Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009) • Hacker News Board

Re: Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009)

#31

Post by thanksgiving » Mon, Feb 09, 2015, 1:06 PM UTC

crdoconnor wrote: post #24

tomp wrote: post #21

Earlier quoted context omitted.

I don't mean to detract from your point, but you have to keep in mind the fact that those were loans, and the government actually made money on those loans (AFAIK). Also, if the damage to the economy would be greater than the taxpayer loss of the bail-outs, they still make sense, as long as they are accompanied by legislation that makes hem less likely in the future (which, sadly, hasn't happened yet). > Also I clear…

>the government actually made money on those loans (AFAIK). Nope. Explanation here: http://www.interfluidity.com/v2/2587.html Cash is not king in financial markets. Risk is. The government bailed out major banks by assuming the downside risk of major banks when those risks were very large, for minimal compensation. In particular, the government 1) offered regulatory forbearance and tolerated generous valuations; 2) l…

Exactly! I'm sure I can find a place to park the money with a semi-decent growth rate for a few years if the US Government gave me a few billion dollars and told me to come up with a modest return at my leisure...

Re: Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009)

#32

Post by smcl » Mon, Feb 09, 2015, 1:08 PM UTC

TomGullen wrote: post #9

jheriko wrote: post #6

Earlier quoted context omitted.

> Either you let the company go bankrupt or you nationalize. I vaguely agree with that sentiment, but the problem in practice is that government sucks at running things. They introduce layers of infrastructure that business doesn't and turn things into political footballs. Although thinking about that for a moment, its a big problem on its own...

I don't see why governments can't nationalise industries such as oil extraction. Seems like a lot simpler of a business model than banking and very lucrative as well.

They can and have - a nice example of this is Norway vs the UK\Scotland. When oil reserves were found in the North Sea both Norway and the UK had claims which were (iirc) roughly similarly sized. They chose completely different paths, with Norway establishing a state owned oil company (Statoil) to handle exploration, extraction and processing with stipulations on what should be done with the windfall. The UK ended up selling licenses to private companies to handle this themselves.

As a result of this Norway now has the largest sovereign wealth fund in the world. It's pretty hard to make direct comparisons given the differences in their populations and economies, but a fairly broad range (i.e. left and right [1][2][3][4]) of people seem to think that this was a wasted opportunity and that if it was managed better they'd have a lot more to show for the last 3 1/2 decades. I'd tend to agree.

[1] http://www.theguardian.com/commentisfree/2014/jan/13/north-s... [2] http://www.bbc.com/news/business-19871411 [3] http://www.economist.com/news/special-report/21570842-oil-ma... [4] http://www.newstatesman.com/politics/2013/04/thatcher-and-no...

edit: A little more digging seems to indicate that I was painting with slightly broad strokes. Norway do indeed operate some sort of licensing scheme according to the "North Sea oil" wiki page (http://en.wikipedia.org/wiki/North_Sea_oil), so it is not entirely operated by Statoil.

Re: Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009)

#33

Post by davidw » Mon, Feb 09, 2015, 1:08 PM UTC

themartorana wrote: post #16

davidw wrote: post #12

Earlier quoted context omitted.

You should have seen how banks were run in Italy when they were essentially the financial wings of various political parties. Anyway, this is pretty clearly about politics, so... article flagged.

You should either participate in a discussion OR flag it as inappropriate, because the second you agree to engage, you believe the conversation has some merit on this forum. Edit: I can't reply to you for some reason, but I didn't downvote you. However, saying "downvote" instead of just doing it, and then flaunting your karma score and elevating yourself to the position of de-facto moderator seems much like saying "h…

If no one mentions that something is inappropriate, the site will gradually migrate towards politics, because the number of people interested in that is vastly superior to the number interested in "HN" topics.

Also: I don't really care about your downvotes, because I've accumulated more than enough of this otherwise useless 'karma' that I'm happy to spend in order to make HN better by keeping politics and 'outrage stories' off of it.

Re: Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009)

#34

Post by Fuxy » Mon, Feb 09, 2015, 1:09 PM UTC

javiramos wrote: post #25

tomp wrote: post #21

Earlier quoted context omitted.

I don't mean to detract from your point, but you have to keep in mind the fact that those were loans, and the government actually made money on those loans (AFAIK). Also, if the damage to the economy would be greater than the taxpayer loss of the bail-outs, they still make sense, as long as they are accompanied by legislation that makes hem less likely in the future (which, sadly, hasn't happened yet). > Also I clear…

Yeah, but when the bank needs loans to stay in business it shouldn't be paying out bonuses. Particularly so if the government (i.e. taxpayers/us) went through giant efforts and took a significant amount of risk to hand out these 'loans'. EDIT: I believe that the bailout was needed and it did (IMO) prevent significant negative ripples from flowing through our financial system. What I really despise is the lack of disc…

Not to mention the unquantifiable damage taxpayers took because the economy went bye bye and they were unable to pay their loans and mortgages.

You can make a heck of a lot of money if you kill the economy, get bailed out and get to keep the properties and houses of the little guys that don't get the same benefits.

If you really wanted the economy to recover quickly you would be bailing out taxpayers not big corporations.

Re: Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009)

#35

Post by pdpi » Mon, Feb 09, 2015, 1:10 PM UTC

javiramos wrote: post #25

tomp wrote: post #21

Earlier quoted context omitted.

I don't mean to detract from your point, but you have to keep in mind the fact that those were loans, and the government actually made money on those loans (AFAIK). Also, if the damage to the economy would be greater than the taxpayer loss of the bail-outs, they still make sense, as long as they are accompanied by legislation that makes hem less likely in the future (which, sadly, hasn't happened yet). > Also I clear…

Yeah, but when the bank needs loans to stay in business it shouldn't be paying out bonuses. Particularly so if the government (i.e. taxpayers/us) went through giant efforts and took a significant amount of risk to hand out these 'loans'. EDIT: I believe that the bailout was needed and it did (IMO) prevent significant negative ripples from flowing through our financial system. What I really despise is the lack of disc…

Notice that you're effectively saying "the bailed out banks should renege on contracts". If nothing else, there's enough money on the table that the affected people are likely to litigate, and there's a fair chance you'll just end up paying the bonuses just the same, but now topped off with the expenses of a lawsuit.

Re: Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009)

#36

Post by crdoconnor » Mon, Feb 09, 2015, 1:10 PM UTC

thanksgiving wrote: post #31

crdoconnor wrote: post #24

Earlier quoted context omitted.

>the government actually made money on those loans (AFAIK). Nope. Explanation here: http://www.interfluidity.com/v2/2587.html Cash is not king in financial markets. Risk is. The government bailed out major banks by assuming the downside risk of major banks when those risks were very large, for minimal compensation. In particular, the government 1) offered regulatory forbearance and tolerated generous valuations; 2) l…

Exactly! I'm sure I can find a place to park the money with a semi-decent growth rate for a few years if the US Government gave me a few billion dollars and told me to come up with a modest return at my leisure...

Especially if I could use them to make a tails-they-lose-heads-I-win bet.

Re: Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009)

#37

Post by cones688 » Mon, Feb 09, 2015, 1:14 PM UTC

sjcsjc wrote: post #2

OP here. Given the current story re HSBC's misbehaviour, I thought it worth reminding everyone of the scale of the theft that took place during the bank bailout.

appreciate the sentiment but HSBC didn't take a dollar, pound or Euro of bailout money.

Re: Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009)

#38

Post by tomp » Mon, Feb 09, 2015, 1:19 PM UTC

crdoconnor wrote: post #24

tomp wrote: post #21

Earlier quoted context omitted.

I don't mean to detract from your point, but you have to keep in mind the fact that those were loans, and the government actually made money on those loans (AFAIK). Also, if the damage to the economy would be greater than the taxpayer loss of the bail-outs, they still make sense, as long as they are accompanied by legislation that makes hem less likely in the future (which, sadly, hasn't happened yet). > Also I clear…

>the government actually made money on those loans (AFAIK). Nope. Explanation here: http://www.interfluidity.com/v2/2587.html Cash is not king in financial markets. Risk is. The government bailed out major banks by assuming the downside risk of major banks when those risks were very large, for minimal compensation. In particular, the government 1) offered regulatory forbearance and tolerated generous valuations; 2) l…

While it's true that banks continue to receive better-than-usual rates from the government, I don't entirely buy this reasoning. Firstly, the liquidity (i.e. "risk") is essentially free for the government/FED (printing money etc.). Secondly, I believe that if the government failed to act to prevent another depression, the loss would be far greater - if nothing else, there would be a huge loss associated with covering of the insured deposits if a commercial bank failed (which would be very likely if any big financial institution failed, because they are so intertwined).

I do think, however, that after having been "bailed out", a business should have a very high tax rate on profits (90 - 99%) for a number of years/decades.

Re: Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009)

#39

Post by aidos » Mon, Feb 09, 2015, 1:20 PM UTC

pdpi wrote: post #35

javiramos wrote: post #25

Earlier quoted context omitted.

Yeah, but when the bank needs loans to stay in business it shouldn't be paying out bonuses. Particularly so if the government (i.e. taxpayers/us) went through giant efforts and took a significant amount of risk to hand out these 'loans'. EDIT: I believe that the bailout was needed and it did (IMO) prevent significant negative ripples from flowing through our financial system. What I really despise is the lack of disc…

Notice that you're effectively saying "the bailed out banks should renege on contracts". If nothing else, there's enough money on the table that the affected people are likely to litigate, and there's a fair chance you'll just end up paying the bonuses just the same, but now topped off with the expenses of a lawsuit.

Are the bonuses often contractual and not discretionary? If so, they're not really bonuses.

Re: Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009)

#40

Post by tomp » Mon, Feb 09, 2015, 1:21 PM UTC

javiramos wrote: post #30

MichaelApproved wrote: post #26

Earlier quoted context omitted.

Also, the payment of "bonuses" in the banking industry are essentially an extension of salary. It's not what you'd typically think of as a bonus for hard work during the year. Bonuses are often pre-negotiated and pre-determined, just like a salary is.

Are you referring to investment banking/trading/PE or what? This is definitely not true in IB or trading. Your bonus is a direct function of what you make. This is particularly true for even more senior partners in IB/trading firms. The rainmakers make significantly more money than 'operating' or 'non-money-making' partners.

Right... but if you "punish" a very successful trader by giving him/her a lower-than-agreed-to bonus (for traders, the bonus should be a percentage of their realized PnL) because of actions of some higher-level executives, the only effect that will have is that the trader will go to a different company that will pay him what he is worth.