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Do Bankers Really Deserve Their Multi-million Pound Pays?

With the money flushing as bonus to bankers and the uproar in the West about excessive pay, are bankers being treated unfairly?

Do they deserve the typical $500K paid as bonus to VPs or EDs at the bulge brackets?

Most VPs are about 28-33 with about 8 years work experience, does it make sense they are making more than an average top 250 firm CEO who does more work than them?

Is their talent any better than that of a Doctor, Rocket Scientist, University Don, Lawyer or Management Consultant and hence deserve the high pay?

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I am watching the news in the UK this very second and the Economics Nobel laureate, Joseph Stiglitz, is saying exactly what I have been saying for years:

The banks are not being run in the interest of social values. They are not even run in the interest of Shareholders. They are being run in the interst of the Bank Managers.

Exactly what I have been saying.

Society will never allow Doctors or Lawyers to operate like that. Bankers are not given or guided by any social or moral responsibilities.

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No, not at all. They shouldn't be rewarded for their greed.

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The problems with ethics in Finance I alluded to earlier is exposed in Goldman Sachs.

Our toxic bank: It's morally bankrupt and calls clients 'muppets' says disgusted British-based Goldman Sachs executive as he walks out

Today is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.

It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.

These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.

My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore.

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.

Source: The New York Times

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Hello friends , I'm 26 peruvian student who is currently living in Italy, I was reading many post about Oil& Gas sector, and I wonder I can ask you for advices , I've received an offer from Imperial College for Msc in Petroleum Engineering , but I'm working in Italy as a process engineer in Basf , I don't know if is better to go to London , I love oil&gas sector , but I don't know if then is easy to get a job as a reservoir engineering in the uk and it is worth (The fees are £23. 500), I've received a partial scolarship , However I'm afraid that I will spend there as minimun £ 15 000 , thanks for your response, friends.

Jhonatan

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The guys earning these bonus are typicaly in managment and traders with P&L.

Very greedy people. Imagine some of these banks layed off a lot of people last year yet one executive decides to pocket 2.5 million pounds for himself

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http://www.efinancialnews.com/story/2010-12-06/how-much-pay-is-too-much

I said it all here:

Risk http://www.nairaland.com/nigeria/topic-364347.0.html#msg5085119

Earnings http://www.nairaland.com/nigeria/topic-364347.0.html#msg5085634

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Just reading this article in the Financial times, they gave exactly my point on the dichotomy of values that exist between Banking/High Finance and Medicine/Law. It seems MBA professors have also spotted this and are working on it.

http://www.ft.com/cms/s/0/2978dc3c-f880-11de-beb8-00144feab49a.html

Risk and returns of the MBA diploma

Those who can, do; those who can’t, teach. But in business and finance it turned out that many of those who did, couldn’t. That has left their teachers – the world’s business schools, especially the most prestigious ones – under fire.

Business schools count many protagonists of the crisis among their alumni, and untold numbers of financial sector foot soldiers sport MBA diplomas. But however righteous the public’s ire over the financial meltdown, is it not a little unfair to direct it at the schools that taught the financiers?

The crisis was a systemic event – the aggregate result of individual choices, not single acts of wrongdoing. Bernard Madoff’s fraud and Raj Rajaratnam’s alleged insider trading did not cause the financial collapse. If it is too simple to blame the crisis on individuals, it seems a stretch to tarnish their schools with guilt by association. (Besides, Mr Madoff never went to business school.)

Still, the spotlight on management schools reveals a dilemma. Do they, like schools of law or medicine, pass on a body of knowledge and know-how defining a profession? Or do they, in a world of rampant degree inflation, merely offer the latest must-have qualification, valued only for proving its holders smart enough to get in but not for anything gained (except contacts) by the time they get out?

The former would be preferable – including for the schools themselves, which would much rather admit that they have done their job badly than suggest that they have no influence on how business and finance are practised.

So as the Financial Times reports on Monday, business schools have started to do some soul-searching, asking what responsibility they have for what happened and how to reform their curricula. About time too. In two important ways business schools have exacerbated what is wrong in business and finance. They can do better if they want to be shapers of the commercial world, not just expensive talent screening devices.

First, business schools – the academic homes to many pre-eminent finance theorists – were crucial in spreading the type of financial analysis that made derivatives and securitised products look too safe to rating agencies, investors, regulators, and the products’ creators.

The good news is that finance professors are well placed to improve on existing models, and many schools are already busy introducing or updating courses on finance. But this can only be part of the effort. Modelling risk better does not by itself alter the incentive to take on too much of it. Business schools must use their financial expertise to actively help investors and regulators, not just financial companies – at least if they aspire to a public role.

Second, however, business schools have failed to articulate what such a role should be for managers. Failing to make business students absorb a “shareholder value” mindset is not the real problem. It is that many managers care rather less about investors than about themselves. Business schools have not (to put it mildly) damped managers’ inflated sense of entitlement.

Many schools are now boosting ethics courses. A dose of moral philosophy could do some good – but lip service is both more likely and worse than no course at all: students quickly see through fig leaves. Students’ own initiatives, such as the “MBA oath” (based on the Hippocratic oath), are more promising. They deserve support.

Yet copying the trappings of professions like law or medicine will do little. The managerial class, if it exists as such, does not have an internalised set of common values of which business schools can be the custodians. But the schools should help managers to value ethical conduct. A good start would be a greater willingness to criticise their students’ conduct – even after they graduate.

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Obama has today proposed restrictions on banks engaging in prop trading, owning hedge funds and private equity firms. About time the riskier aspects of modern banking is hived off so that banks can concentrate on what they do best. Shame he announced on a day I was holding Barclays shares.

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Exactly it is Casino banking . . . hence why they are able to pay Investment Bankers outrageous salaries and bonuses simply for shifting other people's money around and gambling with it . . . while the public is made to take the loss when it happens.

Thats why personally, I don't envy investment bankers cus in reality its like selling your soul cus u know u are playing with the live savings of many . . .

My suspicion is that the reason no one seems to be capable of explaining the so called "Complex Products" is because its an open secret that it is gambling . . .hence no one wants to rock the boat . . .

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Each hedgie is unique but most are not owned by banks. The idea is not to eradicate the problem but to move it somewhere else, the shadow banking system, where its negative effects are contained. It's one thing if MAN Group implodes, it's quite another where RBS implodes. In the latter, the taxpayer foots the bill.

Trading is not an integral of a banking system. The question is not whether to engage in risky trading but whether banks should engage in risky trading.

The gross losses of the implosion of banking system in '08 far exceeds the expected profits the Govt will make from their stakes in the various banks.

Banking has always been essentially as I described it. This stampede into casino banking is a relatively new thing. The world was doing quite well with traditional banking.

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These hedge funds will be part owned by banks or some other arrangement, so it'll simply be moving the problem to a different location waiting to happen. Trading, while risky is still an integral part of how markets work. I don't buy the idea that simply because the banks are currently guaranteed by the Govt that they should be prevented from doing what they do.

In any case, the govt expects to make a profit from their investments in the banks - how on earth do they think that will happen if they prevent the banks from participating in these risky (but highly profitable) activities? Counter productive if you ask me.

Banking is a lot more than that - you can't possibly draw those distinctions at the moment, so till the regulations are changed to enforce the demarcations you speak of, bonuses will continue.

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Their definition of top talent seems to take in a lot of chaff.

Let's bear in mind that the most egregious bonuses go to the traders. These traders make a lot of money because they take a lot of risk. There is a pertinent question as to whether banks, who are guaranteed by the Govt, should be engaged in such risky trading. If the implication of stricter regulation of the bank's compensation regime is that they lose their best traders to hedge funds and the rest of the 'shadow banking' system, so be it. At least, these hedge funds do not have to depend on Govt bailout.

The banking sector should go back to what it does best; taking deposits and providing loans to entrepreneurs. Leave the bonus culture and the attendant risk taking to the shadow banking system.

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Read and weep:

http://www.guardian.co.uk/business/2010/jan/08/bonus-time-city-banks

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The banks will argue that they will lose 'top talent' to other banks if they fail to pay bonuses. You can't simply re-write rules in a single year. The banks are making bumper profits and since their staff have been promised bonuses, they should be paid.

Either the banks reform their reward policies (or are forced to) or this will inevitably contiune.

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With banks' earning season kicking off next Friday, it's bonus time!

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6958528/Record-bonus-pot-at-JP-Morgan.html

Imagine if this money was ploughed back into dividends for the long suffering shareholders or used in beefing up capital positions which is necessary in the light of the latest Basel proposals

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Chei, triple posting. This spambot is useless.

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@sagamite

thanks . . . i don post the thing tire . . . up to 3 times . . .the spambot jsut dey delete am . . .

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@topic

I would prefer to tackle the topic from the point of saying:

- No they do not deserve it . . .

- The mere fact that Banks and some Investment firms required bailout shows that it means the so called "profits" made by those Banks and Investment firms in the past were not real. It hence shows that the bonuses and inflated salaries paid to the Bankers on the basis of those profits are likewise fraudulent, cus common sense dictates that if those profits were real, then the concerned bank or investment firm would not have needed to be bailed out in the first place.

- It is an open secret that most highly educated financial gurus simply can't explain the current complicated schemes such as Derivatives that are being used to make money in the West. This is simply because its either thsoe schemes are fraudulent and hence people are scared to publicly say it (hence they call it complicated) or they are simply senseless and inplausible that most people simple cannot risk their reputations to explain it.

- One simple rule is that: IF A BUSINESS IS SO COMPLICATED THAT YOU CAN'T EXPLAIN IT, THEN THE MOST LIKELY EXPLANATION IS THAT ITS FRAUDULENT.

- So called derivatives are difficult to explain simply because I believe they are intentionally meant to be difficult to explain. . .otherwise how would bankers be able to justify using them to make immoral money.

- Bankers do not actually provide physical goods and services, instead they make money through either:

1. Lending.

2. Keeping other people's money and then charging fees for keeping other people's money

3. Investment in other people that produce physical goods and services.

4. Mafia protection money aka Insurance.

5. Price fixing and manipulation in commodities.

6. Cooking the books. . .

7. Basically creating money out of thing air. . .

Unfortunately, the profit margins for doing the above things is not actually high unless you start becoming heartless and start cutting moral and legal corners. . . e.g. Insider trading, Spurious fees and bank charges, Cut throat interest rates . . . all in all, the richest bankers are usually the ones with the least conscience, cus making money in banking is inversely proportional to how large your consience really is.

- This is because the most legitimate way of making money is either if you sell a physical good or you sell a physical service. . .

- A significant number of bankers are just merely shifting money around . . .and committing immoral but legalised money tricks (that would have been considered to be financial crimes a few centuries ago). . . that do not really result in sale of either physical goods and services.

- Bankers are known to engage in artificial price fixing of goods and services hence increase their profit margin, by fixing the market.

- Most bankers are young cus the reality is that its difficult for a matured and moral person (with a conscience) to remain a banker cus sooner or later they are faced with two options i.e. they either resign to safe their conscience or continue and then become sadists as a result of years of legal but fraudulent transactions (The reason why I find it difficult to reconcile the idea of a christian wealthy Nigerian banker - "Christian" + "Wealthy" Banker simply do not mix).

- The very foundation of banking itself is based on deception i.e. using other people's money to make money while transfering most of the risk to the owner of the money and merely sharing the profit amongst themselves. . . e.g. Wall Street continues to get bonuses while main stream America continues finance the bail out.

- It takes a significant lack of conscience for someone to actually succeed as a Professional Banker . . . the fact is that you simply cannot hope to be a successful banker or investment specialist while still having a conscience. . . it simply cannot happen. Common sense shows that unless you can actually produce a unique commodity or service that people physical buy, its difficult to be rich (without doing something fraudulent), hence it raises the question as to how bankers get paid for doing nothing other than create profits out of thin air.

- Lending and Insurance are one of the most non-violent but heartless areas of financial industry, where bankers (single name that I am using for invesment bankers, normal bankers, insurers and all of them put together) simply make money by picking on the legal and financial naivety of their clients.

- Personally, I would never pay any form of insurance if I can legally get away with it . . . simply because the very nature of insurance itself is fraudulent. If you can give someone money to insure your business and property, why not pay yourself with to insure it yourself so that when you need the money you can actually retrieve the money. Insurance companies are just like a legalised mafia that is forcing people to pay for protection that is (in most cases) never provided when the actual problem actually occurs. The US health industry is one example.

- Africans are smart, hence the reason why insurance business is not really profitable in Africa, cus Africans know that its silly for someone to be paying someone to insure a property for something that occurs by chance despite that there is no guarantee that the person being paid would actually even provide the insurance pay-out when you actually need it.

- Investments in shares and use of insider knowledge to make profits from inflated price selling of useless shares (very rampant in Nigeria).

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Wetin im say? What side is he batting for?

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sagamite

Trump is on CNN now

the topic is

"what do bankers owe the taxpayers''

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@topic

I would prefer to tackle the topic from the point of saying:

- No they do not deserve it . . .

- The mere fact that Banks and some Investment firms required bailout shows that it means the so called "profits" made by those Banks and Investment firms in the past were not real. It hence shows that the bonuses and inflated salaries paid to the Bankers on the basis of those profits are likewise fraudulent, cus common sense dictates that if those profits were real, then the concerned bank or investment firm would not have needed to be bailed out in the first place.

- It is an open secret that most highly educated financial gurus simply can't explain the current complicated schemes such as Derivatives that are being used to make money in the West. This is simply because its either thsoe schemes are fraudulent and hence people are scared to publicly say it (hence they call it complicated) or they are simply senseless and inplausible that most people simple cannot risk their reputations to explain it.

- One simple rule is that: IF A BUSINESS IS SO COMPLICATED THAT YOU CAN'T EXPLAIN IT, THEN THE MOST LIKELY EXPLANATION IS THAT ITS FRAUDULENT.

- So called derivatives are difficult to explain simply because I believe they are intentionally meant to be difficult to explain. . .otherwise how would bankers be able to justify using them to make immoral money.

- Bankers do not actually provide physical goods and services, instead they make money through either:

1. Lending.

2. Keeping other people's money and then charging fees for keeping other people's money

3. Investment in other people that produce physical goods and services.

4. Mafia protection money aka Insurance.

5. Price fixing and manipulation in commodities.

6. Cooking the books. . .

7. Basically creating money out of thing air. . .

Unfortunately, the profit margins for doing the above things is not actually high unless you start becoming heartless and start cutting moral and legal corners. . . e.g. Insider trading, Spurious fees and bank charges, Cut throat interest rates . . . all in all, the richest bankers are usually the ones with the least conscience, cus making money in banking is inversely proportional to how large your consience really is.

- This is because the most legitimate way of making money is either if you sell a physical good or you sell a physical service. . .

- A significant number of bankers are just merely shifting money around . . .and committing immoral but legalised money tricks (that would have been considered to be financial crimes a few centuries ago). . . that do not really result in sale of either physical goods and services.

- Bankers are known to engage in artificial price fixing of goods and services hence increase their profit margin, by fixing the market.

- Most bankers are young cus the reality is that its difficult for a matured and moral person (with a conscience) to remain a banker cus sooner or later they are faced with two options i.e. they either resign to safe their conscience or continue and then become sadists as a result of years of legal but fraudulent transactions (The reason why I find it difficult to reconcile the idea of a christian wealthy Nigerian banker - "Christian" + "Wealthy" Banker simply do not mix).

- The very foundation of banking itself is based on deception i.e. using other people's money to make money while transfering most of the risk to the owner of the money and merely sharing the profit amongst themselves. . . e.g. Wall Street continues to get bonuses while main stream America continues finance the bail out.

- It takes a significant lack of conscience for someone to actually succeed as a Professional Banker . . . the fact is that you simply cannot hope to be a successful banker or investment specialist while still having a conscience. . . it simply cannot happen. Common sense shows that unless you can actually produce a unique commodity or service that people physical buy, its difficult to be rich (without doing something fraudulent), hence it raises the question as to how bankers get paid for doing nothing other than create profits out of thin air.

- Lending and Insurance are one of the most non-violent but heartless areas of financial industry, where bankers (single name that I am using for invesment bankers, normal bankers, insurers and all of them put together) simply make money by picking on the legal and financial naivety of their clients.

- Personally, I would never pay any form of insurance if I can legally get away with it . . . simply because the very nature of insurance itself is fraudulent. If you can give someone money to insure your business and property, why not pay yourself with to insure it yourself so that when you need the money you can actually retrieve the money. Insurance companies are just like a legalised mafia that is forcing people to pay for protection that is (in most cases) never provided when the actual problem actually occurs. The US health industry is one example.

- Africans are smart, hence the reason why insurance business is not really profitable in Africa, cus Africans know that its silly for someone to be paying someone to insure a property for something that occurs by chance despite that there is no guarantee that the person being paid would actually even provide the insurance pay-out when you actually need it.

- Investments in shares and use of insider knowledge to make profits from inflated price selling of useless shares (very rampant in Nigeria).

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Newbie

@topic

I would prefer to tackle the topic from the point of saying:

- No they do not deserve it . . .

- The mere fact that Banks and some Investment firms required bailout shows that it means the so called "profits" made by those Banks and Investment firms in the past were not real. It hence shows that the bonuses and inflated salaries paid to the Bankers on the basis of those profits are likewise fraudulent, cus common sense dictates that if those profits were real, then the concerned bank or investment firm would not have needed to be bailed out in the first place.

- It is an open secret that most highly educated financial gurus simply can't explain the current complicated schemes such as Derivatives that are being used to make money in the West. This is simply because its either thsoe schemes are fraudulent and hence people are scared to publicly say it (hence they call it complicated) or they are simply senseless and inplausible that most people simple cannot risk their reputations to explain it.

- One simple rule is that: IF A BUSINESS IS SO COMPLICATED THAT YOU CAN'T EXPLAIN IT, THEN THE MOST LIKELY EXPLANATION IS THAT ITS FRAUDULENT.

- So called derivatives are difficult to explain simply because I believe they are intentionally meant to be difficult to explain. . .otherwise how would bankers be able to justify using them to make immoral money.

- Bankers do not actually provide physical goods and services, instead they make money through either:

1. Lending.

2. Keeping other people's money and then charging fees for keeping other people's money

3. Investment in other people that produce physical goods and services.

4. Mafia protection money aka Insurance.

5. Price fixing and manipulation in commodities.

6. Cooking the books. . .

7. Basically creating money out of thing air. . .

- This is because the most legitimate way of making money is either if you sell a physical good or you sell a physical service. . .

- A significant number of bankers are just merely shifting money around . . .and committing immoral but legalised money tricks (that would have been considered to be financial crimes a few centuries ago). . . that do not really result in sale of either physical goods and services.

- Bankers are known to engage in artificial price fixing of goods and services hence increase their profit margin, by fixing the market.

- Most bankers are young cus the reality is that its difficult for a matured and moral person (with a conscience) to remain a banker cus sooner or later they are faced with two options i.e. they either resign to safe their conscience or continue and then become sadists as a result of years of legal but fraudulent transactions (The reason why I find it difficult to reconcile the idea of a christian wealthy Nigerian banker - "Christian" + "Wealthy" Banker simply do not mix).

- The very foundation of banking itself is based on deception i.e. using other people's money to make money while transfering most of the risk to the owner of the money and merely sharing the profit amongst themselves. . . e.g. Wall Street continues to get bonuses while main stream America continues finance the bail out.

- It takes a significant lack of conscience for someone to actually succeed as a Professional Banker . . . the fact is that you simply cannot hope to be a successful banker or investment specialist while still having a conscience. . . it simply cannot happen. Common sense shows that unless you can actually produce a unique commodity or service that people physical buy, its difficult to be rich (without doing something fraudulent), hence it raises the question as to how bankers get paid for doing nothing other than create profits out of thin air.

- Lending and Insurance are one of the most non-violent but heartless areas of financial industry, where bankers (single name that I am using for invesment bankers, normal bankers, insurers and all of them put together) simply make money by picking on the legal and financial naivety of their clients.

- Personally, I would never pay any form of insurance if I can legally get away with it . . . simply because the very nature of insurance itself is fraudulent. If you can give someone money to insure your business and property, why not pay yourself with to insure it yourself so that when you need the money you can actually retrieve the money. Insurance companies are just like a legalised mafia that is forcing people to pay for protection that is (in most cases) never provided when the actual problem actually occurs. The US health industry is one example.

- Africans are smart, hence the reason why insurance business is not really profitable in Africa, cus Africans know that its silly for someone to be paying someone to insure a property for something that occurs by chance despite that there is no guarantee that the person being paid would actually even provide the insurance pay-out when you actually need it.

- Investments in shares and use of insider knowledge to make profits from inflated price selling of useless shares (very rampant in Nigeria).

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The fact that a certain kind of activity happens in society with no or minimal regulations doesn't make it socially useful. I can think of an infinite number of examples.

The reality is that until the 2008 meltdown, the regulators didn't appreciate the wider social implications of bank's excessive risk taking blowing up. Many activities, usually the most lucrative, of hedge funds and investment banks such as leveraged speculation on a wide array of arcane instruments such as credit derivatives have little social utility. Tell me, what is the social utility of a CDO?   

The fact that some people make money from this doesn't make it any less useless for society at large. You speak of capitalism, if the consequences of these kinds of speculation is state intervention, as we have seen, it obviously doesn't foster capitalism.

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Yes they are - so also are casinos!

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i'm 100% sure the bankers that are engaged in "socially useless activities" are regulated.

it can only make sense if the regulatory authorities will read ur post and gird thier loins in order to stem these activities u have enumerated

But if nothing can be done by these people, then these activities are rather "economically viable activities as against what you called them

No capitalist goes to the market thinking of being responsible to the society.

if capitalism is heinous as you have described, try socialism

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The huge bonuses being paid to bankers currently and in the recent past is simply a HUGE CON and outright fraud in some cases! The world has always had bankers (and bonuses) and banking is an age old profession but, the massive multi-million bonus packages of today are a more recent invention by smart, intelligent, highly educated, politically savvy, overtly greedy and unconscionable bankers with the active passivity of governments and other custodians of public and private funds.

This has been achieved through the creation of highly complex, 'innovative' financial and investment products and services, outright misinformation, misjudgement (deliberate), incompetence (also deliberate), market hype, artificial markets and sublime insider dealing activities. Most of these activities have been described recently as 'socially useless activities' by Lord Turner of the FSA in the UK (wonder where his voice was prior).

Banks and bankers are crucial to the economy but, the more recent trend towards more and more involvement in 'socially useless activities' at great potential loss to others and great potential gain to themselves poses grave financial danger for the banks and the economy at large.

Majority of the more recent activities of banks and bankers are 'Zero-sum games' -  these create no value/wealth but designed to redistribute wealth from one party to another party without any increase in the overall original wealth/investment - of course the main beneficiaries being the banks and bankers!

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Do bankers deserve their pay? In respect of high end bankers in the UK/US, the answer is no. These people are making money due to state guarantees and virtually free credit because of the mess they caused in the first place. A banker whose livelihood is a product of state subsidy shouldn't be earning millions.

Never mind the shareholders who have been stuffed. Imagine Barclays declaring 1p a share dividend while sharing out multi-billion pound bonuses.

The way to get round this is for regulators to require banks to hold more capital relative to the amount of risk they take. Ultimately, it's up to the shareholders to do something about the compensation culture.

It's all right if a private company dishes out bonuses but ridiculous for publicly traded banks depending on state subsidy to be dishing out bonuses.

Probably, the most important case to made against the bonus culture is that it encourages excessive risk taking which leads to financial collapse or rather, near collapse, as the 'generous' taxpayer will always be there to foot the bill.

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A Nigerian girl I used to see was born and bred in Italy but moved to UK at 15. Both her parents are Nigerians and she told me that when she was growing up, her parents never had to worry about nanny or childcare. In Italy, when the parents had something to do, all they had to do is to just take the kids to the house of any neighbour to help look after the kids.

That to me is just pure soul.

Japan that has the second biggest economy in the world and money flushing in and out, but they have a high stress life which is an ingredient of their high suicide rate.

Hell No, will I ever contemplate living there.

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I was also shocked when I found out about this as well. Europe is far better than the US when it comes to things like that. Let's not talk about our healthcare system and how much that is such a mess.

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brilliant!!!!!!!!!!!!!!!!!!!!!!!!!!!

they have forgotten how they made millions through these bankers

now the crash has come, the bankers shld be jailed

na wa

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why is it that human beings are just bloody built to always remember the bad?

Compare the impact that action of these bankers prior/after the credit crunch do on world economies

How many meltdown have we had in the past 20years and how many overnight millionaires were born during same period due to their direct/indirect actions

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No one is determining 'right' and 'wrong' here - the bankers (in the UK) are not self regulated - the FSA has a responsibility to do that.

If an agency or authority fails to set 'fair' laws (as society or the government of the day perceives them to be) then you CANNOT blame the bankers for benefiting under such as system.

I agree - their corporate value is to make profit, and their societal responsibilities are to ensure that the profits are made in line with the law, and they help out the rest of society as they deem fit, not according to some socialist or capitalist or marxist agenda, but according to the views of the ones who own/run the bank.

Maybe the laws are not right and need to be fixed, but that cannot be the problem of the bankers - regulators have for too long sat on their hands hoping everything will sort itself out - and it hasn't.

Companies will do what is necessary to survive, and making profits are integral to that - the responsibility lies with the regulators and governments to define the playing ground that these institutions can operate on and what will be deemed acceptable or unacceptable.

It doesn't make it right, but let me give an analogy. I own a ship and the most beneficial way of earning income at the time of slavery was to hire out my ship to slave traders who were backed by the government so I can feed my family. The individual involved here cannot make the decision on what is 'right' or wrong outside of the framework set out by the nation/state.  To do so will imply putting yourself at a disadvantage, without making any change or impact on the overall situation.

We all have different views for sure and mine is very clear - regulate the bankers as you deem fit, within the accepted norms of human rights, self determination, democracy and all the other basics ground rules by which society operates. Once that is done, anyone falling foul of that must be punished - it's as simple as that.

Expecting bankers to do the 'right' thing is like playing a football match without a referee and expecting the game to be without incident and everyone agreeing.

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^^^^^^^^

ol boy mr Mauri, NO LONG THING. . abeg. . dis wan don pass 2c now. . .

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People,

I happened to stumble upon this very interesting discussion thread, I throw salute to all the contributors, the level of discussion and the inclusion of some jokes here and there is very impressive.

Here comes my 2cents, as far as I understand the roots of what has come to be the credit crisis.

1. Some clever guys came together to develop some complex financial products i.e. CDO’ (Collateralised debt obligation), CDS’ (Credit default swaps). These sorts of products do have a general name: ABS (Asset backed securities). In the case of the securities instruments that led to the credit crisis, backing assets were sub-prime American mortgages.

2. In the process of transaction, there were all sorts of parties involved each with its own commercial interest. Paramount among them brokers and intermediaries. (They get paid a % of the transaction for bringing buyers and sellers in contact). Their part is done, and off they are to the Bahamas or some other sunny holiday resort, depending on the size of the deal.

3. That brings us to the rating agencies: The standard & poors and the Moodies of this world.  They rate these financial products on specific variables, after which they are accorded a rating. Depending on how high some of these products are rated, that will determine their demand on the market place.

4. At some point, these products get securitized: all bundled together and brought to the exchanges to be sold to investors. Some of these rating agencies responsible for the rating of these products were also involved in this process. Most of these products were rated high by the rating agencies. Why should we expect otherwise?

5. Going back to bullet point 1, these securitised products were back by the sub-prime mortgage in the US. As long as the housing market bubble in the US grew, there was no issue, all parties were happy. I personally think the question we should have asked back then was how come the housing market in the US recorded an increase in value of between 100% & 200% in some cases in a few years time without a corresponding increase in income? A bit of ecomomics, should have revealed that there was artificial growth being created.

- Mortgages/houses were sold to people who could not afford them and with high risk of default.

- These mortgages were sold with an interest form known as: ARM (Adjustable rate mortgage). This is a form of interest rate you pay low rates in the beginning and can arbitrarily increase with very wide margin year-to-year.

- Initially, the buyers of these mortgages were able to service their mortgages due to the low rates. And then came the increase, and then the defaulting, and then the fore-closures, and then the end of the bubble. The rest is history.

6. These resulted in the securities backed by these mortgages becoming worthless, because the assets backing them had dropped drastically in value. Banks, pensions companies and other investors had to start re-valuing their portfolios, leading to billion-dollar write-downs depending on how deep the banks were in these contaminated products.

7. It’s not up to me to point fingers, and it’s not my thing to do. I try to learn from every situation. But looking at the facts, a lot of information was grossly mis-represented by some parties for obvious reasons. Financially, the actions of these so-called smart guys has set the world backward decades financially. Leaving us with no options that to be rescued by the same people (The government/tax payers) they have seriously taken for a ride.

8. I am not going to exonerate the investors from their responsibilities either, but when people seek professional service, they do this because they are lacking the necessary professional knowledge and know-how in taking specific decisions.

Yes, they didn’t do anything wrong according to the law, at least it’s not been proven yet. One of the reasons for this fact is because; laws dealing with complex issues are always re-active. With emphasis on re-active, these are clever guys who have attended the best universities in the world and are connected at all levels.

With Enron and Worldcom, we thought we had seen the worst, after the Enron and Worldcom debacle, new regulations were created to prevent re-occurrence i.e. Soxa (Sobhan Oxley), ISDA upgrade, BASEL-II (upgrade) etc

But these companies/banks do have corporate values and societal responsibilities. Not talking about the ethical and moral responsibilities they have towards the society.

When one of the most terrible crimes in human history (slavery) was perpetuated, it wasn’t wrong according to a lot of laws, but that does not make it right.

I am out of time, this topic has my interest, and I find all the contributions very interesting,  Thought I’d shed my light,  I know I should expect, comments, criticism etc. Will only make the discussion more interesting as long as it remains civil as it has been so far.

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Don't be silly - bankers likely pay more tax in one year than you pay in 10 years so they are more than paying their fair share of the burden.

People MUST take responsibility for their financial decisions and seek out an IFA before making investments. Blaming bankers is shifting blame to someone else instead of dealing with your own flaw.

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Are you saying Doctors, lawyers (especially Barristers), MCs don't work long shifts?

Are you saying their jobs are any less intense or intellectually demanding?

Or are you subconciously coming to the conclusion that bankers just deserve big bonuses, not because of their talent or quality of work, but because their role involves handling the money part (hence taking % from huge capital) and the others don't?

No, you are wrong here.

Goldman Sachs, Morgan Stanley and co were also bailed out to the tune of billions of dollars. They took taxpayers money to stay alive. They depended on taxpayer money being injected in their industry to keep it from crashing when THEY messed it up.

Now they have less competition in their markets, they are making a killing and don't see the sense in simmering the greed that fueled the problem.

I don't blame them. If I was the one tasked with setting up the terms of bailout, I will squeeze their balls so hard it would sound from 2 miles away like knocking 2 snooker balls together repeatedly.

These guys basically just paid of the loans under a year and are trying to get back to norm. I would have ensured the taxpayers that bailed them is entitled to at least 10% of the profits (before mf tax) for the first 10 years of generating profit so they never dream of being in that situation again.

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I haven't seen you back up your statements.

How are they special when they are not even risking their own money?

I hope you know there is rampant insider trading in the industry?

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I think there is a bit of confusion here – there is a big difference between an investment bank (Morgan Stanley, Goldman Sachs being the only two truly investment banks remaining and others like JP Morgan, Citigroup) and a retail bank (HSBC, Lloyds, RBS).

Investment banks are in the business of making money for their clients – their clients are not the normal person walking on the street – its institutional investors and people who have a net worth of at least £1m. These clients are well aware of the possibility of losing money.These are the banks whose business model involves stock market trading, etc  Retail banks are in the business of savings, mortgages, normal bank accounts, etc.  

Investment bankers deserve the high bonuses they get.  I work a 12 hour shift very often, and there are large amounts of money at stake – usually six figure sums and more and my job is extremely intense and intellectually demanding.

What I don’t agree with is retail banks diverting from their core business and starting to do business like investment banks.  These are the people who now need the taxpayers money, NOT INVESTMENT BANKS and I don’t think they deserve the huge bonuses as the taxpayer now has to pay for their greed.  Retail banks are not supposed to be trading on the stock market as their core business and this is what happened – contributing to the financial crisis.

So in summary, investment bankers do deserve the high bonuses, but retail bankers certainly don’t.

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GREEDY BANKERS- i hope they all rot in hell with their private jets, They just want to have a nice life but they do not want to pay tax, their bonus should be taxed, they are just too arrogant, they employ the best accountant so dat they do not pay too much tax, they were happy to give sub prime mortgages to the poor but now they are repossessing their houses, these people are heartless, go to any homeless sections of any london council or the citizens advise centre n c families with children as young as 6 wks trying to get teh council to help them, bloody bankers,

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i think they deserve the bonuses they get (on assumption that they meet their targets) simply because if i am making my company and her shareholders millions of profits every year due to ma shrewd investments then i expect to get a share of that bounty.

It's as simple as that

If they could make money without my bail out, they should be rewarded, but since they are "making money" with my bail out, they should get nothing. If bankers think that they are really smart, let them go into invention like Bill Gates, Larry Ellison, and Steve jobs

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It depends on the balance sheet of the bank. It's not a situation where bankers cook up figures and at the end of the day they buy private jets for

themselves or buy houses oversea. And one begins to wonder what fantastic thing are the bankers doing.

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@ Jay Bee

Thanks for this Topic.

I use to think that Banker bonuses where crazy but I have come to realize that it is one of the hardest Job. When I mean bankers, I am talking of investment banking. Those traders are special. Because of globalization , if you don't pay the good traders or bankers money, they can simply move to another company or country and that company loses. Bonuses can not be stopped in investing banking.

For Nigerian Banking, I think it is very different and i have always told my friends in the banks in Nigeria that putting pressure on staff to go and bring customers to deposit money is not really banking, charging customer 5 per thousand is just robbery by banks. They should open wide their investment wings and make proper money from the world market.

Below is some good links to read

http://www.google.co.uk/imgres?imgurl=http://img.dailymail.co.uk/i/pix/2008/04_04/GregCoffeyES_468x562.jpg&imgrefurl=http://www.dailymail.co.uk/news/article-561417/City-heartthrob-gives-160million-bonus-hedge-fund-boss.html&h=562&w=468&sz=70&tbnid=0q4IOfUi1dz7aM:&tbnh=133&tbnw=111&prev=/images%3Fq%3Dgreg%2Bcoffey&hl=en&usg=__UfNihkdUEvyMLS8Ocf0ak-Tbke8=&ei=FT3XSuu4NJK04Qb7stHNCA&sa=X&oi=image_result&resnum=4&ct=image&ved=0CBEQ9QEwAw

another link

http://www.makemesomemoney.co.uk/2009/05/07/rajesh-gill-the-7-to-7-man/

I think Good Bankers Deserve what they earn

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We should differentiate between Investment Bankers (Wall Street/NSE guys) versus Corporate/commercial or business bankers.

You are given a target and you suppassed that target, why should you not share in the pot because if you don't meet the target, you get sacked,

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It's hard to compare the value of work done cos they are totally different fields.

What abt if u say something like;

value added to the economy,

value added to humanity

bla bla bla

give us something to work with

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I see where Jaybee's coming from . . . they make money for their respective banks

And yeah, they work longhours, but teachers do too . . . no one counts the time theyspend marking and making lesson notes, or who says the nurse isn't as important to the smooth-running of the society as bakers??

That's not the question . . . but we seem to forget that they are in no way the risk-bearers when things go wrong.

They've got sparkling references and CVs with fat golden handshakes when they actually helped to tear the country apart.

So ethically, their paycheques are not in any way justifiable.

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Man u don't have to tell or say here what u earn, I just asked a question. Your alighted statement was honest but also

of smugness, hence the question.

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all of you arguing here shouldn't forget to leave your numbers and addresses so i can alert "the owners" so they can come and collect their share!

and ppl will be complaining that ppl nowadays are refusing to read engineering. . .tah!

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Do you know almost all the analysts in LB got drowned too?

all they have worked for went down the drain cos most of them re-invested the bonuses and income in the bank

how do you detach such a scenario with the boom-bust situation that pervades the Investment banking world

i insist, he who is involved in creating wealth for others deserves to be paid handsomely

thts ma position

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funny shyte is Saga knows all these things

he is just trying to play devils advocate

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