If we do not allow Mr Ricci to keep it, he won’t make it and so no one will get that dosh.

Sorry, what? I’ve not heard a more absurd argument for a long time. If that bonus doesn’t get paid it goes back to shareholders – which are institutions like pension funds, which means they get more in dividends. In other words – we’re all paying for his bonus.

That is Economics 101

25. Sunny Hundal – “Sorry, what? I’ve not heard a more absurd argument for a long time. If that bonus doesn’t get paid it goes back to shareholders – which are institutions like pension funds, which means they get more in dividends. In other words – we’re all paying for his bonus.”

No it doesn’t. He makes it. If he does not get to keep it, he won’t make it. Bonuses are usually paid to a very small section of the banking community who consistently choose right on big deals. That is, they are paid for the profits they generate from their skills and knowledge. If they don’t make those deals, the money does not get made. Ricci is paid for the management skills he has. If he does not exercise those skills, if he is replaced by a fool who does not know what it is doing, Barclays does not make a profit because the wrong decisions were made. The bonus does not come from some fixed lump sum. It relates directly to the number of correct decisions Ricci makes.

Put me in charge and not only wouldn’t I get that bonus, Barclays would make no profits. No one benefits.

“That is Economics 101″

No, it isn’t. Ricci doesn’t just warm a chair. He makes those profits.

@22

No, it’s a geniune question: Where do profits come from?

@26

Ricci is paid for the management skills he has.

He is paid his wage for that. It’s about high-time people (particularly on the right) recognised there is a difference between a wage and a bonus.

27. Mr S. Pill – “No, it’s a geniune question: Where do profits come from?”

Value adding. Making good loans. Making good business decisions.

28. Mr S. Pill – “He is paid his wage for that. It’s about high-time people (particularly on the right) recognised there is a difference between a wage and a bonus.”

And part of his wage is paid as a bonus. Which he only gets if he makes the right decisions and makes money for the bank.

But by all means if you think there is a difference, feel free to explain to us why it is better to reward Ricci whether he makes money or not, as opposed to a bonus.

The bonus does not come from some fixed lump sum. It relates directly to the number of correct decisions Ricci makes.

Yes, and pigs fly. If the correlation was so direct, then these people would be paying back money for the bad decisions of the past decade. Barclays just about survived the crisis because its peers were bailed out. It still has plenty of bad loans on its books. The bonus culture is only one way and not correlated to performance at all. You’d actually have to show me evidence its correlated to performance for me to take that seriously.

I think the bonus culture if they are based on short-term profits and paid in cash can be corrosive. However, there are very few cash bonuses now as they are paid in shares that can’t be sold for X number of years. Moreover, if the profits disappear the bonus paid in shares can be recalled. The term is probably misleading because it is really a form of profit sharing that is distributed to different teams based on how much money that team made for the bank. The desk head decides the percentage of the bonus pool that each member of the team should get. That is why a bank overall could make a trading loss that year and bonuses are still paid. Many individual teams will still have exceeded their targets and get paid a bonus.

If you have a situation where you say no bonuses should be paid and everyone should just work for a basic salary. Well that pretty much removes the incentive to work 12-14 hour days. If you are not going to share in the profit what incentive is there to make the bank anything above the basic target? Moreover, banks are in the business of trying to keep the people who make them money. If bonuses were banned they would just raise salaries. That would ultimately be bad for shareholders because the higher salaries would also be going to those who lost the bank money.

30. Sunny Hundal – “Yes, and pigs fly. If the correlation was so direct, then these people would be paying back money for the bad decisions of the past decade. Barclays just about survived the crisis because its peers were bailed out. It still has plenty of bad loans on its books. The bonus culture is only one way and not correlated to performance at all. You’d actually have to show me evidence its correlated to performance for me to take that seriously.”

Sorry but no. The relation can be direct and yet one way. I have never heard of a contract that says someone ought to pay the bank money if their decisions do not work out. Usually they are just fired. The bonus system exists for the reasons I stated. It rewards good performance. You only have to read their contracts to see that.

@ 30 Sunny

Ah, the banking expert of the left speaks again…

Bonuses are only paid for money made, and usually paid in stock defferred for 3 years. Make no money, get no bonus. They will usually be dependent on individual, group and total bank performance. Lots of people end up getting nothing when they personally have done well but their bank hasn’t…and if you personally don’t do well you are more than likely to get fired – in the process losing any of the defferred stock accumulated over the previous 3 years.

If Mr. Ricci doesn’t perform well over the next 3 years, he will lose the majority of that 44m bonus, which no doubt has hefty performance related clauses in it. He hasn’t jsut been handed a cheque for 44m.

The clawback can be large, or even total if he doesn’t perform.

Sunny Hundal @ 30

You’d actually have to show me evidence its correlated to performance for me to take that seriously.

Fair enough. Here’s the evidence.

Barclays Capital’s performance since 2006 in reverse order:

2009-2010

Barclays Capital profit before tax of £4,780m (2009: £2,464m)

http://group.barclays.com/About-us/Barclays-at-a-glance/Editorial/1231786418277.html

2008-2009

Barclays Capital continued to be the strong driver of growth within the group, with top-line income at the division surging 81% to £17.862 billion, while profit before tax jumped 89% to £2.464 billion.

http://www.proactiveinvestors.co.uk/companies/news/13342/barclays-profits-beat-expectations-barclays-capital-drives-growth-13342.html

2007-2008

Profits at Barclays Capital – the British bank’s investment arm – increased 5%

http://news.bbc.co.uk/1/hi/business/7252060.stm

2006-2007

Barclays Capital turned in a record performance in 2006. Profit before tax increased 55%

http://www.investor.barclays.co.uk/results/2006/annualreport/annualreview2006/businessreview/barclayscapital.htm

It’s not just cheap loans that Barclays benefitted from.

The process of taxpayers rescuing banks that required direct funding involved ensuring that they repaid their creditors in full.

So taxpayers money went from bailed-out banks to institutions such as Barclays who had lent money to them or held investments with them. And then went to their grossly overpaid staff.

In effect, Barclays made woefully stupid bets to invest in crap assets to capture a juicy-sounding upside without due regard to the risks. When their bets turned out bad the taxpayer stepped in to give them all the potential “winnings” as if they had actually made good bets.

It annoys me immensely when the bureaucrats at Barclays (not risking their own money are they?) shamelessly siphon off taxpayers money in this way claiming that they earned it.

@ 35

“It annoys me immensely when the bureaucrats at Barclays (not risking their own money are they?) shamelessly siphon off taxpayers money in this way claiming that they earned it.”

So when someone tries to pay back the money they owe Barclays, Barclays should refuse?

Not what I’m saying.

It’s the arrogant “we earned it” attitude and the pretence that they were not baiiled out combined with the argument that the taxpayer has no right to payback as well- they clearly do.

I support AV because it is a system that can shake up politics more regbulary than fptp. With AV there will be a balance of single party and coalition governments, AV can still produce one party governments when the mandate is there. But will produce more coalition governments when the mandate is not there. I think this will help to cut corruption as long lasting one party governmnets tend to ne more corrupt as do long lasting coaltion governments. AV will lead to the system being shaken up more often. You cannot rely on one party governments.