If anyone needed convincing that they should offer the Occupy protestors full and unconditional support, all doubts should be set aside by the stunning news that the average earnings rise of directors of major companies is 49%.
There is a massive squeeze at present on the living standards of ordinary people, with unemployment rising, inflation rising and salary increases substantially below inflation, plus a whole series of tax increases. Despite the mainstream media, pretty well everybody now understands that this is because their money is being paid straight into the pockets of fatcat bankers by the government. The bankers has already shown they were going to spit in our faces by maintaining the massive incomes of their executives, even at loss makers like UBS.
Those who argue that it should be left up to the shareholders to determine executive salaries are missing the point. The shareholders are, overwhelmingly, other institutions whose executives also benefit from this culture of sickeningly excessive reward, in an orgy of mutually reinforced looting.
What is so striking about this is the absolute fearlessness, the total arrogance of the 1%, safe in their control of the politicians and the power of the state. They seem to think they can trample on the little people forever, with impunity. We are approaching a stage where these people are becoming totally isolated from any bond of communality which holds together a society; are becoming in short the open enemies of the people.
They may find eventually this was not such a wise move, but for now they are so drowned in material consumption they really do not care.
“They may find eventually this was not such a wise move, but for now they are so drowned in material consumption they really do not care.”
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They at no stage in the history of mankind have ever cared.
Capitalism is in a state of total utopian euphoria.
03/12/2009 not mine. I suspect you may need to be registered to open the page, perhaps not, but here it is in case:
http://boards.fool.co.uk/its-some-years-ago-now-but-i-used-to-run-a-11767396.aspx
It’s some years ago now, but I used to run a medium sized investment bank. I think I’ve still got a reasonable insight into what makes them tick.
The first thing I’d say is that they are absolutely not like any other business. They’re a loose confederation of a smallish number of very talented people (talented in a very narrow sense BTW), surrounded by many “also rans”. Essentially the bank provides the smallish number of very talented people with a platform which enables them to trade and make money. The platform comprises capital, regulatory systems, settlement, systems and the reputation of the bank itself. The talented people can’t make money without this platform, but without the talented people the platform won’t make much money at all. The sort of people who actually have the necessary talents are in fact quite rare – it depends on the job, but it requires high intelligence, very high “self starting” abilities, market “feel”, an ability to think creatively under massive pressure, and a willingness to operate in a completely “dog eat dog” environment which can be quite extraordinarily mentally and emotionally punishing. The people with those talents do it to make as much money as possible, not as a social service, and few of them have a social conscience. If they did, they wouldn’t be investment bankers. I’ve employed many hundreds of investment bankers in my time, and whilst the majority have been pretty average, the “best” (i.e. the people who really make the money) are rare beasts. They’re like top footballers – most of us would like to think we can do it, but in fact we can’t. Don’t get me wrong, I’m not saying these people are socially admirable or even particularly nice people. It’s just that few other people can do what they do. And mostly they do make money.
The big problem we have now is that the people who’ve lost all the money are a small subset of the small subset of talented people. Most of the talented people at banks have kept making money throughout the crisis – it’s just that a very few supposedly talented people in highly specialist areas lost absolute fortunes. And believe me, that small subset is not being paid massive bonus’ – they’ve all been fired. If we now refuse to pay bonus’ to the people who’ve kept on making money throughout the crisis then, absolutely for sure, they’ll go to a bank who can pay them the bonus. And there’ll always be a bank somewhere that will.
To my mind the real problem over the last few years has not been the bonus culture – it’s been the lack of oversight of the most talented people by the senior management and owners of banks. The blunt fact is that the most talented people don’t want to be senior managers – they want to keep doing what they’re doing and making money, and anyway they’d often make useless managers. So the managers are usually career “politicians” who generally simply don’t understand what the traders and bright people are doing. Indeed, the level of understanding of banking in banking Boards has been scandalously low. In part that’s because of the sort of people bank traders are – they just wouldn’t sit well on Boards, they don’t like politicking, they’re ludicrously self confident and opinionated, and they’re just not “clubbable”. The result has been that the people charged with managing the traders simply don’t understand what they’re doing, so they can’t weed out the few who are about to run amock.
But in my view the worst thing is that the owners of banks – pension funds, investors and so on – have historically had astonishingly little idea of how the banks they own and invest in actually work. All they wanted was for banks to show maximum short term profits, and frankly any bank which hadn’t delivered that in recent years would have seen its Board fired and it’s share price cricified. We’re all culpable. For example, right now, I bet that virtually none of us here could give even the most rudimentary explanation of how Risk Weighted Assets are currently calculated and how that might change over the next few years. Yet it’s the single biggest issue currently facing banks and we (and other investors, regulators, etc) blather on endlessly about Tier 1 ratios, Core T1 etc as if we actually know what we’re talking about. We don’t. And who is there who knows enough to even begin a sensible conversation about a huge moral hazard currently taking place, which is the force feeding of bank balance sheets with gilts and higher rated corporate debt at wholly artificially low interest rates by the regulators and the BoE. This is a time bomb which will cause quite horrendous losses when (if) QE winds down and rates rise. But I see little or no discussion of it anywhere. And what about the re-set time-bomb on prime US mortgages which seems likely to hit next year and lead to a sharp renewed rise in delinquency rates? Where do you see that discussed? It’s all too complicated, isn’t it, much easier just to blame the greedy bankers.
And why, to play devil’s advocate, haven’t banks bond holders (not just pref holders, bond holders) in Western banks been forced to take the hit? Governments everywhere have pumped massive amounts of money into banks yet all their losses and more could have been absorbed without any cost to the tax payer if bank bond holders had been allowed to take the hit. It’s been the most massive transfer of wealth from the gneral population to a smaller group of bond holders in history. Yet who do you find complaining about it? Nobody in the mainstream media because it’s too complicated to understand.
I don’t know what the answer is. To me, the only possible start to finding an answer is to get brighter, more experienced people into Board positions on banks, into the regulators, and into any position where they can control risk from the point of view of actually understanding what’s going on. Simply bashing them and bashing all bonus’ may be emotionally satisfying, but it’s not the answer. Many years ago I used to work in a broking partnership – in general, that worked because it was the partners’ own capital that was at risk, and enough of us were still at the “sharp end” to understand the risks and stop it when it got out of control. So maybe bank’s senior management should have more of their own capital at risk in the bank? But Dick Fuld had over $1bn in Lehman’s stock, and lost the lot when it went down.
It may be argued that we simply shouldn’t “do” investment banking at all. But capital markets do carry out a crucial function in the allocation of a capital. That’s how our economic system works. And remember, some of the biggest losses weren’t made in investment banking – they were made in bog standard lending on ludicrously low spreads to bad credit risks. The people who did that and pushed for it weren’t investment bankers – they were Boards and their shareholders, who pressed for profit maximisation today and as much growth as possible. Chuck Price – “while the music’s playing, you’ve got to keep dancing”. And even now, what are we all saying – we’re pressing the banks to lend more and more, to keep the game afloat. Surely we should be applauding any banks who now have the guts to refuse to lend, not castigating them? But where’s the profit in refusing to lend? Who’s going to get a bonus for that? We won’t get out of the mess we’re in by printing money and lending more and more to paper over the cracks. That way, we’re only postponing the evil day and hyper inflation will kill us all in the end. We’ve got to stop lending and borrowing so much and CUT EXPENDITURE. Yes, we’ve got to take some pain. But in the modern world people don’t like to hear too much of that. Much easier to trade in soundbites.
On the Giles Fraser thread Mary gave the link to the BBC’s Sick Joke for the Day [executive pay rises in top UK companies]. The paradox that “To encourage the rich you pay them more; to encourage the poor you pay them less” is usually explained by reference to the short supply of gifted bankers and footballers , while by contrast good road-menders, nurses, receptionists, teachers, bakers and bus-drivers are supposed to be two-a-penny.
In fact pay levels have little to do with how we value individuals, their skills and their contributions to society. Determining factors for pay levels include comparative bargaining powers, market constraints and imperfect market information. A considerable part of the framework for these is set by political and administrative structures, within a legal framework (at least in in those societies where laws and justice are respected and applied equally to rich and poor, to those with influential friends and those with none).
How we value people and how we feel valued has little to do with pay. What matters includes having the right resources and training, being trusted, the satisfaction of work well done and the appreciation of others. There is something pathological about both people and systems for whom remuneration packages are the primary incentive and reward. It is dehumanising at both extremes to pay people as little as you can get away with or as much as they can get away with.
To get my vote – an imperfect surrogate for being qualified to practice as a national or local legislator; and one that operates within the equally imperfect market of party political selection processes – a politician will need to agree that the mark of our having internationally competitive financial and footballing industries will be that competent bankers and footballers can be hired more inexpensively in the UK than in other countries. However, just as good mathematical analysis benefits from employing negative numbers, our political analysis needs to have recourse to negative values: in the case of banks – indebtedness to the taxpayer; in the case of our four national football teams, goals conceded in international matches.
[I’ve reposted this from the Giles Fraser string]
Mr Murray,
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Whereas I totally agree with you I also think that there were hardly times when those top 1% have had any bonds with the rest of us. And this does not apply to any particular society but generally to the top 1% against the rest throughout the world.
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They (top 1%) use us wherever and whenever they need. They make us buy houses on extraordinary inflated prices so that we pay them interests for the rest of our lives, they make us to borrow money and spend in shops so that they can report on sales increase, they send us to foreign countries where some of us find death, they make us believe that if we do not spend more we will all suffer, they make us believe that if we do not give billions to banks (from which these 49% increase eventually comes) we will all suffer, they make us to choose between two political parties only and so on and so on.
“What is so striking about this is the absolute fearlessness, the total arrogance of the 1%, safe in their control of the politicians and the power of the state.”
Indeed, did you hear Martin Sorrel, CEO of WPP, on the Today programme this morning? His arrogance spilled over into audible contempt and incredulity at the questions.
http://news.bbc.co.uk/today/hi/today/newsid_9626000/9626078.stm
In order to understand our predicament, it would be helpful to revise the concept of the “hydraulic trap”. This concept refers to the peculiar way that civilizations based around a large river worked, specially ancient Egypt and China. Within these states, a relatively small oligarchy could exploit the overall population by gaining control over the irrigation systems. In other worlds, the oligarchy were those who had the hand in the tap. During their extended history, a number of rebellions against the oligarchs took place, but since the mechanism of control was relatively simple and straightforward, a new oligarchy always formed that took over themselves to exploit the bulk of the population.
In modern west societies the more obvious candidate to be the hydraulic trap-like mechanism is, oil. However, in light of recent years events, it seems that finacial “wizardy” (i.e. phantom money) is actually doing the trick.
What we need to remember about the usurious lenders and their criminality is they have always done this.
They buy the politicians as some sort of usurious investment.
These Zionists pay money in to the party coffers, and we are taxed to pay it back, many fold.
We need to remember that Usury is condemned in every religion and philosophy.
The Banks should all be seized and so should all the wealth the bankers have hoarded by these dishonest means.
“They make us buy houses on extraordinary inflated prices so that we pay them interests for the rest of our lives”
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“Capital must protect itself in every possible manner by combination and legislation. Debts must be collected, bonds and mortgages must be foreclosed as rapidly as possible. When, through a process of law, the common people lose their homes they will become more docile and more easily governed through the influence of the strong arm of government, applied by a central power of wealth under control of leading financiers. This truth is well known among our principal men now engaged in forming an imperialism of Capital to govern the world. By dividing the voters through the political party system, we can get them to expend their energies in fighting over questions of no importance. Thus by discreet action we can secure for ourselves what has been so well planned and so successfully accomplished.”…
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USA Banker’s Magazine, August 25 1924
Have a look at the current Global Strategy Weekly published by Societe Generale. They say they are being extremely pessimistic, but I find their opinions oddly refreshing. They consistently draw parallels between Germany in the Thirties and the current conniptions in the Eurozone. In particular they say that they only solid block on contagion afflicting Italy and Spain is the monetary commitment of the ECB. Societe Generale predicts the ECB will be forced to back the bail-out fund, effectively making it irrelevant whether or not we are in the Euro. If the ECB monetises the debt of member states there will be hyper-inflation across the continent. This is exactly what the treasury secretary in Germany in the late Twenties was doing – he was sucked into persistent recourse to a medication that eventually brought the world the Third Reich. The Euro will become valueless as the machinations of governments fail to deal with the basic problem of too much debt and too little growth. As the EU implodes, so does the UK.
Sorry, I should have drawn a conclusion which made reference to Craig’s blog – which is that, as the Euro collapses and we get the dawn of a deep depression which lasts for decades, the fault of government and bankers and not of a benighted currency, for Pete’s sake, which is simply a unit of measurement, capitalism in its present form will be swept away. The fat cats will go too, because they are parasitic on capitalism. Indeed the reason why they have survived despite such terrible behaviour is because of a wider attachment to capitalism. Nobody will allow it to return, because everyone knows who was to blame. And the reason I am not pessimistic is because we won’t be getting fascism or communism this time. Society will reject capitalistic and supervening structures altogether, because we will be wary of structures that have proved difficult to control democratically. My bet will be on localism and exchanges of value rather than money, which sounds a bit medieval. Perhaps there will be vouchers redeemable locally. But I would bet against the return of the money markets and investment banking. Incidentally, Societe Generale also confidently predicts another almighty recession, starting in a few months, and says that the last time that American unemployment was as high as it is at the moment at the start of a recession was in … 1937.
Yes I heard it on the Radio 4 news very early this morning. Breathtaking. Vile. The more so because they are virtually untouchable. Worthwhile that you’ve featured it. 50 years of PRIVATE EYE and for what when this excrement remains untouched.
Profits are up 50% so they deserve it, no?
I rather doubt profits are up 50%. But even if so, did they take a huge earnings cut when profits fell? And did the workers get a 50% pay increase because proftis were up 50%? No, they got salary increases below inflation and redundancies.
I have been unemployed for over 2 years after severe kidney operations. I am fine now and have been actively looking for jobs since my last operation. In september I had a temporary work (sometimes 8, sometimes 15 hours per week and provided care for disabled people, as of the law 16hours or less is considered to be part time and one is entitled to some benefits). Before I started my temporary work I used to receive 50.5 pounds per week as a job seeker’s alowance and + housing benefit. I sent information about my salaries which was around 50 pounds per week after i received my first monthly salary. Straight away they cut off not only my JSA but housing benefit as well. What the heck of encouragement for people to find a job they are talking about when in fact they are forcing me to quit my temporary job and go back to the benefits again?
“Profits are up 50%”
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See, that big pile of “Profits”, thats our stolen pensions is that.
Arsalan,
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Not to argue with you again but just to point out that it seems that counties like China, India, Saudi Arabia, Brazil have mostly benefitted from our consumer culture. Will you argue that all these countries are Zionists?
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Also getting rid of banks completely will not benefit most of us. But monitoring banks making them behave within certain rules and making them being responsible for their losses themselves will gradually improve situation.
This Guest person is right on the money. Is it always the same guest?
“Is it always the same guest?”
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Afraid So.
See what I wrote above…”we can get them to expend their energies in fighting over questions of no importance”…thats about who is going to win this years X-Factor is that. All laid on, all accounted for, dumb down peoples minds, distract onto other events, thats the order of the day.
Craig
Profits may not be up 50% – but it is pretty much a matter of logic that if the public sector and import/export position is a deficit, and the private sector is running down its savings then corresponding surplus is going into the corporate sector – although of course the cake is shrinking as a whole.
You should also note that the survey relates to the FTSE 100 – which isn’t dominated by bankers (who my guess is will be falling behind the otehr corporate troughers this year) – so is not the representative of corporate Britain as a whole. The FTSE 100 contains quite a lot of oil and gass and mineral companies with overseas operations – which I suspect tells you quite a lot as to where profits and directors pay is stacking up at present.
You can of course rant and rave about this or evne put up tents and call for the overthrow of capitalism and make other vacuous demands, but I’m afraid it will do little to address the real problem.
Perpahs a few areas that should be looked at and challenged might include the following:
– the announced reductions in the rate of corporation tax from 28% to 24% (I didn’t hear too much objecting to this from your Lib Dem friends – could we all have a 4% cut in our tax rates?)
– making the corporate tax rate more responsive to the actual level of investment undertaken by companies
– stricter bonus and payroll codes for regulated industries ( yet again another area where Vince Cable has caved in).
– statutory appointment of worker directors to company boards and remuneration committees and to pension schemes (who can then instruct fund managers accordingly)
– greater use of the fit and proper criteria by the FSA when it comes to approving regulated persons at banks, fund managers and other financial institutions – targetting those who seem prone the short termism highlighted by Boris above
– better economic and financial education of many on the left – because quite frankly the level of understanding and naivety of how the City and markets work is pretty astunding at present, and without such an understanding any regulation will just create bureaucracy rather than have any effect.
Getting mad just isn’t enough I’m afraid. Wiz – Capitalism will not be swept away – even if that was desirable given the lack of coherent replacements, I think you will find that not a few capitalists may be able to outwit such arguments.
@Arsalan
“We need to remember that Usury is condemned in every religion and philosophy.”
We should also remember that it is practiced by supporters of every religion and philosophy as well. Arab and Moslem leaders have been inclined to more than dabble as well – as anyne who has dealt with the City knows all too well.
“better economic and financial education of many on the left”
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Like they are the ones who have led us into this financial armageddon, only a true right wing idiot could have written the above.
Confused:
(“I sent information about my salaries which was around 50 pounds per week after i received my first monthly salary. Straight away they cut off not only my JSA but housing benefit as well.”)
Don’t you wish the government applied the same level of scrutiny and the same capacity to completely wreck someone’s life, to the hundreds who earn £(millions) as well as the millions who earn £(hundreds)? It wouldn’t cost a lot more to do, after all.
Wishing you better luck for the future, anyway.
No kidding here. Just a kick in your face and confirmation that we have a haves/have not society. This e-mail came this morning to a friend who runs a charity.
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Invitation to ‘Raising funds from the Rich 2011’ at Central Hall Westminster on 6th December
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Download conference brochure Book online and request invoice Book by email
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You and your colleagues are warmly invited to ‘Raising Funds from the Rich’, the annual UK Conference on philanthropy organised by Action Planning and The Sunday Times Rich List with ACEVO, CAF and Blackbaud. The event is designed to help you secure more high net worth individuals as major donors, a key and fast-growing source of income for many charities. The conference, attended by 1,000 charity chief executives, trustees and fundraisers, provides a unique opportunity to hear directly from Britain’s leading major donors and experts in major donor fundraising. Speakers this year include:
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Sigrid Rausing, one of Britain’s foremost philanthropists who is using wealth from the Tetra Pak packaging business to advance a wide range of social causes worldwide
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Lord Jeffrey Archer, the international best-selling author who has has raised over £100 million from the wealthy, and holds the Guiness World Record for the most successful charity auction
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Sunday Times Rich List Editor, author, Dr Stephen Beresford, on how to research the interests of wealthy and access the ‘growing battalions of new self-made rich’
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Coutts Million Pound Donor Report, author, Dr Beth Breeze, on how major donors select charities they support, and how to ensure your charity
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Robin Thomas of Action Planning on ‘ten ways to ask for a £1 million gift’ – a session for chief executives and trustees, who have a key role to play in your campaign
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Wealth Intelligence director at Action Planning, Kerry Rock, on how to access 250,000 UK millionaires and identify your weathiest supporters
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The attendance fee is £137 (including lunch and a networking reception) and you can book online or request an invoice here, email anne at actionplanning.co.uk or call Anne on 020 8661 8060. Alternatively, complete the form on the brochure. Here is some feedback from attendees at this conference:
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“Congratulations on an extraordinary day. The atmosphere was terrific and you had a superb range of speakers.”
Lord Bilimoria, CBE, DL, Chairman, Cobra Beer Partnership Ltd
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“A fantastic opportunity to hear directly from major donors why they give and what makes them make their decisions.”
Karen Stenning, Fundraising Manager, Rehabilitation for Addicted Prisoners Trust
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“A very enjoyable and informative event. Excellent range of speakers and topics covered.”
Caroline Cryer, UK Director, Hope in Action
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We look forward to your company on 6th December.
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Kind Regards,
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David Senior
Conference Chair
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Action Planning
http://www.actionplanning.co.uk
I’d like to have a look at the rest of that Bankers’ Magazine if it’s online somewhere. It’s odd that it was published, really … unless it was restricted to some wood-dwelling, handshake-analysing, power-broking elite like the Bilderburg Group. But surely the end is coming too for conspiracy theories. It doesn’t matter what the truth is nowadays. Nothing will happen until it absolutely has to.
You can picture him saying this with his earnest but phony ‘trust in me I’m on your side’ face on.
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Mr Cameron added: “Everyone, whether they are in public life, whether they are in private enterprise, they all need to be able to justify the decisions they make about pay.
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“So I welcome the debate about this. I welcome the transparency. I want to see proper action and I believe in a responsible society and that is responsibility exercised by everybody including in the board room.”
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http://www.belfasttelegraph.co.uk/news/local-national/uk/pm-voices-concern-at-directors-pay-16069890.html
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Anon
So how would you deal with the bankers apart from cheap slogans and quips. Behaps to support my case you should also look at this from the post above by Boris.
“To me, the only possible start to finding an answer is to get brighter, more experienced people into Board positions on banks, into the regulators, and into any position where they can control risk from the point of view of actually understanding what’s going on. Simply bashing them and bashing all bonus’ may be emotionally satisfying, but it’s not the answer.”
So what would you do kick in an bank window, pitch a tent, demand the overthrow of capitalism and its replacement with what?? Oh to be a true left wing revolutionary – but then one day you have to grow up.
“Mr Cameron added: “Everyone, whether they are in public life, whether they are in private enterprise, they all need to be able to justify the decisions they make about pay.”
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I agree, I would very much like to see who has their pay paid into non-taxable offshore bank accounts, and how did they earn that money ???, where did it come from, be made to account for every penny of it!.
But at least the good guys get recognition sometimes
http://news.yahoo.com/arab-spring-activists-win-sakharov-prize-091456970.html
Stephen, I’ve just read the whole of your post. The investment banker quoted by Boris makes it quite clear that the senior managers and directors of investment banks don’t know what the elite traders are up to, and wouldn’t understand even if they did. So it is hard to grasp your faith in regulation. As you yourself say, capitalists are clever and able to outwit arguments based on logic. They can bully and they can bluster and they can smokescreen. But it will be hard to disguise the end of capitalism. I am not someone who goes in for fin de siecle thinking. Twenty years ago I stood for the SDP in a parliamentary by-election, for heaven’s sake. But increasingly I am thinking we might be seeing the end of history. We are entering a period where history is no guide – I would direct you to This Time Is Different. If and when Germany gives up on the Euro, which is perfectly conceivable, and a whole currency collapses, which would then be inevitable, and then the banking system goes the same way, which would follow without the support of the public, would, I ask rhetorically, the public support the recreation of the banking system one more time? I really don’t think so.
Guest
I assure you that many are able to avoid tax without the hassle of using foreign bank accounts or resorting to illegal non declaration of their pay. In order to stop people avoiding tax you need to understand how they do it in the first place I’m afraid.