if you want to complain about RBS boss's £960,000 pay – here's his email!

Bonuses in shares are not taxed as income IIRC – its a tax dodge

Unfortunately that’s not what HMRC thinks, they seem to think it’s taxable just like any other income.

Ernie. I don’t want to labour the point or be rude but you are misunderstanding the difference between profits and profitability. But never mind lots of people do the same

Thanks for your polite comment, but I understand better than you think, or at least you claim to think. I also understand how easy it is for banks to make profits – throughout recent recessions (80s, 90s) banks have continued to make profits. Whenever a bank fails it is invariably due to systematic incompetence, as was the case in 2008 and which led to such catastrophic consequences globally, no one disputes that – whatever their political persuasion.

Anyone think now might be a good time to but shares in RBS?

Anyone think now might be a good time to but shares in RBS?

Now might be a good time to buy shares in several of the banks.

Some of their share prices are so low there’s only really one way to go in the long run. Although it’s certainly a long-term investment.

Ok – ernie, happy to explain properly if you like 😉 But you still mistake “making profits” ie crudely revenues > costs and being particularly “profitable”. See if you can find any nice city bloke and get him/her to explain why banks trade at a discount (consistently over time) to non-banks. If you are lucky they will explain underlying profitability (low) and leverage (high).

Then you can ask them to explain why regulators want lower leverage and finally they might explain why that means bank bashing will mean that banks are unlikely to make enough profits to grow themselves out of the recession and therefore allow QE to work.

Hopefully they will make it easy enough to understand 😉

Oh and then you can bash GO and the BoE for an overly narrow and incorrect policy mix.

Double Oh, then you really can be angry that shareholders were banboozled by bank management and allowed them to be paid on the basis of leverage rather than profits. Try Deutsche Bank as a good example.

Its a binomial call based on what happens to Greece, Portugal and Italy. If they default, you can still lose a lot of money. If they struggle through, banks could double or triple in value – even with low profitability :wink:. So place your bets!!

I think you mean binary and while I am posting I should say your understanding of what banking involves and how they are run could be written on the back of a postage stamp with room for the Lord’s Prayer. ROCE? Completely the wrong measure and what you probably meant hasn’t been used for over twenty years.

Thanks mefty – binary is correct. Know jack sh!t about banking obviously, but excuse for me talking about profitability and leverage. Regulators don’t seem to understand it either (BTW by capital employed I was referring to equity so RoE nor ROCE.)

So please help me out – how is profitability measured, what is this leverage thing that everyone talks about and why have banks always traded at about a 20% discount to markets pretty consistently for the past 50 years? I would genuinely like to know. And is it really true that banks are really profitable?

how is profitability measured

Don’t have time for most of this but this one is easy – the way that gets you paid the most.

C’mon mefty help me out. Just one answer then – how do you measure profitability in a bank, or at last what have people used in the last 20 years?

Didn’t those nice and clever men at Barings Bank pay that fellow Leeson a lot of money – was that because he was very profitable or was that over 20 years ago as well?

So RBS makes £4.8bn (04), £5.4bn (05), £6.2bn (06), £7.3bn (07), -£24.1bn (08), -£3.1bn (09), -£1.1bn (10) and expected (apparently, but how do they know?) to make apprx -£765m (11), £1.8bn (12) and £3.2bn (13).

So leaving aside from the 08-11 bit, does that mean they did a good job?

Hopefully they will make it easy enough to understand

Don’t be a herbert teamhurtmore, I’m unimpressed by patronising and condescending attitudes, specially when the sense of superiority comes from a disciple of a flawed economic model who continues to remain in denial.

Truly ernie – that line came out wrong. It wasn’t meant to be as rude as it sounds, apologies! The smiley was meant to indicate that I wasn’t being clear (self pi$$ take) but it doesn’t come across like that on re-reading.

But what is my economic model out of interest and what am I denying?

I’ve heard you argue on here that there’s nothing wrong with unregulated free-market capitalism, it’s just the capitalists who were wrong. If ever there was an example of someone trying to bullshit themselves out of a corner it’s that.

The starting point is normally a combination between a RAROC and EVA but these are often too blunt for many businesses which use uncharged attributes of the organisation or take risk which cannot be valued properly as data is not available to evaluate – sometimes there is insufficient data, but the model is still trusted, this together with the underpricing of liquidity risk in many ways lead to the credit crunch. So as a manager you have to weigh this all up with what the impact is going to be on your career, whether you can pass the buck, and other strategic decisions, and then you stick your finger in the air.

Are banks profitable – no one knows – how do you value long term derivative books where there is no depth to the market? How do you value anything if there is no market? RBS’s gross balance sheet (which will have been tidied up) was 1,623,383 million at the end of 2010, a 1% swing in that is £16 billion – i.e one year’s profit in a very good year. Merrill Lynch lost in the credit crunch more than they made in their whole 90 years history. Are Bank’s profitable, I will tell you in 100 years.

Never argued that actually – I may have argued that there has never been unregulated free-market capitalism but that is an entirely different point – I would lose my job if I argued what you are saying!!

I did argue that the crisis was more of a failure of capitalists than capitalism – a theme taken up by a number or professors over the past month in the FT for example. But again that is different.

An A level economics student understands that your first point (that you ascribe to me) is wrong!

I’m unimpressed by patronising and condescending attitudes, specially when the sense of superiority comes from a disciple of a flawed economic model who continues to remain in denial.

Me too.

But Ernie, as mefty said, I know jack all about banks. You have been telling me that everyone knows that banks are profitable. Please can you explain. A friend of mine was telling me recently that banks were basically fundamentally low profitability businesses and he invests in them.

Then perhaps I can agree with those on here that Hester and was it Hourican that someone mentioned are worth their salaries. I thought I was agreeing with you here?

So if he goes, billions of public money will be lost ? Let’s hope he doesn’t get run over and killed while crossing the road tomorrow eh ? No doubt he gets accompanied everywhere by a team of fully equipped paramedics just in case of an emergency. Britain really would be up Shitcreek without a paddle if something were to happen to him. And all he asks in return is for lots of money. Bless him.

patronising and condescending?? 😉 {at least i apologised when I was rude!]

Never argued that actually

Yep, you have.

teamhurtmore – Member

I think that history will tell us that we have seen a failure of capitalists rather than capitalism.

Unregulated free-market capitalism was pretty much what we had in 2008, but if you want to argue that it wasn’t unregulated and free-market enough for you to call it that, then fair enough.

The fact remains you claim that there was nothing wrong with the economic model in place in 2008 (whatever you like to call it) and it was only the people who were at fault. Firstly almost no one agrees with you hence the propping up of failed institutions, introduction of quantitative easing, etc, all of which was in direct contradiction to the existing protocols. And secondly ‘the market’ is a wholly man-made entity, if the people who operated within it were wrong, then so was the system. You can’t distinguish the two.

As I said, blaming the capitalist and not capitalism is a cop out and an obvious attempt to remain in denial of the unpalatable truth that something which you believed in turned out to be flawed.

Ernie – fair enough to be cross if I was rude, but doesn’t justify talking bllx about what I have or have not said.

The point that I have made is that it is incorrect to describe the UK (or any other economy) as having unregulated free markets. That is NOT the same as believing that we should have them, rather that it analysing what went wrong in the crisis one has to start with the correct terms of reference. Most global economies including the UK are mixed economies that share characteristics of free and command economies. Governments play a very significant role in the allocation of resources in the UK and were one of several players who were responsible for the financial crisis. So, as the FT argues, to start by saying that the crisis was caused by free market capitalism is at best sloppy thinking and at worst downright misleading.

Even financial markets are not free. Significant intervention takes place not least in exchange rates (the euro) and the level of interest rates. When central bankers deliberately kept rates too low in order to cover for their previous errors, this is hardly a free market and yet it contributed to the crisis. Ditto current negative interest rates.

Why are you quoting QE. A monetarist tool that I have argued is of limited use right now. So get your facts right otherwise we both look like ar***** and surely one is enough of that. And no I am not being rude about you.

If you do not like it then do something about it. This is only happening because we sit back and do nothing. All we have to do is get enough RBS customers together to complain and then threaten to close their accounts in say March and there may be enough pressure that things may change. If you think this won’t work well we managed it in the Netherlands.

null

Even financial markets are not free.

Yeah I think we all know that. It’s still offered to us as the “free-market” though, even though we both know that there is no such thing. I have repeated said on here that the most important minister after the PM is always the chancellor/finance minister. If what they said about the ability of the capitalism and the free-market was true, then the finance minister wouldn’t have much to do other than twiddle his thumbs. But as it is the finance minister has to operate at more or less a permanent crises management level. Capitalism simply cannot look after itself or provide what is required of it without constant government interference. I’m glad we both agree on that.

Anyway, we digress, which I’m sure was your intention. So let’s get back to your point, which is :

“…..that we have seen a failure of capitalists rather than capitalism”

That is nonsense, for the reasons I gave above. What we have seen is a failure of capitalism, however much you want to dress it up as something else.

BTW RE : “Why are you quoting QE”. Try reading it in its context – QE, along with nationalising failed banks and other measures, “was in direct contradiction to the existing protocols”. Government intervention was in response to the catastrophic failure of laissez-faire economics, the economic model which you claim has not failed – it is all “the fault of capitalist” according to you.

Finally : “Ernie – fair enough to be cross if I was rude” Really mate, I’ve got better things to get cross about than what some herbert on a bike forum says 😀

so how do i subscribe to cat facts then?

Well Ernie – you are correct about not worrying about what some “Herbert” on a bike forum says. I’ll back you up there. You can retire tonight with your “understanding” of free market capitalism that you say we never had but blame for the current problems??? I’ll stick to the different debate in the FT and elsewhere where the argument starts from a different point.

Serious analysis points to a failure of western capitalism. I wonder why that is and why other fast growing areas of the worlds are combining capitalism into their economic system. At what point did the Chinese growth story take off? What is happening in Africa, LatAm and Asia. State planning, free markets….no like us its mixed economic systems combining governments and markets in allocating resources. Perhaps that is why economists point to the failure in Europe and the US as not one of a system but of the players within it – the excess leverage at the government, individual and now sovereign level tells me that this is because players made mistakes not the system.

Why is RBS a basket case when Standard Charetere isn’t? Why lloyds and HSBC less so? People perhaps?

I wonder why it was the Labour party who was voted out power? Because people made errors in government. Ditto people personalise arguments against CMD and Osborne. From now on they can all hide behind the excuse that it was nothing to do with them, just those rampant unregulated markets! And all those with negative equity and unserviceable debt burdens can do the same.

Sleep well

Does anyone contributing to this thread actually bank with an ethical bank like co-op who don’t pay ridiculous bonuses to execs?

No, thought not.

Does anyone contributing to this thread actually bank with an ethical bank like co-op who don’t pay ridiculous bonuses to execs?

I do – with Smile.

Just out of interest, do you know what the bonuses paid to Smile execs are? And do you think Smile would be better if they paid more?

You can retire tonight with your “understanding” of free market capitalism that you say we never had but blame for the current problems???

Stop pretending to be daft hurty, you know full well that “free-market capitalism” is what it is generally called, despite the fact that the state often interferes when there is a crises.

You also know full well that laissez-faire economics was the model in operation when the credit crunch and global recession kicked in.

And finally you also know full well that whatever label you choose to slap on it is completely irrelevant.

OK you choose to simply call it “capitalism” and leave out the free-market reference, fair enough, I’ll go with that if you want. The fact remains that you have claimed “capitalism” hadn’t failed, only the “capitalist” failed. This is of course complete nonsense, the system failed, failed catastrophically, and continues to fail. Even the leader of the Conservative Party David Cameron a week ago publicly spoke of the, quote : “crises of capitalism”.

As I said previously, you are obviously in denial because admitting that the system has failed undermines everything which you previously held to be true.

At what point did the Chinese growth story take off? What is happening in Africa, LatAm and Asia. State planning, free markets….no like us its mixed economic systems combining governments and markets in allocating resources.

Again your argument appears to rely on the hope that I am totally clueless, I don’t believe for a moment that you are that ignorant of global economics. In 2011 the two fastest growing economies in the world were those of Argentina and China, both experienced growth of 9.2%. You know full well that the economic policies followed by the governments of Argentina and China couldn’t be more different to those followed by the British government. There is no “state planning” of the British economy at all. It is based on the policy of laissez-faire with government intervention only occurring as a panic measure when things go drastically wrong. There is no “plan”, just occasionally a reaction.

Contrast that with Argentina and China where there is clear strategic planning and government intervention is the norm. And if you look further at Argentina you will see that the difference with Britain couldn’t be starker. Faced with the largest sovereign debt default in history, Argentina finally abandoned decades of failed neoliberal economic policies and it went on a tax and spending spree backed by nationalisation and massive government intervention. Could that be more different to the economic policies followed by British governments for the last 30 years ?

Sure Argentina is far from having a fully socialist economy, but it does follow Keynesian economics and has a mixed economy with extensive government intervention through taxation and nationalisation, something which you falsely accuse Britain of having, although granted it is still in the process of re-nationalising – an issue which China doesn’t have to worry about. Britain does not have a mixed economy, there is nothing of any significance which is government owned, certainly nothing in the productive sectors with the only exception being health, education, and the military/police. And the privateers will probably soon get their grubby hands in health.

I wonder why it was the Labour party who was voted out power?

Do you ? How about “because they had been in power for 13 years and the British electorate doesn’t generally like a party that much, that they want it to stay in power for a lot longer” ? I think the more important question is why did the Conservatives fail to win the election ? After all for the party of government to lose an election and for the opposition to fail to win it, is pretty much unheard of in British politics. Answering that question would be much more constructive – don’t you think ?

BTW : Boris joins attack on No 10’s ‘failure’ over RBS boss’s bonus

I think its an excellent idea that soeone who is effectively a public sector worker gets a bonus. Whens it being rolled out to the rest of us?

Ernie – well at least I am only pretending to be daft. You are correct that I am not completely ignorant about global economics and indeed have bought and sold a company in Argentina recently and work extensivlely with China. To suggest that a system that allows the state to steal directly from its citizens and their pensions is in some way a model that we should aspire to is either niave or downright stupid. Ditto the Achilles heel in the Chinese system is that state influence in the banking system has led to a massive hidden problem of unproductive assets that will bite the Chinese hard at some stage in the next 5 years. But you like simple questions, why has China introduced elements of markets into its model and what happened to growth after it did?

All economic and political analysis points to that same reason why we are in a crisis – an unsustainable build up of leverage at the individual, bank and ultimately sovereign level. People in economic systems that range from largely laissez faire, to anti the Anglo-Saxon model, from RW to socialist governments ect made the same mistakes and gorged on debt. This is what makes monetarist solutions largely impotent and keynesian economics better but still slow to work.

So for the next 10-15 years governments will have to counter the mistakes made by all these players by financial repression where they will artificially intervene to hold interest rates below their natural level and GDP growth to solve these problems. Hence whatever system is in place the recovery will be slow and painful.

Perhaps the reason why we have a coalition is that people realise that no political party has the answer?

How can you possibly say that there is no state planning/allocation in the uk? In those situations where markets do not work who allocates resources in the uk – the Easter bunny?

On the news Boris had mixed views about Hester and frankly I agree with him. The government could have been much tougher.

Got to page 2 and read the comment from ernie-lynch questioning why it should always come down to profit when talking about banks….fell about laughing for a bit….then laughed some more….then managed to hold it together long enough to think about how astoundingly stupid ernie must be.

Ernie me old mucker, if banks dont make a profit then there is no point in their existence….they would simply be vaults for holding your money and they would have to charge you for this like any other holding/storage facility….people in general dont like being charged for having their salary kept for them and would be up in arms….you see as a rule we are a greedy bunch and have come to expect interest on our money, this interest doesnt materialise from thin air and is the result of the banks using our money to try to make a profit….no profit equals no interest….i could go on and state the blindingly obvious about how a bank that doesnt pursue a profit will not be able to loan money either….no mortgage services, no business loans etc…no personal loan when you want to buy a car etc etc….

I’m sure we could go back to a society like that but it would be one hell of a culture shock for most of the country….people having to live within their means?! :lol:….you break that to the electorate and tell them the banks will no longer be run for profit but for service…no more credit, no more loans and repossession of houses the banks (not the public who live in them) own too.

The current system isnt perfect but the alternative sounds decidedly crap too.

From what i’ve seen on the news the last few days this chap in charge of RBS has been paid in shares….good, there’s his incentive for sticking around and making sure the bank can be sold back into the private sector at some point for a massive profit not only for himself but (listen up lefties) the tax payer too.
If the bank fails then our taxes that propped the bank up disappear into the ether….if the bank succeeds and can be made attractive to investors again then the government recoups it’s/our money….hey this is easy, why dont some people get this stuff?!

From the figures being thrown around it appears he took charge of an organisation with 1 billion pounds worth of debt and has now made 2 billion in profit….not bad going, you’d think the leftists would be pleased that we (actually the government but why split hairs) stand a fighting chance of getting a windfall and eventually seeing some of this money back in the chancellors pot….why the glum faces lefties?…this is good news surely?

Socialism is the politics of envy and as ever the left seem to fixate on the headline figure of his bonus and conveniently ignore how this man’s stewardship has reversed the fortunes of RBS….dont worry guys, i’m sure they’ll be a Labour government along soon to spend spend spend….and then we’ll have to do this all again in about 10 years time!

anagallis_arvensis – Member
I think its an excellent idea that soeone who is effectively a public sector worker gets a bonus. Whens it being rolled out to the rest of us?

Indeed. I’ve achieved far more than was asked of me in 2011. The government are only offering me poorer conditions for my pension.

konabunny – Member
Does anyone contributing to this thread actually bank with an ethical bank like co-op who don’t pay ridiculous bonuses to execs?

I do – with Smile.
Just out of interest, do you know what the bonuses paid to Smile execs are? And do you think Smile would be better if they paid more?

Chief exec got £183k bonus in 2010 according to the article below. Customer service is always rated highly so I don’t believe higher rewards would make a difference, overall they seem to have the right balance.

If you have money in a bank whose pay structures strike you as iniquitous, put it somewhere else. As an RBS customer about to jump ship, my own choice is the Co-operative Bank, freshly merged with the Britannia Building Society. Their executives are hardly paupers (last year, the chief executive of Co-operative Financial Services was paid a salary of £590,000, with a bonus of £183,000), but their pay policy falls short of arrogant insanity – and as proof of their bona fides as both progressives and prudent operators, they make a lot of their ethical investment policy and proud avoidance of the financial instruments that got most other banks into such a mess.

I’m making the move because a friend did, which underscores the crucial point. If even 50,000 people took their custom away from the usual big-hitters, the banks would notice, and the idea would surely spread. So what’s stopping us?

Pembo. Greed is what stops people from doing it….see my above post.

By and large the general public didnt have a problem with massive salaries and bonuses when interest was being paid on their accounts at 5%+ a few years ago….likewise when somebody could walk out of a bank with a mortgage for 6-8 times their salary you didnt hear a bad word about the banks.

Personal debt has been fuelling the private sector for years and government debt has been fuelling the public sector for years….we are seeing this being corrected, it not pleasant but any responsible government from any party would be doing the same thing….the alternative is bankruptcy on a national scale.

I once read that a person should be able to clear all their debts with what is in their savings account should things go tits up (mortgages excluded obviously)….wise words, i posted on another forum a few years ago about massive personal debt and was metaphorically laughed out of the room by the other posters….best advice i ever read though.

I bank with smile who efectively coop online, excellent they are too.

I’m glad i came on this thread if only to read a right wing poster state that socialism is the politics of envy, good work sir well done.

5% of the population have hoarded 40% of the nations wealth. This is nothing to do with fair reward, its about having the power to grab that much money

Indeed TJ – cronyism and exists is lots of different systems. Why? People! TJ the Matt cartoon in the Torygraph will appeal to you today.

So front page of today’s FT. Three headlines:

Cuban reforms to encourage private business and allow property trading have proved popular on the socialist island.

the German government wants Greece to cede sovereignty over tax and spending decisions to an (unelected) euro zone budget commissioner

Barclays investors warn they will not tolerate lavish bonuses for executives

Plus inside an interesting transparency on Hester’s performance – a mixed scorecard!!!

(ps thanks Ernie – your advice to adopt the Argie model really kept me going on my long run this morning! One of STW’s treasured quotes. )

Ernie – well at least I am only pretending to be daft.

I take it you are suggesting with that remark that I, in contrast, am actually daft. Well I certainly wouldn’t claim to be clever, just very average – I’m just a simple manual worker without tertiary education. You on the other hand I am sure are quite possibly very intelligent, I believe you have taught economics – have you not ? Which begs the question why do you come out with dumbass comments like this :

“To suggest that a system that allows the state to steal directly from its citizens and their pensions is in some way a model that we should aspire to is either niave or downright stupid.”

It was you who brought China and Latin America into the argument, not me, you divvy.

Nor did I claim that we should should aspire to the model offered by Argentina (I know that it’s Argentina you’re referring to in the comment about stealing pensions from its citizens) I simply pointed out just how different Argentina’s economic policies are to Britain’s, after you had falsely claimed that they were the same. Now you are telling me off for wanting them to be the same ! Seriously mate, do all teachers of economics get into such a muddle ? 😯

As far as whether we should or should not aspire to the model offered by Argentina well the Argentines certainly seem to like it, and they have had plenty of experience with the neoliberal alternative.

Three months ago Argentina’s president was reelected by a majority vote, not many world leaders are so popular that they are the first choice of more than 50% of their citizens. Her nearest rival, a socialist (no neoliberals in the picture) got 17% of the vote, which I believe makes it the greatest gap between the winner and the runner-up in Argentine history.

So it is very clear that the president who ‘steals directly from her citizens and their pensions’ is very popular her voters, and everyone agrees that it is because of the results which she delivers, and the fact that the Argentine electorate is fully aware of what the alternatives are.

But I’m wasting my time telling you all that hurty, because you know all about Argentina. After all you bought and sold a company in Argentina recently.

I was going to comment about China but I’m bored now, can’t be arsed, and I need to do stuff, maybe another time. Although I will quickly say that China’s growth occurred after it ceased its policy of isolation, 40 years ago it wasn’t even a member of the UN – google “Ping Pong Diplomacy”. It has introduced elements of markets into its model as it has grown in recent years, but that has occurred mostly in the later years rather than the earlier ones. The Chinese economy has done massively well since the Tiananmen Square massacre over 20 years ago and the subsequent clampdown and repression, but I don’t conclude that the massacre and clampdown necessarily played a significant part in China’s economic success or that we should look at following the example.

deviant – Member

Got to page 2 and read the comment from ernie-lynch questioning why it should always come down to profit when talking about banks….fell about laughing for a bit….then laughed some more….then managed to hold it together long enough to think about how astoundingly stupid ernie must be.

Ernie me old mucker, if banks dont make a profit then there is no point in their existence….

😀 And I laughed at your inability to read a simple post. Have another go mate, this is what I wrote :

“So just “making a profit” is all that represents whether he’s doing a good job ?

Some people believe that banks should provide a service, not just generate big fat profits for themselves.”

Do you notice the use of the words “not just” ? This time I put them in bold and underlined them specially for you, now try to understand what that means. Any luck ?

Also if you read the post again you will notice that I provide proof directly underneath that comment showing the government whole-heartily agrees with me. Let me hold your hand and post it again for you :

Royal Bank of Scotland misses lending target

And just in case you didn’t want to click on the link I even provided a quote from that article, and I wrote it in bold letters so you wouldn’t miss it. Let me do it again for you :

“Royal Bank of Scotland is expected to come under fire tomorrow as official figures will show it missed its lending target for the first three months of the year, a goal which fellow state-owned Lloyds Banking Group exceeded.”

Do you understand the concept of banking not just being about generating big fat profits but also about providing a service ? David Cameron’s government certainly does.

I have to say deviant, you’re inability to read a simple comment is hilarious – are you another economics teacher ?

Still, it’s good to have a good ol’ belly laugh every now and again and we both appear to have had one 8)

Seriously mate, do all teachers of economics get themselves into such a muddle?

Fortunately not, as I guess their students listen to what they say and read what they write correctly.

fwiw of course I don’t think you are daft, but I do think these specific points are. That’s an important difference. Enjoy your Saturday – hope you get to have a nice ride! Trails seemed a bit greasy running earlier.