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)

#71

Post by srj » Mon, Feb 09, 2015, 2:18 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…

I don't believe making a profit was the government's intention. Stopping a credit freeze was. Would you have the US government behave as a payday loan lender? If not then what's your point?

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

#72

Post by isaacremuant » Mon, Feb 09, 2015, 2:20 PM UTC

motters wrote: post #60

In other words taxpayers money was redistributed into the personal bank accounts of some of the richest people.

IIRC, The official narrative from politicians, news anchors and think-tanks was that:

- If the bailouts didn't happen, it would be mayhem, "too big to fail", etc.

- You got your money back with interest. It was all payed back (disregard economic theory and value of money in hand).

- Why are you complaining, you banjo-playing hippie? You can't be in OWS if you have an iphone! (In Erin Burnett's voice)

------

Many people will talk situations that forced the banks to hand out these bonuses and maybe they're right but the deeper problem is that when companies/banks/people suffer no consequence (and even worse, benefit from) doing illegal/harmful things then they're going to keep up doing them. profit vs "cost of infraction".

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

#73

Post by gadders » Mon, Feb 09, 2015, 2:21 PM UTC

tormeh wrote: post #4

>“When the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well,” Cuomo’s office said in the 22-page report. “When the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well. Bonuses and overall compensation did not vary significantly as profits diminished.” Waaat. I think the government should stop bailing out businesses.…

>>Waaat. I think the government should stop bailing out businesses. Either you let the company go bankrupt or you nationalize.

What, like General Motors?

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

#74

Post by freehunter » Mon, Feb 09, 2015, 2:22 PM UTC

easytiger wrote: post #51

quaffapint wrote: post #44

Earlier quoted context omitted.

I work in banking as just another cog. We suffered wage stagnation and no bonuses. The executives on the other hand still got at least a 10% bonus each year, because they had contracts. So, please keep that in mind when it says 'employees'.

Still happening. Especially people working in IT in banks are getting almost nothing in bonus and no pay increase for many years. The number of jobs is significantly reduced also.

Ever since I've started working in IT, the rule has always been if you want a pay raise or a promotion, you go to a different company. Out of the four companies I've worked for in three different Midwest states, I've never worked at a place where the highest raise of anyone on my team has ever exceeded 1.5% per year. 2-3 years then get out and get your raise somewhere else.

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

#75

Post by lucozade » Mon, Feb 09, 2015, 2:23 PM UTC

randomsearch wrote: post #46

javiramos wrote: post #30

Earlier quoted context omitted.

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.

> Your bonus is a direct function of what you make Isn't the point of the article that this is demonstrably untrue?

Not quite. The article is pointing out that the overall level of bonus is not well correlated with the revenue (or profit) of the companies as a whole. The poster is pointing out that that's largely because an individual's bonus, particularly in areas like IB (where most of the bonus pool ends up), is much more of a function of the revenue the individual brings in.

Part of the reason for the discrepancy at the time of the crash is that, until the liquidity crisis gummed everything up, most of the catastrophic losses where in a relatively niche area. A lot of the other parts of the banks did continue to make money.

Then when the liquidity crisis hit, the view was, generally, that significant parts of the businesses were still fundamentally sound so there was no point losing good people as they'd be needed to build things back up again.

I happen to think that all this is sensible up to, but not including, the bit about losing good people. This was fundamentally self serving and tended to define "good" as those who were successful is a overly risky environment.

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

#76

Post by eli » Mon, Feb 09, 2015, 2:23 PM UTC

uptown wrote: post #59

While the data is accurate - the messenger, in this case, is Andrew Cuomo - a politician who aspires to run for President in the near-term. He had very little problem accepting campaign contributions from the financial services industry - they were his second-largest contributor by-sector. http://influenceexplorer.com/politician/andrew-cuomo/d83c545...

Well, hey if we're just going to ad hominem attack Andrew Cuomo, it'd probably be much more effective to point out the recent scandal where he disbanded an anti-corruption task force because it was too effective and started questioning his friends, and that there's allegedly an active federal investigation into his affairs.

Doesn't have much to do with the bank bailout though.

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

#77

Post by vidarh » Mon, Feb 09, 2015, 2:26 PM UTC

mattgibson wrote: post #17

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...

> the problem in practice is that government sucks at running things. They introduce layers of infrastructure that business doesn't Actually, there is no evidence of this. See this report that compares the Govt run industries before and after privatisation: http://www.psiru.org/reports/public-and-private-sector-effic... "The results are remarkably consistent across all sectors and all forms of privatisation and outso…

I think people tend to conflate government run businesses with government departments.

Government departments will often be more bureaucratic for the simple reason that they have many additional roles to their primary ones: They are subject to openness and audit criteria that no private business is; they're subject to leadership systems that need to be resilient to far more frequent and drastic changes than in most businesses; they're subject to performance measurement across a far wider set of criteria than most private businesses etc.

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

#78

Post by collyw » Mon, Feb 09, 2015, 2:28 PM UTC

JetSetWilly wrote: post #14

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...

The UK government nationalised RBS and thus far RBS does not seem to be particularly badly run or more bureaucratic when compared to other banks, so I'm not sure there's any real evidence for this statement. In fact the UK government is expected to make a tidy profit when it privatises RBS again.

Ahhhh, cute, you believe what the government tell you.

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

#79

Post by tomp » Mon, Feb 09, 2015, 2:30 PM UTC

ThomPete wrote: post #66

jimktrains2 wrote: post #62

Earlier quoted context omitted.

> On the fallacy that the U.S. taxpayers made money on the bailouts > 8.6% is insultingly low compensation to use taxpayer money So, money was made? > could have been spent on more beneficial investments (infrastructure, education, healthcare) to bail out private companies who were the victims of their own greed and poor governance. Why couldn't it still be used on infrastructure, education, or healthcare?

Money were made but not enough compared to the risk involved with lending them out. Thats the point.

Bot possibly, even probably, enough compared to the risk involved with not lending them out (i.e. another depression).

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

#80

Post by vidarh » Mon, Feb 09, 2015, 2:33 PM UTC

smcl wrote: post #32

TomGullen wrote: post #9

Earlier quoted context omitted.

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…

Norway certainly does have private exploration too, but note that we also levy massive extra taxes on oil companies, which adds up to something like 70% total, vs. 28% corporation tax on the profits of most other businesses.

I believe the licensing system also takes into account investment and effects on local economy to an extent that creates substantial capital inflow beyond what you'd otherwise see.