Scrambled Clegg....???

[Mick Mac]

???? Wrote:

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> I think Vince Cable is being hailed as a genius

> because he called the Bust. This was good and he

> was among a few dissenting voices but he does seem

> a bit of a one trick pony in that sense not seen

> him adding much to that one piece of foresight.

What did he predict exactly?

If he predicted a bust then big deal - even I know the economy goes in cycles.

If he predicted that the US sub prime mortgage market was going to bring down the world's banking system than hats off to him.

I don't know what he predicted - can any one tell me?

[Mick Mac]

What did he predict exactly?

If he predicted a bust then big deal - even I know the economy goes in cycles.

If he predicted that the US sub prime mortgage market was going to bring down the world's banking system than hats off to him.

I don't know what he predicted - can any one tell me?

Several economists/financial guru predicted the disaster - Nouriel Roubini being probably the most famous. Certainly, nobody ever predicted exactly when it would happen, but that's impossible, like trying to predict exactly when an earthquake will happen - we know Istanbul is going to be hit by an earthquake but no one knows when. In fact even John Humphrys, who's not an economist or financial pundit, predicted the disaster in an excellent article he wrote several years ago in the ST. He'd been reading Warren Buffet's warnings that derivatives are "financial weapons of mass destruction" and drew a parallel with the structured products that banks were selling. I think there were a lot of people in the financial community who knew something nasty was going to happen; I remember an article in the FT - can't remember who by - that said that the situation was a bit like someone who had jumped off the Empire State building and as he whistled passed each floor he said "OK, so far". However, I don't ever remember Vince the Cable warning about the situation either in print or anywhere else

Cable's point about the rising personal debt and property bubble is a valid one but it did not cause the credit crunch. The issue's of the credit crunch are

1) The US sub-prime mortgages, the ridiculous mortgages sold to self-certified families who couldn't afford them.

2) The de-regulation of the derivative market which meant these debts could be packaged up and be sold in ridiculously complicated bundles that neither buyer nor seller could understand

3) The state of the bonus scheme in the financial sector where traders were incentivized to trade these derivatives, and the quality of these debts were irrelevant

4) The exposure to the US sub-prime market caused by trading these derivatives

I fail to see how this situation would be any different if we had no personal debt. Without so much Government debt or consumers mortgages we may have more flexibility but neither would have stopped the international credit crunch occurring

[Brendan]

Oh, hark at these arseholes.*

Let?s just examine the predicament we?re in. There are still people with skills to do all manner of stuff. All the recourse we needed to do something 5 years ago still exist. There are still houses for people to live in and photosynthesis still occurs. Problem is the people in charge of the scorecard broke it. They broke it with the exponential growth of their attempts to cook it to their advantage.

For them to turn around and spout forth that everybody is as culpable as they are. Especially as they can?t possibly understand the amazingly clever intricacies of the whole business doesn?t wash one little bit with a lot of people.

It?s like someone selling me a faulty computer and then saying that I have to foot the bill because I couldn?t possibly understand the complexities of microprocessors.

*Thank you Mr Brooker.

[matthew123]

Before begrudging anyone for making a 'dishonest' dollar let us not forget the overpaid dentists, doctors and consultants, who don't even do a full days work, picking up 6 figures salaries year on year who are pretty much immune to economic blight regardless of performance..

But if we really want to make savings why not simply axe the countless brain dead shows on the BBC (such as EastEnders)... the amount of money thrown at many of these talentless monkeys is almost criminal.

The list is endless.

[*Bob*]

By Christ yes, Matthew!

Bloody dentists and doctors! Studying away for years so they can fix our teeth and make us well, without have to care a single jot for the consequences should anything go wrong.

Bastards.

[Brendan]

Sorry but I have a policy of not antagonising people who may one day be holding a scalpel over my sedated body or who regularly use power tools within millimetres of the nerves in my teeth.

[SeanMacGabhann]

speechless

[Gimme]

Bonuses are just performance related pay. Salesmen get bonuses (it is just called commission).

Not all performance related pay is bad, only when used to incentivise people to take massive risks.

The reason the financial crisis happened is not because 300,000 people who work in the city get bonuses, but merely because a very small number of people (in certain functions within banks) were incentivised to expose their employers to massive amounts of risk for very large bonuses.

The vast majority of people who work in most of the financial sector get bonuses as performance related pay for doing a good job (in advising people, in IT, in HR, in executing client orders) and not for taking risks.

Removing bonuses in general would not resolve the banking crisis (although I'm sure it would make people who don't get them very happy indeed). But rethinking the way that bonus system works for those who are responsible for taking risk onto the balance sheet of banks would have a big impact on the future likelihood of a similar meltdown and some of the suggestions for deferred bonuses, paying in shares etc to disincentivise those people from taking the risks that have caused all the problems, are precisely for that purpose - if only the banks can be forced to apply these measures to their risk takers.

A large chunk of the tax take in the UK was from having a competitive financial sector. Unfortunately a small number of reckless individuals spoilt that for everyone. The solution isn't trying to cripple the financial sector as a whole but to target those people who are taking on risk for high reward.

And one final thing... the government is going to make an absolute fortune in years to come when the value of the 'toxic' assets held by the banks they own suddenly rises (as if by magic) and becomes worth a lot more than zero (as shown on the balance sheets of these banks). The reason that the assets are valued at zero is because nobody knows how to price them. Credit Suisse paid their top earners in shares in a toxic asset fund (supposedly a punishment). That toxic asset fund has gone up by 68% this year!!!

[giggirl]

Well put Gimmie. I think it's a bit "Daily Mail" knee jerk to just ban bonuses - and capping bonuses at ?2500 is effectively a ban.

[Brendan]

You lost me at are.

So how do you stop people being incentivised to take massive risks with other people?s money?

You would have to (quite rightly in my opinion) legislate against it but then the whole city will wail injustice and persecution.

[sydenhamcentral]

I also thought Cameron was awful last night and that Brown was much better.

If you listen to the 3 debates I found that Cameron said exactly the same thing, word for work, again and again without answering the questions in every debate. I know Brown keeps going on about Tax Credits (I don't even know what they are, how do you get them?) but it paled into insignificance compared to David "autocue" Cameron. All 3 debates were pretty similar and it was the same argument in every debate. The BBC one managed to stop looking like it was being shown in the studio that used to host 'The Price is Right' which felt a bit more dignified.

It's great that they HAVE got people talking. Hopefully more people will vote, but I am getting a bit tired of it all now.

[Gimme]

You wouldn't need legislation.

E.g. The FSA could bring in regulations that state that anyone who works for a bank who is involved in proprietorial trading activities can be paid bonuses but they must paid in shares and are withheld for 3 to 5 years. This would disincentivise people from taking massive short term risks as any if the bets went wrong their shares would be worthless. At the same time, the authorities could force banks to carry the capital to cover all risk positions generated from derivatives to disincentivise them from holding the risk positions at all (as holding all that capital would be expensive in itself).

This would leave most of the people who work in financial sector who aren't involved in proprietary risk activities unaffected and yet remove the primary causes of the financial meltdown of 2008.

Brendan Wrote:

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> You lost me at are.

>

> So how do you stop people being incentivised to

> take massive risks with other people?s money?

>

> You would have to (quite rightly in my opinion)

> legislate against it but then the whole city will

> wail injustice and persecution.

[silverfox]

Gimme said of toxic assets:

"...The reason that the assets are valued at zero is because nobody knows how to price them. Credit Suisse paid their top earners in shares in a toxic asset fund (supposedly a punishment). That toxic asset fund has gone up by 68% this year!!!"

Amazing how when these unquantifiable toxic assets were given to bankers as pay, they not only managed 'to value them' but they rose in value 68%!

[Keef]

I don't know, I'm kind of with Matt when it comes to Dentists!

[Magpie]

Tax credits are pretty simple; You earn money, the government takes some as tax, the government employs people to process the tax (and hence accrues admin costs) and then gives it back to you as a credit. Of course it would be simpler and cheaper just to pay less tax, but for some reason that doesn't appeal. Of course its mean tested, so thats more admin cost but does mean that a very small proportion of families (ie those on incomes over c60k which is a lot of money outside the SE) don't get them. Its crazy really but thanks to Gordon there are loads of examples of this kind of thing. The same thing happens with the low paid and unemployed. You start working and/or increase your hours when you work part time, and you get your benefits withdrawn pretty much on a 1-1 basis. The most sensible thing said all night did come from Clegg and it was around increasing the tax allowance, which basically means the low paid keep more of their money, so more incentive to work rather than live on benefits.

[Magpie]

Well toxic assets have gone up for the bankers but remember that the UK government now has a paper profit on the stakes it took in RBS and Lloyds. Astute move that by Brown. A big chunk of the deficit is caused by lower tax take (as a result of lower profits from the banks) not the money lent/invested to the banks to stop them collapsing.

[HAL9000]

Judging by the number of issues that have been conflated or confused, this thread reveals how little most people know about investment banking and its relationship to the 'financial crisis'.

[Gimme]

The government is probably relying on RBS and Lloyds shareprice to cut the deficit.

Lets face it... RBS paid ?70 billion for ABN Amro so if they can get that for RBS and Lloyds stakes then that's almost half the deficit sorted already!

[Brendan]

Thanks for your input http://en.wikipedia.org/wiki/Input Hal why not enlighten http://en.wikipedia.org/wiki/Enlightenment_in_Western_secular_tradition us?

[Brendan]

On the subject of Doctors: http://www.independent.co.uk/opinion/the-daily-cartoon-760940.html

[Narnia]

HAL9000 Wrote:

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> Judging by the number of issues that have been

> conflated or confused, this thread reveals how

> little most people know about investment banking

> and its relationship to the 'financial crisis'.

HAL, are you going to tell us and will it take a week out of my life to read it? I'd like to know but wonder what the cost will be!

[Jeremy]

Replacing cash bonuses wish shares is not without merit - in fact a lot of the large firms have been doing this for years, after you reach a certain grade.

The problem is that in a big company, your individual performance (or the performance of your desk, department, or even your whole office) may be a mere blip in the context of the whole company. So it's not necessarily such a strong incentive.

Trading regulations would provide a better solution, but they would have to be implemented by someone who understands the industry and the metrics (i.e. not politicians).

[woofmarkthedog]

Dentist/Doctors & Surgeons/Consultants

We are talking about the ones who spent 100 plus hours a week on call in Hospitals after years & years of mind bending study. Dentists also have the highest rates of suicide & alcohol/drug misuse. But they are ones who make a very real difference to most peoples lives. The same group of professionals who have their own board of standards that strikes them off when they fuck up

Yeah, I don't begrudge them one bit

Pay 'em I say, pay 'em lots

Politicians & bankers will do & say anything to further their own ends

So be dammed I say, they are as rotten as each other

W**F

[HAL9000]

In general, investment banking divisions do not make money by taking huge risks - they make money by selling risk, which is transferred from risk-adverse clients to those seeking high risk/reward opportunities.

That business model underlay the creation of the Collateralized Debt Obligation and Credit Default Swap instruments that precipitated the financial crisis of 2008.

The inherent risks embedded within those instruments were either misrepresented by the sellers or misevaluated by the buyers ? probably a combination of both.

The 2008 Crisis was a more sophisticated version of the Savings and Loan Crisis of the late 1980s and early 1990s.

[????]

So leaveriging up yourself massively to make risky trades, as an investment bank Lehmans did, isn't risky?