Yet Another Bunch of Banking Idiots!

[Guest fountainhall]

This is clearly a bad hair morning or something similar, for I can find little good news anywhere

 

If there is one bunch of jerks I want to see jailed for many, many years it is the bankers and their underlings who gambled with money they did not own and did not have, and as a result plunged the world into years of recession (should that be decades?). Yet how many are behind bars? Less than a handful by my last count. And it should be hundreds if not thousands of them now in jail left to rot, as far as I am concerned.

 

If there was one silver lining to that crisis, you'd have thought it would be that the banks had learned their lessons. But, of course, they didn't. Last year, there was the UBS securities trader ("Oh, he was such a nice gentle man and paid his rent on time!") who happened to lose US$2 billion.

 

Well, guess what? They're at it again! Yesterday J P Morgan Chase announced a "surprise" trading loss of US$2 billion on "complex investments" made by its traders.

 

The strategy taken at its CIO had been "riskier, more volatile and less effective" than previously believed, (CEO Jamie) Dimon said.

 

"There were many errors, sloppiness and bad judgement. These were egregious mistakes.

 

"They were self-inflicted and this is not how we want to run a business . . ,

 

"We will admit it, we will learn from it, we will fix it, and we will move on," Mr Dimon said.

http://www.bbc.co.uk...siness-18030022

 

Did I really read that? "Errors, sloppiness, bad judgement, self-inflicted, we will learn from it, we will fix it . . ." Words totally fail me. Such condemnation should have heads rolling - a great many of them, right into the baskets at the foot of the guillotine.

 

And that's not all. The Washington Post which broke the story estimates the current loss at US$2.3 billion and a further US$1 billion could be lost in the current quarter!

 

http://online.wsj.co..._LEFTTopStories

 

As a Professor from Boston points out in the same BBC article -

 

"Taxpayers ultimately have to bail out these 'too big to fail' banks. And that's what JPMorgan is - it is too big to fail," he told BBC World Service radio.

 

"How could a bank that's supposed to be the premier bank in setting the leadership role allow such risk taking?"

[Rogie]

Sorry to learn of the bad hair morning. If it's any consolation I've been having a bad hair month, but the end is in sight. Next week I am back in the UK. For some reason my hair doesn't take too kindly to Thailand's hot season. It goes all curly! Actually it makes me look younger so I don't actually care that much.

 

Wow! Whenever I see that word egregious I know summats up. That's a serious word, a word that grown-ups use. Better get out of the way everybody . . .

 

Has anyone heard of the MU? Could be something like an MA (Master of Arts) or an MSc (Master of Science). Unfortunately not, rather like those bogus doctorates one can buy under the counter from a little-known university or college in Calcutta or Salt Lake City, there is nothing to stop somebody jumping up one morning, clapping his hands and deciding that today is THE DAY, today, unless I am very much mistaken, I am an MU. In an ideal and fair world, once a person (almost always a man, strangely enough!) declares himself something of such magnitude, he bears big responsibility. Most (I hope so!) honour that responsibility. But what about those who don't. How about something akin to a Sharia Court. A Sharia court for everybody, not just Moslems. One where those accused of financial chicanery can be tried and sentenced. What kind of sentences would be appropriate do you think, for anyone found guilty of gross financial misconduct? Loss of an eye, loss of a hand, maybe on a sliding scale so that for example:

SELF-STYLED MASTER of the UNIVERSE - PUNISHMENTS FOR THE 'FALLEN'

Loss of $1 million = loss of an ear

Loss of $5 m = loss of a hand

Loss of $50m = loss of a more 'intimate' external organ

Loss of $500 m = loss of all three 'intimate' organs

Loss of $1 billion = death by stoning

[Guest fountainhall]

We've had Société Générale losing almost $4 billion due to a rogue trader. We’ve had UBS losing US$2 billion due to a rogue trader. We’ve had Jamie Diamand giving a feisty defense of his J P Morgan’s actions in losing around $6 billion and more through rogue trading. We’ve had Barclays’ Bob Diamond giving pretty nervous and seemingly dodgy testimony to a House of Commons Committee about his bank’s manipulation of the LIBOR rate. We’ve had a senior executive of HSBC actually resign at a Senate Hearing over the illegal laundering of huge amounts of cash. We’ve had UK taxpayers facing yet another huge loss of up to US$1.6 billion from the Royal Bank of Scotland, thanks partly to more LIBOR scandals, partly to a disastrous computer failure and partly to cover compensation to small businesses who were allegedly wrongly sold interest rate swap derivatives alongside loans.

 

And now we have Standard Chartered Bank, once a hugely respected pillar of Asian banking (though based in London), running a rogue unit within the Bank that allegedly has hidden $250 billion of illegal transactions over a decade, most with Iran. US$250 BILLION!

 

Whilst nothing has so far been proved nor admitted in this latest scandal, the initial talk is that once again a bank will be let off with sanctions and hefty fines. And once again, the people who perpetrated such deeds get off more or less scot-free. Why are they not all in jail for many, many years?

[Guest]

Allegedly.

Considering inaccurate allegations by the "authorities", I remember it was alleged that Iran's western neighbour had WMD by the US authorities, in concert with their UK counterparts. So let's wait & see who's right on this one.

 

As for bankers, well the whole regulatory system permits them to receive incentives with huge bonuses for short term profits. As for any unmanageable short or long term losses, the shareholders & sometimes the taxpayer pick up the tab.

So the regulatory system needs to be re-written so that performance bonuses can only be of a long term nature. That clearly needs a consensus of all of the major financial capital centres, as banks can easily move their HQ to a more convenient location.

[Guest fountainhall]

Someone was listening to z909! Five years after the banking crisis almost brought the world’s financial system crashing down, a UK government Parliamentary Commission has finally produced a Report which advocates prison sentences for bankers guilty of reckless misconduct, and the withholding of bonuses for up to 10 years so that a banker’s ultimate payout is linked to the longer term performance of a bank and the employee’s particular business area.
 

"Too many bankers, especially at the most senior levels, have operated in an environment with insufficient personal responsibility," the report says

“Senior executives were aware that they would not be punished for what they could not see and promptly donned the blindfolds.

"Where they could not claim ignorance, they fell back on the claim that everyone was party to a decision, so that no individual could be held squarely to blame - the Murder on the Orient Express defence."

Sense at last! The Report advocates six main changes to the way banking is conducted -
 

* senior bankers should be assigned clear personal responsibilities, with the legal onus on them to show they have done all that is reasonably required

* recklessly disregarding these responsibilities should be made a criminal offence - including a possible prison sentence

* senior bankers - and anyone in a position to cause the bank serious harm, such as top traders - should adhere to a new set of banking standards set by regulators

* pay for bankers should be deferred for up to 10 years, with the ultimate payout linked to the long-term performance of the bank and of the employee's particular business area

* deferred pay and pension rights should also be cancellable if a banker misbehaves, or - in the case of senior managers - if the bank has to be bailed out

* banks should be legally required to put financial safety ahead of shareholder interests

http://www.bbc.co.uk/news/business-22954586

[Guest]

Someone was listening to z909! Five years after the banking crisis almost brought the world’s financial system crashing down, a UK government Parliamentary Commission has finally produced a Report which advocates prison sentences for bankers guilty of reckless misconduct, and the withholding of bonuses for up to 10 years so that a banker’s ultimate payout is linked to the longer term performance of a bank and the employee’s particular business area.

 

Beware, politicians are frequently incompetent idiots.  If reckless misconduct of bankers justifies jail, then Gordon Brown should be burnt at the stake for his management of the economy.  Not so much for his quite reasonable decisions during the crisis, more for borrowing 3% of GDP at the peak of the bubble which preceded it.  Borrowing 3% each year during the boom?   Just as reckless as the bankers.

 

The whole problem with bonuses is that bankers benefit hugely from short term profits, so they have incentives to make the kind of short term decisions which were being made*.  The withholding of bonuses for 10 years is very sensible.

Why not make it mandatory for bonuses to be paid as shares, which will be awarded 10 year later?

Also, there should be some restrictions on bank directors pensions.  For example, if the bank ever needs a bail out, then the directors pension should be cropped down to the same level as counter staff get. That way, they have an incentive to think long term.

 

* On the matter of incentives, well politicians think short term too, as their main concern is winning the next election.  That needs some kind of non-parliamentary commission to look into it & impose some long term incentives.  Perhaps MPs salaries should be linked to some KPIs such as:

1 Average economic growth over the next 20 years.

2 Balance of trade over the next 20 years.

3 Public sector deficit

4 Minimum state pension